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What changed in STEM, INC.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of STEM, INC.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+406 added−380 removedSource: 10-K (2025-03-05) vs 10-K (2024-02-29)

Top changes in STEM, INC.'s 2024 10-K

406 paragraphs added · 380 removed · 266 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeCompetitive Strengths Our competitive strengths include the following: • Significant Benefits from Scale & Network Effects : We believe we operate one of the largest global distributed clean energy storage networks, with more than 5.5 Gigawatt-hours (“GWh”) of operating or contracted energy storage assets and more than 27.5 GW of solar assets under management.
Biggest changeCompetitive Strengths Our competitive strengths include the following: • Exceptional AI and Renewable Energy Expertise : We have a seasoned leadership team with a demonstrated track record of execution and extensive experience in software, distributed energy expertise focused on AI, technology development, new market commercialization, renewable project development and utility / grid program operations. • Significant Benefits from Scale : We believe we operate one of the largest global distributed clean energy networks, with nearly 30 Gigawatts (“GW”) of solar assets under management and more than 5 Gigawatt-hours (“GWh”) of contracted energy storage assets under management.
For example, California offers a cash rebate for storage installations through the Self Generation Incentive Program and Massachusetts and New York offer performance-based financial incentives for storage. Storage installations also are supported in some states by state public utility 7 commission policies that require utilities to consider alternatives such as storage before they can build new generation.
For example, California offers a cash rebate for storage installations through the Self Generation Incentive Program and Massachusetts and New York offer performance-based financial incentives for storage. Storage installations also are supported in some states by state public utility commission policies that require utilities to consider alternatives such as storage before they can build new generation.
In September 2020, the FERC issued Order 2222, opening up U.S. wholesale energy markets to aggregations of distributed energy resources like rooftop solar, BTM batteries, and electric vehicles. FERC Order 2222 is currently in the implementation stage. Energy storage systems require interconnection agreements from the applicable local electricity utilities in order to connect to the grid and operate.
In September 2020, the FERC issued Order 2222, opening up U.S. wholesale energy markets to aggregations of distributed energy resources like rooftop solar, BTM batteries, and electric vehicles. FERC Order 2222 is currently in the implementation stage. Solar and energy storage systems require interconnection agreements from the applicable local electric utilities in order to connect to the grid and operate.
Mike Carlson 60 Chief Operating Officer, since September 2022; Vice President of Koch Engineered Solutions (an equipment technology and services company) from August 2020 to September 2022; President of Digital Grid North America at Siemens Industries, Inc. (a technology company) from July 2014 to March 2019.
Mike Carlson 61 Chief Operating Officer, since September 2022; Vice President of Koch Engineered Solutions (an equipment technology and services company) from August 2020 to September 2022; President of Digital Grid North America at Siemens Industries, Inc. (a technology company) from July 2014 to March 2019.
We pursue the registration of our domain names and trademarks and service marks in the U.S. In an effort to protect our brand, as of December 31, 2023, we had nine registered trademarks in the U.S.
We pursue the registration of our domain names and trademarks and service marks in the U.S. In an effort to protect our brand, as of December 31, 2024, we had nine registered trademarks in the U.S.
Our key competitors include energy monitoring and optimization software providers, energy storage system OEMs, hardware integration providers, renewable project developers and EPC firms.
Our key competitors include energy monitoring and optimization software providers, energy storage and edge device OEMs, hardware integration providers, renewable project developers, EPC firms, and consulting firms.
As of December 31, 2023, we had 82 patents across storage and solar asset performance. Our intellectual property encompasses a diverse mix of patents with respect to our proprietary systems and software.
As of December 31, 2024, we had more than 80 patents across storage and solar asset performance. Our intellectual property encompasses a diverse mix of patents with respect to our proprietary systems and software.
We believe that the principal competitive factors in the clean energy market include, but are not limited to: • safety, reliability and quality; • product performance and uptime; • historical track record and references for customer satisfaction; • experience in maximizing the value of clean energy systems for multiple stakeholders; • technological innovation; • comprehensive solution from a single provider; 6 • ease of integration; and • seamless hardware and software-enabled service offerings.
We believe that the principal competitive factors in the clean energy market include, but are not limited to: • safety, reliability and quality; • product performance and uptime; • historical track record and references for customer satisfaction; • experience in proving bankability for multiple stakeholders; • technological innovation; • comprehensive solution from a single provider; • upfront and ongoing costs of software and services; • ease of integration and clarity of value proposition; and 6 • seamless edge hardware, software, and service offerings.
There are government regulations pertaining to battery safety, transportation of batteries and disposal of hazardous materials. We and our suppliers, as applicable, are required to comply with these regulations in order to sell our batteries into the market. The license and sale of our batteries and technology abroad is likely to be subject to export controls in the future.
We and our suppliers, as applicable, are required to comply with these regulations in order to sell our batteries into the market. The license and sale of our batteries and technology abroad is likely to be subject to export controls in the future.
Kim Homenock 49 Chief People Officer, since March 2022 and was promoted to executive officer in July 2022; Director, Devices Software & Services HR for Amazon (a technology company) from May 2021 to March 2022; Director, NA Transportation HR from January 2018 to May 2021.
Kim Homenock 51 Chief People Officer, since March 2022; Director, Devices Software & Services HR for Amazon (a technology company) from May 2021 to March 2022; Director, NA Transportation HR from January 2018 to May 2021.
Alternatively, you may access these reports at the SEC’s website at www.sec.gov. Copies are also available, without charge, from Stem Investor Relations, 100 California Street, 14th Floor, San Francisco, California, 94111.
Alternatively, you may access these reports at the SEC’s website at www.sec.gov. Copies are also available, without charge, from Stem Investor Relations, 4 Embarcadero Ctr., Suite 710, San Francisco, California, 94111.
Bill Bush 58 Chief Financial Officer, s ince November 2016. Saul R. Laureles 58 Chief Legal Officer and Corporate Secretary, since May 2021; Director, Corporate Legal Affairs an d Assistant Corporate Secretary at Schlumberger Limited ( a global energy technology company), from May 2007 to May 2021.
Laureles 59 Chief Legal Officer and Corporate Secretary, since May 2021; Director, Corporate Legal Affairs an d Assistant Corporate Secretary at Schlumberger Limited ( a global energy technology company), from May 2007 to May 2021.
Matthew Tappin 37 President of Asset Management Division since March 2023; Vice President, Corporate Development, from May 2021 to March 2023; Corporate Development, New Energies at Shell (an energy company), from August 2019 to May 2021; Vice President and Director, Corporate Business Development at Centrica (an energy services company), from June 2017 through August 2019.
Matthew Tappin 37 President, Software, since September 2024; President of Asset Management Division, March 2023 to September 2024; Vice President, Corporate Development, from May 2021 to March 2023; Corporate Development, New Energies at Shell (an energy company), from August 2019 to May 2021. 9
ITEM 1. BUSINESS Overview Stem, Inc., a Delaware corporation (“Stem,” the “Company,” “we,” “us,” or “our”), is a global leader in artificial intelligence (“AI”)-driven clean energy solutions and services.
Overview Stem, Inc., a Delaware corporation (“Stem,” the “Company,” “we,” “us,” or “our”), is a global leader in artificial intelligence (“AI”)-driven software and services that enable its customers to plan, deploy, and operate clean energy assets.
There is rising demand for solutions that can provide clean electric power with lower carbon emissions with high availability. Additionally, the transition to renewable energy sources and distributed energy infrastructure has increased the complexity and variability of power generation and end-customer electricity demand. This industry transformation has created an opportunity for an increased role for clean energy solutions like ours.
There is rising demand for solutions that enable the deployment and operation of clean electric power assets with high availability and performance. Additionally, the transition to renewable energy sources and distributed energy infrastructure has increased the complexity and variability of power generation and end-customer electricity demand.
On April 3, 2023, we used approximately $99.8 million of the net proceeds to purchase and surrender for cancellation approximately $163.0 million aggregate principal amount of our 0.50% Green Convertible Notes due 2028 (the “2028 Convertible Notes”) . 4 On March 29, 2023 and March 31, 2023, in connection with the pricing of the 2030 Convertible Notes, and on April 3, 2023, in connection with the exercise in full by the 2023 Initial Purchasers of their option to purchase additional notes, we entered into Capped Calls (the “2030 Capped Calls”) with certain counterparties.
On March 29, 2023 and March 31, 2023, in connection with the pricing of the 2030 Convertible Notes, and on April 3, 2023, in connection with the exercise in full by the 2023 Initial Purchasers of their option to purchase additional notes, we entered into Capped Calls (the “2030 Capped Calls”) with certain counterparties.
Information About Our Executive Officers The following table sets forth, as of January 31, 2024, the names and ages of our executive officers, including all offices and positions held by each for the past five years. Name Age Current Position and Five-Year Business Experience John Carrington 57 Chief Executive Officer and Director, since December 2013.
Information About Our Executive Officers The following table sets forth, as of January 31, 2025, the names and ages of our executive officers, including all offices and positions held by each for the past five years.
Our operations are subject to stringent and complex federal, state, and local laws and regulations governing the occupational health and safety of our employees and wage regulations. For example, we are subject to the requirements of the federal Occupational Safety and Health Act (“OSHA”), as amended, and comparable state laws that protect and regulate employee health and safety.
For example, we are subject to the requirements of the federal Occupational Safety and Health Act (“OSHA”), as amended, and comparable state laws that protect and regulate employee health and safety. There are government regulations pertaining to battery safety, transportation of batteries, tariffs, and disposal of hazardous materials.
Our goal is to have programs that are based on clear and consistent policies, recognizing the need to have flexibility to meet different organizational or market conditions. Available Information Our website is www.stem.com. We use our Investor Relations website, at https://investors.stem.com, as a routine channel for distribution of important information, including news releases, analyst presentations, and financial information.
We are committed to building the best workplace in our communities and the broader industry. Available Information Our website is www.stem.com. We use our Investor Relations website, at https://investors.stem.com, as a routine channel for distribution of important information, including news releases, analyst presentations, and financial information.
We believe we are well-positioned to compete successfully in the market for energy storage hardware and software-enabled services. Despite our limited operating history, we are among the leaders in global distributed energy storage and solar assets under management, supported by our Athena platform, compelling customer services, strategic partnerships and seasoned leadership team with a proven track record of success.
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.
Our team of more than 200 software development, data science, and product professionals is responsible for the design, development, integration, and testing of the Athena platform. We focus our efforts on developing Athena to improve our algorithms, augment value with new revenue streams and localize our capabilities based on geography and regulatory considerations.
We focus our efforts on developing our software to improve our algorithms, augment value with new revenue streams and localize our capabilities based on geography and regulatory considerations.
Our industry peers are typically focused on the development and marketing of single-purpose built solutions with captive hardware offerings, while our AI-powered platform is capable of delivering a multitude of software-enabled services operating an extensive and diverse network of clean energy systems across multiple geographies, utility, and grid operator service areas.
In storage, our competitors are typically focused on the development and marketing of single-purpose built solutions with captive hardware offerings, while our AI-powered software is hardware agnostic, and benefits from operational data across a multitude of hardware types, geographies, utilities, and grid operator service areas.
History We were originally known as Star Peak Energy Transition Corp. (“STPK”), which was a special purpose acquisition company that completed its public offering on August 20, 2020.
After assets are operational, we enable optimal economic and technical returns with managed energy services such as trading and bidding strategies, wholesale market participation, performance reporting, system warranties, and more. History We were originally known as Star Peak Energy Transition Corp. (“STPK”), which was a special purpose acquisition company that completed its public offering on August 20, 2020.
Federal, state and local government statutes and regulations concerning electricity heavily influence the demand for our products and services even though we are not regulated as a utility. These statutes and regulations often relate to electricity pricing, net metering, incentives, taxation, competition with utilities and the interconnection of customer-owned electricity generation.
However, the availability, value, or implementation of federal incentives could also change with political conditions including those related to Congress or the presidency. Federal, state and local government statutes and regulations concerning electricity heavily influence the demand for our products and services even though we are not regulated as a utility.
Additionally, our clean energy solutions are designed to support renewable energy generation by helping to alleviate grid intermittency issues, thereby reducing customer dependence on traditional, fossil fuel resources.
We believe that the network created by our growing customer base increases grid resilience and reliability through the real-time balancing of market-based supply and demand signals. Additionally, our solutions are designed to support renewable energy generation by helping to alleviate grid intermittency issues, thereby reducing customer dependence on traditional, fossil fuel-based power generation resources.
The pace of wholesale interconnection is often a source of delay for project implementation, although FERC is requiring process improvements through Order 2023, which is an ongoing proceeding that is likely to continue at least through 2024.
The pace of 7 wholesale interconnection is often a source of delay for project implementation, although FERC is requiring process improvements through Order 2023, which is an ongoing proceeding. Our operations are subject to stringent and complex federal, state, and local laws and regulations governing the occupational health and safety of our employees and wage regulations.
In the U.S., governments, often acting through state utility or public service commissions, change and adopt different rates for commercial customers on a regular basis. These changes can have a positive or negative effect on our ability to deliver cost savings to customers for the purchase of electricity. Several states have mandates or policies designed to encourage energy storage adoption.
These changes can have a positive or negative effect on our ability to deliver cost savings or revenue generation for our customers. Several states have mandates or policies designed to encourage energy storage adoption.
The platform is able to co-optimize multiple energy market revenue streams across a diverse fleet of hardware throughout multiple geographies and energy markets. • Compelling Business Model & Customer Solutions : Our goal is to provide a seamless customer experience from commercial proposal to installation and to ongoing operations.
Both tools function across a diverse fleet of hardware throughout multiple geographies and energy markets. • Subject Matter Expertise : Our goal is to provide a seamless customer experience from commercial proposal to installation to ongoing operations. Our advisory services span development and engineering, procurement and integration, and performance and operations.
We encourage our managers and employees to participate in continuing education programs through approved institutions and online learning such as Udemy, Stem University, and the Middle Manager Learning series to supplement essential and leadership skills.
We support ongoing professional development through structured training, leadership development initiatives, and skill-building workshops. To further empower our workforce, we encourage participation in continuing education programs through approved institutions and online learning platforms such as Udemy, STEM University, New Hire Training, and the STEM Learning Series.
Our solution is designed to support these objectives with minimal impact on customer operations. • Leading Strategic Partnerships : We have numerous partnerships with a diverse set of industry leaders to reduce execution risk and increase speed to market in certain geographies.
Our employees have deep industry and technical expertise, which enables us to provide a full suite of monitoring, control, optimization, scheduling, and reporting functionality for our customers. • Leading Strategic Partnerships : We have numerous partnerships with a diverse set of industry leaders to reduce execution risk and increase speed to market in certain geographies.
As of December 31, 2023, Athena had accumulated more than 37 million runtime hours, with more than 500,000 industrial Internet of Things (“IoT”) devices under management, across more than 184,000 sites in 48 countries. We operate in two key areas within the energy landscape: Behind-the-Meter (“BTM”) and Front-of-the-Meter (“FTM”).
As of December 31, 2024, Athena had accumulated more than 43 million runtime hours, with more than 500,000 industrial Internet of Things (“IoT”) devices under management, across more than 178,500 sites in 57 countries. We also deliver software-enabled managed services to our customers through the Athena AI platform.
We believe that the global push for lower carbon emissions, combined with vast technological improvements in lithium-ion battery-powered technologies, will drive C&I customers, utilities, independent power producers and project developers to grow their use of and investment in clean energy systems.
This industry transformation has created an opportunity for an increased role for clean energy software and services like ours. We believe that these trends will drive C&I customers, utilities, independent power producers and project developers to grow their use of and investment in clean energy systems.
We believe that our future success depends in part on our continued ability to hire, motivate and retain qualified employees in any operating environment. Recruiting We believe in investing for the future, including the future of our workforce by recruiting exceptional individuals who share our company values.
We believe that our future success depends in part on our continued ability to hire, motivate and retain qualified employees in any operating environment. Talent Development At Stem, we prioritize talent development through structured and ongoing initiatives designed to support employee growth and success.
We also provide a monthly global culture coalition cadence to address our mission of “bringing a community of employees together to improve the work experience through innovative, creative, and fun culture initiatives.” Each month we discuss a different diversity, equity and inclusion subject, and we also invite relevant guest speakers to educate our workforce and provide pamphlets for employees and their families, provide books honoring Black History Month, display in our offices artwork from women artists, and provide goods from indigenous owned businesses as giveaways in our monthly contests.
For example, we provide a monthly global culture coalition cadence to address our mission of “bringing a community of employees together to improve the work experience through innovative, creative, and fun culture initiatives.” In the spirit of our core values, we are “One Team” and succeed through collaboration when we respect, acknowledge and celebrate each other’s differences.
Under this software-only arrangement, our AI-driven Athena platform responds to grid calls within 10 minutes, while simultaneously optimizing for local and seasonal system peaks. We have also partnered with Ameresco for a 313 MWh, multiple-site battery storage project. We will provide battery storage hardware, system design support, and Athena® software to the project.
In 2024, we partnered with Ameresco for a 313 MWh, multiple-site project where we provided battery storage hardware, system design support, and Athena® software that will minimize costs and maximize efficiency.
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We maintain one of the world’s largest digitally connected, intelligent, renewable energy networks, providing customers with (i) energy storage hardware, sourced from leading, global battery original equipment manufacturers (“OEMs”), that we deliver through our partners, including developers, distributors and engineering, procurement and construction (“EPC”) firms, (ii) edge hardware to aid in the collection of site data and the real-time operation and control of the site plus other optional equipment, and (iii) an ongoing software platform, Athena ® , and professional services to operate and manage the performance of standalone energy storage, integrated solar plus storage 3 systems, and solar assets.
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ITEM 1. BUSINESS Our New Strategy In October 2024, we announced a new business strategy that reflects a renewed focus on developing and marketing our AI-enabled software and services offerings.
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In addition, in all of the markets where we help manage our customers’ clean energy assets, we have agreements to use the Athena platform to participate in such markets and to share the revenue from such market participation. We deliver our battery hardware and software-enabled services to our customers through our Athena platform.
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This transition will entail significant operational changes, including reduction of what has historically been the source of most of our revenue (battery hardware resales), adjustments to the way we develop and market our products and services, and realignment of our business processes.
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We believe that the network created by our growing customer base increases grid resilience and reliability through the real-time processing of market-based demand signals, energy prices and other factors in connection with the deployment of renewable energy resources to our customers.
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These changes are expected to result in reduced revenue, restructuring-related costs and short-term disruptions in our operations, which may negatively affect our ability to effectively scale our software and services offerings and achieve our financial and operational targets.
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An energy system’s position in relation to a customer’s electric meter determines whether it is designated a BTM or FTM system. BTM systems provide power that can be used on-site without interacting with the electric grid and passing through an electric meter.
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Failure to successfully and timely implement our new strategy may have a material adverse effect on our business, financial condition, and results of operations. See “We may not be able to successfully implement our recently announced new strategy.” in Part I. Item 1A. “Risk Factors” in this Report for additional information about some risks related to our new strategy.
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FTM, grid-connected systems provide power to off-site locations and must pass through an electric meter prior to reaching an end-user. For BTM customers, Athena mitigates customer energy costs through services such as time-of-use and demand charge management optimization and by aggregating the dispatch of energy through a network of virtual power plants.
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We offer a comprehensive suite of solutions that are designed to transform how solar and energy storage projects are developed, built, and operated, including (i) an integrated suite of software and edge hardware products, and (ii) full-lifecycle energy services from a team of industry experts.
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Our software is designed to reduce commercial and industrial (“C&I”) customer energy bills, increase their energy yield, and help our customers facilitate the achievement of their corporate environmental, social, and corporate governance (“ESG”) and carbon reduction objectives. Through Athena’s PowerTrack application, our software is designed to maximize solar energy output and minimize asset downtime.
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More than 16,000 global customers rely on Stem to maximize the value of their clean energy projects and portfolios. Since our inception in 2009, we have engaged in developing and marketing AI-enabled software and services, raising capital, recruiting personnel, and growing our annual recurring revenue.
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For FTM customers, our software decreases risk for project developers, asset owners, independent power producers and investors by adapting to dynamic energy market conditions in connection with the deployment of electricity and improving the value of energy assets over the course of their FTM system’s lifetime.
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As the energy landscape has changed in recent years, we have increasingly focused on larger, utility-scale projects, supporting asset owners, developers, utilities, operators, and traders.
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We also help asset owners and operators monitor and manage the health and performance of their clean energy assets. As an early participant in the BTM market, we developed operational focus and technical capabilities that position us to have multiple product offerings and services in the evolving market for FTM energy storage services.
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Over the last 15 years, we have grown into one of the most experienced clean energy software providers in the world, achieving milestones such as deploying software with multiple Fortune 500 companies, operating the largest virtual power plant in California, and becoming the de facto standard for commercial and industrial solar asset management software.
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We believe that Athena’s ability to optimize operations in both the BTM and FTM markets for storage and solar assets is unique in the industry and provides us with a competitive advantage. Through our February 2022 acquisition of Also Energy Holdings, Inc. (“AlsoEnergy”), we combined our storage optimization capabilities with AlsoEnergy’s solar asset performance monitoring and control software.
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We operate in two key areas within the renewable energy landscape: solar and storage. In solar, we serve project developers, asset owners and engineering, procurement and construction firms (EPCs) by selling them solar edge devices and monitoring and control software, as well as professional services related to the design and commissioning of the same.
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This large, diverse network generates a significant amount of operational data leading to enhanced software performance through machine-learning, which improves customer economics. • Advanced Technology Platform : We developed one of the first AI platforms for energy storage and virtual power plants that automates storage participation in electricity markets and performs monitoring and management of customer loads, solar generation and energy prices with real-time, complex decision-making algorithms.
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In storage, we serve project developers, asset owners, EPCs, and distributors by selling them software-enabled forecasting and optimization managed services that minimize spending on utility bills, or maximize revenue from energy market participation. In some cases, we also resell battery OEM hardware to our customers for a fee.
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Customers sign long-term contracts, typically between 3 and 20 years in duration, while providing us the flexibility to control their clean energy systems to maximize revenue, lower their energy costs, earn market participation revenue, and meet their decarbonization goals.
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Some customers own both solar and storage assets, and use our full software capabilities and services across both asset classes. Our suite of software applications is enabled by our AI platform, Athena®. Each application helps customers maximize the value of their energy assets.
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In October 2023, we partnered with NineDot Energy® in the development and completion of the first battery energy storage site in the Bronx, New York City. The Gunther site features a 3 MW/12 MWh battery energy storage system, a solar canopy, and infrastructure ready for bi-directional electric vehicle chargers.
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Our asset performance management (APM) application, PowerTrack™ APM, provides a unified solution that empowers asset owners and operators to efficiently monitor and control complex storage, solar, and hybrid portfolios for optimal performance.
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Athena will enable the electric cooperative to dispatch the battery into system peaks to minimize costs and maximize efficiency. • Exceptional AI and Energy Storage Expertise : We have a seasoned leadership team with a demonstrated track record of execution and more than 150 years of accumulated experience in energy storage, software and distributed energy expertise focused on AI, technology development, new market commercialization, renewable project development and utility / grid program operations.
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Our Energy Management System (EMS) application, PowerCore™ EMS, is a technology-agnostic, edge-to-cloud integration solution for monitoring, managing, and controlling energy storage and hybrid systems for maximum performance and reliability. Our energy storage optimization application, PowerBidder™ Pro, combines Athena’s wholesale market bidding engine with a web interface, allowing users to choose between automated and user-defined trading strategies.
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Our data science team has more than 150 years of combined experience in machine learning, optimization and controls. Our Mission Our mission is to maximize the economic, environmental, and resiliency value of renewable energy assets through our leading AI platform.
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To complement our software applications, we manufacture commercial- and utility-scale edge hardware solutions. These edge devices function across solar and storage products from multiple original equipment manufacturer (“OEM”).
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In order to fulfill our mission, we provide our customers, which include C&I enterprises as well as independent power producers, renewable project developers, utilities and grid operators, with (i) energy storage hardware, sourced from leading, global battery OEMs, that we deliver through our partners, including developers, distributors and EPC firms, (ii) edge hardware to aid in the collection of site data and the real-time operation and control of the site plus other optional equipment, and (iii) an ongoing software platform and professional services to operate and manage the performance of standalone energy storage, integrated solar plus storage systems, and solar assets .
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To help our customers achieve long-term performance and profitability goals for their energy projects, we also provide advisory services spanning development and engineering, procurement and integration, and performance and operation services.
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In addition, in all of the markets where we help manage our customers’ clean energy assets, we have agreements to use the Athena platform to participate in such markets and to share the revenue from such market participation. Our Customers We operate in two key areas within the energy storage landscape: BTM and FTM.
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In the early stages of project planning, our experts help lay a solid foundation for our customers’ solar and storage 4 projects by guiding the design and ensuring informed decision-making. During the building stage, we provide guidance for hardware procurement and integration for timely deployment.
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BTM systems installed at C&I customer locations provide power that can be used on-site without interacting with the electric grid and generally without generating energy that passes through a utility electric meter. FTM grid-connected systems deliver power into the grid which is often sold to off-site customers and transported by the grid prior to reaching an end-user.
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On April 3, 2023, we used approximately $99.8 million of the net proceeds to purchase and surrender for cancellation approximately $163.0 million aggregate principal amount of our 0.50% Green Convertible Notes due 2028 (the “2028 Convertible Notes”) .
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For BTM customers, we seek to maximize value by providing AI-powered storage services that reduce spending on utility bills, enhance the economics of solar and provide backup power. Additionally, we help BTM customers achieve renewable energy targets as part of their environmental, social 5 and governance (“ESG”) commitments.
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This large network generates a significant amount of operational data which drives enhanced software performance. • Proven software capabilities : Our core asset management software, PowerTrack, provides a flexible and comprehensive interface that allows customers to monitor and control individual solar assets and portfolios. Our energy storage software is able to co-optimize multiple energy market revenue streams.
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For FTM customers, we provide software-enabled services to capture revenue from energy market participation, including the sale of capacity, energy and ancillary services into regional electricity markets helping these customers enhance renewable project returns while improving grid resiliency and reliability for utilities and grid operators.
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More recently, we announced a 484 megawatt (“MW”) 5 solar deployment for Neovolt, one of the largest renewable asset owners in Hungary, who will standardize its asset management on PowerTrack. Research and Development We have invested significant amounts of time and expense in the development of our software.
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These services that we provide are all at the direction of our customers, and we do not independently participate in the wholesale electricity market. Research and Development We have invested significant amounts of time and expense in the development of our Athena platform. The ability to maintain our leadership position depends in part on our ongoing research and development activities.
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The ability to maintain our leadership position depends in part on our ongoing research and development activities. Our software development, data science, and product professionals are responsible for the design, development, integration, and testing of our software products.
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We believe that, as one of the largest solutions providers in this industry, we have a significant head start against our competition in this rapidly evolving environment.
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In solar, our competitors provide monolithic software and edge devices, whereas PowerTrack™ and our edge devices provide customers with a flexible solution that meets their individual project needs. We believe we are well-positioned to compete successfully in the market for software and software-enabled services.
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We believe that one of the key advantages driving sustainable differentiation for us includes the focus and capabilities built in our pioneering history in the BTM segment of the energy storage industry.
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These statutes and regulations often relate to electricity pricing, net metering, incentives, taxation, competition with utilities and the interconnection of customer-owned electricity generation. In the U.S., governments, often acting through state utility or public service commissions, change and adopt different rates for commercial customers on a regular basis.
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This experience required an emphasis on AI-driven co-optimization of energy storage operations and the build-out of significant operational infrastructure to maximize economic value and grid stability for enterprise customers, utilities, and grid operators.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

128 edited+43 added−36 removed234 unchanged
Biggest changeIf we fail to close sales on a regular and timely basis, it could adversely affect our business. • We may fail to attract and retain qualified management and technical personnel, which may adversely affect our ability to compete and grow our business. • We may not be able to develop, produce, market or sell our hardware and software-enabled services successfully. • We have incurred significant losses in the past and may continue to incur net losses through at least 2024. • We may be unable to reduce our cost structure. • Any future acquisitions we undertake may disrupt our business, adversely affect operations, dilute our stockholders, and expose us to significant costs and liabilities. • Our current and planned foreign operations will subject us to additional business, financial, regulatory, and competitive risks. • If any energy storage systems procured from OEM suppliers and provided to our customers contain manufacturing defects, our business and financial results could be adversely affected. • Estimates of useful life for our energy storage systems and related hardware and software-enabled services may be inaccurate, and our OEM suppliers may not meet service and performance warranties and guarantees. • Future product recalls could materially adversely affect our business, financial condition and operating results. • Any disruption of, or interference with, our use of Amazon Web Services could adversely affect our business. • Any failure to offer high-quality technical support services may adversely affect our relationships with our customers. 11 • Our business currently depends on the availability of rebates, tax credits and other financial incentives. • The economic benefit of our energy storage systems to our customers depends on the cost of electricity available from alternative sources. • We face risks related to our DevCo business model. • If customers do not continue to use our subscription offerings or if we fail to expand the availability of hardware and software-enabled services, our operating results will be adversely affected.
Biggest changeIf we fail to close sales on a regular and timely basis, it could adversely affect our business. • We may fail to attract and retain qualified management and technical personnel, which may adversely affect our ability to compete and grow our business. • We have incurred significant losses in the past and may continue to incur net losses through at least 2025. • We may not be able to develop, produce, market or sell our hardware and software-enabled services successfully. • We may be unable to reduce our cost structure. • Any future acquisitions we undertake may disrupt our business, adversely affect operations, dilute our stockholders, and expose us to significant costs and liabilities. • Our current and planned foreign operations will subject us to additional business, financial, regulatory, and competitive risks. • Our platform performance may not meet customer needs. • If any energy storage systems procured from OEM suppliers and provided to our customers contain manufacturing defects, our business and financial results could be adversely affected. 10 • Estimates of useful life for our energy storage systems and related hardware and software-enabled services may be inaccurate, and our OEM suppliers may not meet service and performance warranties and guarantees. • Increases in hardware costs would adversely affect us. • Future product recalls could materially adversely affect our business, financial condition and operating results. • Any disruption of, or interference with, our use of Amazon Web Services could adversely affect our business. • Any failure to offer high-quality technical support services may adversely affect our relationships with our customers. • Our business currently depends on the availability of rebates, tax credits and other financial incentives. • Our business is subject to risks associated with construction, utility interconnection and delays. • If customers do not continue to use our subscription offerings or if we fail to expand the availability of hardware and software-enabled services, our operating results will be adversely affected. • The economic benefit of our energy storage systems to our customers depends on the cost of electricity available from alternative sources. • We face risks related to our DevCo business model.
We compete for customers, financing partners and incentive dollars with other providers of energy storage systems and asset performance monitoring and control solutions.
We compete for customers, financing partners and incentive dollars with other providers of asset performance monitoring and control solutions and energy storage systems.
The diversion of management’s attention and any difficulties encountered in the integration process could hurt our business; • the identification, acquisition and integration of acquired businesses requires significant investment, including to determine which new service offerings we might wish to acquire, harmonize service offerings, expand management capabilities and market presence, and improve or increase development efforts and technology features and functions; • the anticipated benefits from any acquisition may not be achieved on a timely basis or at all, including as a result of loss of clients or personnel of the target, other difficulties in supporting and transitioning the target's clients, 17 difficulties in managing expanded operations and operations in foreign jurisdictions in which we have never operated, the inability to realize expected synergies from an acquisition, or negative organizational cultural effects arising from the integration of new personnel; • we may face difficulties in integrating the personnel, technologies, solutions, operations, and existing contracts of the acquired business; • we may fail to identify all of the problems, liabilities, risks or other shortcomings or challenges of an acquired company, technology or solution, including issues related to intellectual property, solution quality or architecture, income tax and other regulatory compliance practices, revenue recognition or other accounting or internal control practices, or employee or client issues; • to pay for future acquisitions, we could issue additional shares of our common stock or pay cash.
The diversion of management’s attention and any difficulties encountered in the integration process could hurt our business; 17 • the identification, acquisition and integration of acquired businesses requires significant investment, including to determine which new service offerings we might wish to acquire, harmonize service offerings, expand management capabilities and market presence, and improve or increase development efforts and technology features and functions; • the anticipated benefits from any acquisition may not be achieved on a timely basis or at all, including as a result of loss of clients or personnel of the target, other difficulties in supporting and transitioning the target's clients, difficulties in managing expanded operations and operations in foreign jurisdictions in which we have never operated, the inability to realize expected synergies from an acquisition, or negative organizational cultural effects arising from the integration of new personnel; • we may face difficulties in integrating the personnel, technologies, solutions, operations, and existing contracts of the acquired business; • we may fail to identify all of the problems, liabilities, risks or other shortcomings or challenges of an acquired company, technology or solution, including issues related to intellectual property, solution quality or architecture, income tax and other regulatory compliance practices, revenue recognition or other accounting or internal control practices, or employee or client issues; • to pay for future acquisitions, we could issue additional shares of our common stock or pay cash.
Any further international expansion could subject our business to risks associated with international operations, including: • compliance with multiple, potentially conflicting and changing governmental laws, regulations and permitting processes, including trade, labor, environmental, banking, employment, privacy and data protection laws and regulations, such as the EU Data Privacy Directive, as well as tariffs, export quotas, customs duties and other trade restrictions; • compliance with U.S. and foreign anti-bribery laws, including the Foreign Corrupt Practices Act of 1977, as amended; • difficulties in collecting payments in foreign currencies and associated foreign currency exposure; 18 • compliance with potentially conflicting and changing laws of taxing jurisdictions where we conduct business and applicable U.S. tax laws as they relate to international operations, the complexity and adverse consequences of such tax laws and potentially adverse tax consequences due to changes in such tax laws; • the laws of some countries do not protect proprietary rights as fully as do the laws of the U.S.
Any further international expansion could subject our business to risks associated with international operations, including: • compliance with multiple, potentially conflicting and changing governmental laws, regulations and permitting processes, including trade, labor, environmental, banking, employment, privacy and data protection laws and 18 regulations, such as the EU Data Privacy Directive, as well as tariffs, export quotas, customs duties and other trade restrictions; • compliance with U.S. and foreign anti-bribery laws, including the Foreign Corrupt Practices Act of 1977, as amended; • difficulties in collecting payments in foreign currencies and associated foreign currency exposure; • compliance with potentially conflicting and changing laws of taxing jurisdictions where we conduct business and applicable U.S. tax laws as they relate to international operations, the complexity and adverse consequences of such tax laws and potentially adverse tax consequences due to changes in such tax laws; • the laws of some countries do not protect proprietary rights as fully as do the laws of the U.S.
For example, our trade secrets and other confidential information could be disclosed in an unauthorized manner to third parties, our owned or licensed intellectual property rights could be challenged, 28 invalidated, circumvented, infringed, or misappropriated or our intellectual property rights may not be sufficient to provide us with a competitive advantage, any of which could have a material adverse effect on our business, financial condition and results of operations.
For example, our trade secrets and other confidential information could be disclosed in an unauthorized manner to third parties, our owned or licensed intellectual property rights could be challenged, invalidated, circumvented, infringed, or misappropriated or our intellectual property rights may not be sufficient to provide us with a competitive advantage, any of which could have a material adverse effect on our business, financial condition and results 28 of operations.
Successful completion of a project may be adversely affected, delayed or rendered infeasible by numerous factors, including: • interconnection costs and capacity constraints; • transmission grid congestion issues; • delays in obtaining required governmental permits and approvals; • regulatory changes that adversely affect energy storage participation in wholesale markets; • changes in wholesale market energy and ancillary services prices and costs; • construction delays and contractor or developer partner performance shortfalls; • cost overruns, including costs related to renting or owning land necessary to develop DevCo Projects; • labor, equipment, and material supply shortages, failures or disruptions; and • force majeure and other events out of our control.
Successful completion of a project may be adversely affected, delayed or rendered infeasible by numerous factors, including: • interconnection costs and capacity constraints; • transmission grid congestion issues; • delays in obtaining required governmental permits and approvals; • regulatory changes that adversely affect energy storage participation in wholesale markets; • changes in wholesale market energy and ancillary services prices and costs; 24 • construction delays and contractor or developer partner performance shortfalls; • cost overruns, including costs related to renting or owning land necessary to develop DevCo Projects; • labor, equipment, and material supply shortages, failures or disruptions; and • force majeure and other events out of our control.
Some states have utility procurement programs and/or renewable portfolio standards for which our technology is eligible. Our offerings are currently installed in various U.S. states, each of which may have its own enabling policy framework. There is no guarantee that these policies will continue to exist in their 21 current form, or at all.
Some states have utility procurement programs and/or renewable portfolio standards for which our technology is eligible. Our offerings are currently installed in various U.S. states, each of which may have its own enabling policy framework. There is no guarantee that these policies will continue to exist in their current form, or at all.
We continue to develop and refine our disclosure controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we will file with the SEC is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms and that information required to be disclosed in reports under the Exchange Act is accumulated and communicated to our principal executive and financial officers.
We continue to develop and refine our disclosure controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we will file with the SEC is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms and that information required to 34 be disclosed in reports under the Exchange Act is accumulated and communicated to our principal executive and financial officers.
We have received patents and have filed patent applications with respect to certain aspects of our technology, and we generally rely on patent protection with respect to our proprietary technology, as well as a combination of 26 trade secrets and copyright law, employee and third-party non-disclosure agreements and other protective measures to protect intellectual property rights pertaining to our proprietary technology and hardware and software- enabled services.
We have received patents and have filed patent applications with respect to certain aspects of our technology, and we generally rely on patent protection with respect to our proprietary technology, as well as a combination of trade secrets and copyright law, employee and third-party non-disclosure agreements and other protective measures to protect intellectual property rights pertaining to our proprietary technology and hardware and software- enabled services.
Factors that could cause fluctuations in the trading price of our common stock include the following: • results of operations that vary from the expectations of securities analysts and investors; • results of operations that vary from those of our competitors; • volatility in the trading prices and trading volumes of technology stocks; • changes in expectations as to our future financial performance, including financial estimates and investment recommendations by securities analysts and investors; • declines in the market prices of stocks generally; • strategic actions by us or our competitors; • announcements by us or our competitors of significant contracts, acquisitions, joint ventures, other strategic relationships or capital commitments; • any significant change in our senior management; • changes in general macroeconomic or market conditions or trends in our industry or markets, including as a result of a general economic slowdown or a recession, increasing interest rates and changes in monetary policy, or inflationary pressures; • changes in business or regulatory conditions, including new laws or regulations or new interpretations of existing laws or regulations applicable to our business; • future sales of our common stock or other securities or the incurrence of significant debt; • investor perceptions or the investment opportunity associated with our common stock relative to other investment alternatives; • the public’s response to press releases or other public announcements by us or third parties, including our filings with the SEC; • litigation involving us, our industry, or both, or investigations by regulators into our operations or those of our competitors; • financial and operating guidance, if any, that we provide to the public, and any changes in this guidance or our failure to meet this guidance; • actions by institutional or activist stockholders; • changes in accounting standards, policies, guidelines, interpretations or principles; and • other events or factors, including those resulting from natural disasters, geopolitical instability or war, acts of terrorism or responses to these events.
Factors that could cause fluctuations in the trading price of our common stock include the following: • The addition or loss of significant customers; • results of operations that vary from the expectations of securities analysts and investors; • financial and operating guidance, if any, that we provide to the public, and any changes in this guidance or our failure to meet this guidance; • results of operations that vary from those of our competitors; • volatility in the trading prices and trading volumes of technology stocks; • changes in expectations as to our future financial performance, including financial estimates and investment recommendations by securities analysts and investors; • declines in the market prices of stocks generally; • strategic actions by us or our competitors; • announcements by us or our competitors of significant contracts, acquisitions, joint ventures, other strategic relationships or capital commitments; • any significant change in our senior management; • changes in general macroeconomic or market conditions or trends in our industry or markets, including as a result of a general economic slowdown or a recession, increasing interest rates and changes in monetary policy, or inflationary pressures; • changes in business or regulatory conditions, including new laws or regulations or new interpretations of existing laws or regulations applicable to our business; • future sales of our common stock or other securities or the incurrence of significant debt; • investor perceptions or the investment opportunity associated with our common stock relative to other investment alternatives; • the public’s response to press releases or other public announcements by us or third parties, including our filings with the SEC; • litigation involving us, our industry, or both, or investigations by regulators into our operations or those of our competitors; • actions by institutional or activist stockholders; • changes in accounting standards, policies, guidelines, interpretations or principles; and • other events or factors, including those resulting from natural disasters, geopolitical instability or war, acts of terrorism or responses to these events.
Any manufacturing defects or 19 other failures of our energy storage systems to perform as expected could cause us to incur significant re-engineering costs, divert the attention of our personnel from operating and maintenance efforts, expose us to adverse regulatory action and litigation and significantly and adversely affect customer satisfaction, market acceptance and our business reputation.
Any manufacturing defects or other failures of our energy storage systems to perform as expected could cause us to incur significant re-engineering costs, divert the attention of our personnel from operating and maintenance efforts, expose us to adverse regulatory action and litigation and significantly and adversely affect customer satisfaction, market acceptance and our business reputation.
However, these incentives may expire on a particular date, end when the allocated funding is exhausted, or be reduced or terminated as a matter of regulatory or legislative policy. Our energy storage systems and asset performance monitoring and control solutions have qualified for tax exemptions, incentives or other customer incentives in many states.
However, these incentives may expire on a particular date, end when the allocated funding is exhausted, or be reduced or terminated as a matter of regulatory or legislative policy. Our asset performance monitoring and control solutions, as well as our energy storage systems, have qualified for tax exemptions, incentives or other customer incentives in many states.
Our market opportunities are also based on the assumption that our existing and future offerings will be more attractive to our customers and potential customers than competing products and services. If these assumptions prove inaccurate, our business, financial condition and results of operations could be adversely affected. We currently face and will continue to face significant competition.
Our expected market opportunities are also based on the assumption that our existing and future offerings will be more attractive to our customers and potential customers than competing products and services. If these assumptions prove inaccurate, our business, financial condition and results of operations could be adversely affected. We currently face and will continue to face significant competition.
The occurrence of any of the following risks and 10 uncertainties, or additional risks and uncertainties not currently known to us or that we currently deem immaterial, could, in circumstances we may or may not be able to accurately predict, materially adversely affect our business, operations, reputation, financial condition, results of operations, cash flows, liquidity, growth, prospects and stock price.
The occurrence of any of the following risks and uncertainties, or additional risks and uncertainties not currently known to us or that we currently deem immaterial, could, in circumstances we may or may not be able to accurately predict, materially adversely affect our business, operations, reputation, financial condition, results of operations, cash flows, liquidity, growth, prospects and stock price.
Parties with an interest in other energy sources, including lawmakers, regulators, policymakers, environmental and advocacy organizations or other activists may invest significant time and money in efforts to delay, repeal or otherwise negatively influence regulations and programs that promote renewable energy. Many of these parties have substantially greater resources and influence than we have.
Parties with an interest in other energy sources, including lawmakers, regulators, policymakers, environmental and advocacy organizations or other activists may invest significant time and money in efforts to delay, repeal or otherwise negatively influence laws, regulations and programs that promote renewable energy. Many of these parties have substantially greater resources and influence than we have.
Additionally, existing or future tariffs may negatively affect key customers, suppliers, and manufacturing partners. Such outcomes could adversely affect the amount or timing of our revenues, results of operations or cash flows, and continuing uncertainty could cause sales volatility, price fluctuations or supply shortages, or cause our customers to advance or delay their purchase of our products.
Additionally, existing or future tariffs may 31 negatively affect key customers, suppliers, and manufacturing partners. Such outcomes could adversely affect the amount or timing of our revenues, results of operations or cash flows, and continuing uncertainty could cause sales volatility, price fluctuations or supply shortages, or cause our customers to advance or delay their purchase of our products.
The growth and profitability of our business depends on the continued decline in the cost of battery storage, solar photovoltaic (“PV”) system components and related hardware. Over the last decade, the cost of renewable energy hardware has generally declined; however, increased demand and global supply chain constraints could cause price increases.
The growth and profitability of our business depends in part on the continued decline in the cost of battery storage, solar photovoltaic (“PV”) system components and related hardware. Over the last decade, the cost of renewable energy hardware has generally declined; however, increased demand and global supply chain constraints could cause price increases.
We currently host our Athena platform and support our energy storage network operations on one or more data centers provided by Amazon Web Services (“AWS”), a third-party provider of cloud infrastructure services. We do not have control 20 over the operations of the facilities of AWS that we use.
We currently host our Athena platform and support our energy storage network operations on one or more data centers provided by Amazon Web Services (“AWS”), a third-party provider of cloud infrastructure services. We do not have control over the operations of the facilities of AWS that we use.
Any of these events could adversely affect our brand, relationships with customers, operating results or financial condition. 27 Furthermore, our Athena platform is complex, developed for over a decade by many developers, and includes a number of licensed third-party commercial and open-source software libraries.
Any of these events could adversely affect our brand, relationships with customers, operating results or financial condition. Furthermore, our Athena platform is complex, developed for over a decade by many developers, and includes a number of licensed third-party commercial and open-source software libraries.
Any delays in our customers’ ability to connect with utilities, delays in the performance of installation-related services or poor performance of installation-related services will have an adverse effect on our results and could cause operating results to vary materially from period to period. 22 Our business depends on customers renewing their services subscriptions.
Any delays in our customers’ ability to connect with utilities, delays in the performance of installation-related services or poor performance of installation-related services will have an adverse effect on our results and could cause operating results to vary materially from period to period. Our business depends on customers renewing their services subscriptions.
We may incur losses in our business in excess of: (1) those experienced in prior years, (2) the average expected level used in pricing, or (3) current insurance coverage limits. The incidence and severity of severe weather conditions and other natural disasters are inherently unpredictable.
We may incur losses in our business in excess of: (1) those experienced in prior years, (2) the average expected level used in pricing, or (3) current insurance coverage limits. 23 The incidence and severity of severe weather conditions and other natural disasters are inherently unpredictable.
Our software has contained defects and errors and may in the future contain undetected defects or errors. We continue to evolve the features and functionality of our platform through updates and enhancements, and as we do, we may introduce additional defects or errors that may not be detected until after deployment to customers through our hardware.
Our software has contained defects and errors and may in 27 the future contain undetected defects or errors. We continue to evolve the features and functionality of our platform through updates and enhancements, and as we do, we may introduce additional defects or errors that may not be detected until after deployment to customers through our hardware.
Risks Related to Our Business and Industry 12 Our limited operating history at current scale and our nascent industry make evaluating our business and prospects difficult. From our inception in 2009 through 2012, we were focused principally on research and development activities relating to our energy storage systems technology.
Risks Related to Our Business and Industry Our limited operating history at current scale and our nascent industry make evaluating our business and prospects difficult. From our inception in 2009 through 2012, we were focused principally on research and development activities relating to our energy storage systems technology.
Any such outcome could adversely affect our operating results or ability to continue to grow our sales volume or to increase sales to existing customers or new customers. If any energy storage systems procured from OEM suppliers and provided to our customers contain manufacturing defects, our business and financial results could be adversely affected.
Any such outcome could adversely affect our operating results or ability to continue to grow our sales volume or to increase sales to existing customers or new customers. 19 If any energy storage systems procured from OEM suppliers and provided to our customers contain manufacturing defects, our business and financial results could be adversely affected.
To help attract, retain, and motivate qualified employees, we use stock-based awards, such as restricted stock units, and performance-based cash incentive awards. Sustained declines in our stock price, or lower stock price performance relative to our competitors, can reduce the retention value of our stock-based awards.
To help attract, retain, and motivate qualified employees, we use stock-based awards, such as restricted stock units, and performance-based cash incentive awards. Further sustained declines in our stock price, or lower stock price performance relative to our competitors, can further reduce the retention value of our stock-based awards.
If we were unable to maintain our existing proprietary technology, our ability to attract and retain customers could be impaired, our competitive position could be adversely affected, and our revenue could be reduced. A failure of our information technology (“IT”) and data security infrastructure could adversely affect our business and operations.
If we were unable to maintain our existing proprietary technology, our ability to attract and retain customers could be impaired, our competitive position could be adversely affected, and our revenue could be reduced. 26 A failure of our information technology (“IT”) and data security infrastructure could adversely affect our business and operations.
If renewable energy technologies are not suitable for widespread adoption, or if sufficient demand for our hardware and software-enabled services does not develop or takes longer to develop than we anticipate, our sales may decline and we may be unable to achieve or sustain profitability.
If renewable energy technologies are not suitable for widespread adoption, or if sufficient demand for our software-enabled services does not develop or takes longer to develop than we anticipate, our sales may decline and we may be unable to achieve or sustain profitability.
These broad market and industry fluctuations may adversely affect the market price of our common stock, regardless of our actual operating performance. In addition, in the past, following periods of market volatility, stockholders have instituted securities class action litigation against companies.
These broad market and industry fluctuations may adversely affect the market price of our common stock, regardless of our actual operating performance. 33 In addition, in the past, following periods of market volatility, stockholders have instituted securities class action litigation against companies.
In addition, our failure or perceived failure to pursue or fulfill our goals, targets and objectives 23 or to satisfy various reporting standards within the timelines we announce, or at all, could expose us to government enforcement actions and private litigation.
In addition, our failure or perceived failure to pursue or fulfill our goals, targets and objectives or to satisfy various reporting standards within the timelines we announce, or at all, could expose us to government enforcement actions and private litigation.
The effect of such public opposition to renewable energy 30 projects and any resulting reduction in customer demand for our hardware and software-enabled services could adversely affect our business, financial condition and results of operations.
The effect of such public opposition to renewable energy projects and any resulting reduction in customer demand for our hardware and software-enabled services could adversely affect our business, financial condition and results of operations.
If we do not develop innovative and reliable product offerings and enhancements in a cost-effective and timely manner that are attractive to customers in these markets; if we are otherwise unsuccessful in competing in these new product categories; if the new product categories in which we invest our limited resources do not emerge as expected or do not produce the growth or profitability we expect, or when we 14 expect it, or if we do not correctly anticipate changes and evolutions in technology and platforms, our business and results of operations may be adversely affected.
If we do not develop innovative and reliable product offerings and enhancements in a cost-effective and timely manner that are attractive to customers in these markets; if we are otherwise unsuccessful in competing in these new product categories; if the new product categories in which we invest our limited resources do not emerge as expected or do not produce the growth or profitability we expect, or when we 13 expect it, or if we do not correctly anticipate changes and evolutions in technology and platforms, our business and results of operations may be adversely affected.
These or other tariffs could adversely affect our hardware component prices and negatively affect any plans to sell products in China and other impacted international markets.
These or other tariffs could adversely affect our hardware component prices and negatively affect any plans to sell products in any impacted international markets.
Disruptions in the availability of key equipment, components or materials such as lithium may adversely affect our business, prospects and operations, and volatility in prices and availability of such items may negatively affect our customer relationships and ability to plan for future growth. We also face risks resulting from supplier concentration and limited supplier capacity.
Disruptions in the availability of key equipment, components or materials such as lithium may adversely affect our business, prospects and operations, and volatility in prices and availability of such items may negatively affect our customer relationships and ability to plan for future growth. 14 We face risks resulting from supplier concentration and limited supplier capacity.
If customers do not continue to use our subscription offerings or if we fail to expand the availability of hardware and software-enabled services available to our customers, our business and operating results will be adversely affected. In addition to upfront sale of hardware and network integration, we depend on customers continuing to subscribe to services enabled by our Athena platform.
If customers do not continue to use our subscription offerings or if we fail to expand the availability of products and services available to our customers, our business and operating results will be adversely affected. In addition to upfront sale of hardware and network integration, we depend on customers continuing to subscribe to services enabled by our Athena platform.
This activity could cause or avoid an increase or decrease in the market price of our common stock. 35 We are subject to counterparty risk with respect to the capped call transactions. The Option Counterparties are financial institutions, and we are subject to the risk that any or all of them might default under the capped call transactions.
This activity could cause or avoid an increase or decrease in the market price of our common stock. 36 We are subject to counterparty risk with respect to the capped call transactions. The Option Counterparties are financial institutions, and we are subject to the risk that any or all of them might default under the capped call transactions.
Industry competition and cross- 16 industry labor market pressures may negatively impact our ability to attract and retain our executive officers and other key technology, sales, marketing and support personnel and drive increases in our employee costs, both of which could adversely affect our business, financial condition and results of operations.
Industry competition and cross-industry labor market pressures may negatively affect our ability to attract and retain our executive officers and other key technology, sales, marketing and support personnel and drive increases in our employee costs, both of which could adversely affect our business, financial condition and results of operations.
We Face Risks Related to our DevCo Business Model From time to time, we have entered into strategic joint ventures with qualified third parties to develop energy storage power generation projects (“DevCo Projects”), as more fully described under Note 1 — Business , in the accompanying notes to the consolidated financial statements in Part II, Item 8, “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K.
We Face Risks Related to our DevCo Business Model In the past, we have entered into strategic joint ventures with qualified third parties to develop energy storage power generation projects (“DevCo Projects”), as more fully described under Note 1 — Business , in the accompanying notes to the consolidated financial statements in Part II, Item 8, “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K.
Escalating trade tensions, particularly between the United States and China, have led to increased tariffs and trade restrictions, including tariffs applicable to certain materials and components for products used in solar energy projects and the renewable energy market more broadly, such as module supply and availability.
Escalating trade tensions, particularly between the United States and China, have led to increased tariffs and trade restrictions, including tariffs applicable to certain materials and components for products used in storage or solar energy projects and the renewable energy market more broadly, such as module supply and availability.
Regulatory Risks • The installation and operation of our energy storage systems are subject to environmental laws and regulations. • Existing regulations and changes to such regulations may reduce demand for our energy storage systems. • Our business could be adversely affected by trade tariffs or other trade barriers. • Negative attitudes toward renewable energy from lawmakers and others may adversely affect our business, including by delaying permits for our customers’ projects. • Opposition to our customers’ project requests for permits could adversely affect our operating plans.
Regulatory Risks • Negative attitudes toward renewable energy from lawmakers, government officials and others may adversely affect our business, including by delaying permits and government funding for our customers’ projects. • The installation and operation of our energy storage systems are subject to environmental laws and regulations. • Existing regulations and changes to such regulations may reduce demand for our energy storage systems. • Our business could be adversely affected by trade tariffs or other trade barriers. • Opposition to our customers’ project requests for permits could adversely affect our operating plans.
Our customers depend on our support organization to resolve any technical issues relating to our hardware and software-enabled services. In addition, our sales process is highly dependent on the quality of our hardware and software-enabled services, on our business reputation and on strong recommendations from our existing customers.
Our customers depend on our support organization to resolve any technical issues relating to our hardware and software-enabled services. In addition, our sales process is highly dependent on the quality of our software and service offerings, on our business reputation and on strong recommendations from our existing customers.
Additionally, increased demand for these services, without corresponding revenue, could increase costs and adversely affect our business, financial condition and results of operations. Our business currently depends on the availability of rebates, tax credits and other financial incentives.
Additionally, increased demand for these services, without corresponding revenue, could increase costs and adversely affect our business, financial condition and results of operations. Our business currently depends on the availability of rebates, tax credits and other financial incentives to our customers.
Risks Related to Third-Party Partners Our hardware and software-enabled services rely on interconnections to distribution and transmission facilities that are owned and operated by third parties, and as a result, are exposed to interconnection and transmission facility development and curtailment risks.
Risks Related to Third-Party Partners Our hardware and certain of our software-enabled services rely on interconnections to distribution and transmission facilities that are owned and operated by third parties, and as a result, are exposed to interconnection and transmission facility development and curtailment risks.
Many factors may influence the widespread adoption of renewable energy generation and demand for our hardware and software-enabled services, including, but not limited to the cost-effectiveness of renewable energy technologies as compared with conventional and competitive technologies, the performance and reliability of renewable energy products as compared with conventional and non-renewable products, fluctuations in economic and market conditions that impact the viability of conventional and competitive alternative energy sources, increases or decreases in the prices of oil, coal and natural gas, continued deregulation of the electric power industry and broader energy industry, and the availability or effectiveness of government subsidies and incentives.
Many factors may influence the widespread adoption of renewable energy generation and demand for our products and services, including, but not limited to the cost-effectiveness of renewable energy technologies as compared with conventional and competitive technologies, the performance and reliability of renewable energy products as compared with conventional and non-renewable products, fluctuations in economic and market conditions that impact the viability of conventional and competitive alternative energy sources, increases or decreases in the prices of oil, coal and natural gas, continued deregulation of the electric power industry and broader energy industry, and the availability or effectiveness of government subsidies and 12 incentives.
We rely on a very small number of suppliers of energy storage systems and other equipment.
We currently rely on a very small number of suppliers of energy storage systems and other equipment.
We may issue securities in the future in connection with investments or acquisitions or otherwise. The amount of shares of common stock issued in connection with an investment or acquisition could constitute a material portion of our then-outstanding shares of common stock.
We may issue securities in the future in connection with investments or acquisitions or otherwise. The number of shares of common stock issued in connection with an investment or acquisition could constitute a material portion of our then-outstanding shares of common stock.
Our hardware and software-enabled services are interconnected with electric distribution and transmission facilities owned and operated by regulated utilities necessary to deliver the electricity that our storage systems produce.
Our hardware and certain of our software-enabled services are interconnected with electric distribution and transmission facilities owned and operated by regulated utilities necessary to deliver the electricity that our storage systems produce.
Risk Factors Summary Risks Related to Our Business and Industry • Our limited operating history at current scale and our nascent industry make evaluating our business and prospects difficult. • Our distributed generation offerings may not receive widespread market acceptance. • Sufficient demand for our hardware and software-enabled services may not develop or take longer to develop than we anticipate. • Battery storage costs may not continue to decline. • Estimates and assumptions used to determine the size of our total addressable market may be inaccurate. • We currently face and will continue to face significant competition. • If we do not successfully execute on our new product and new market opportunities, our operating results could be adversely affected.
Risk Factors Summary Risks Related to Our Business and Industry • Our limited operating history at current scale and our nascent industry make evaluating our business and prospects difficult. • Our distributed generation offerings may not receive widespread market acceptance. • Sufficient demand for our software and services may not develop or take longer to develop than we anticipate. • Estimates and assumptions used to determine the size of our total addressable market may be inaccurate. • We currently face and will continue to face significant competition. • If we do not successfully execute on our new product and new market opportunities, our operating results could be adversely affected.
This may be particularly complicated by factors such as: • our limited operating history at current scale; • our historical and anticipated near-term lack of profitability; • unfamiliarity with or uncertainty about our energy storage systems and the overall perception of the distributed and renewable energy generation markets; • prices for electricity in particular markets; • competition from alternate sources of energy; • warranty or unanticipated service issues we may experience in connection with third-party manufactured hardware and our proprietary software; • the environmental consciousness and perceived value of environmental programs to our customers; • the size of our expansion plans in comparison to our existing capital base and the scope and history of operations; and • the availability and amount of incentives, credits, subsidies or other programs to promote installation of energy storage systems.
This may be particularly complicated by factors such as: • our recent change in business strategy; • our limited operating history at current scale; • our historical and current lack of profitability; • unfamiliarity with or uncertainty about our energy storage systems and the overall perception of the distributed and renewable energy generation markets; • prices for electricity in particular markets; • competition from alternate sources of energy; • warranty or unanticipated service issues we may experience in connection with third-party manufactured hardware and our proprietary software; • the environmental consciousness and perceived value of environmental programs to our customers; • the size of our expansion plans in comparison to our existing capital base and the scope and history of operations; and • the availability and amount of incentives, credits, subsidies or other programs to promote installation of energy storage systems.
Enterprises may be unwilling to adopt our offerings over traditional or competing power sources for any number of reasons, including the perception that our technology is unproven, lack of confidence in our business model, unavailability of back-up service providers to operate and maintain the energy storage systems, and lack of awareness of our related hardware and software-enabled services.
Enterprises may be unwilling to adopt our offerings over traditional or competing power sources for any number of reasons, including the perception that our technology is unproven, lack of confidence in our business model, unavailability of back-up service providers to operate and maintain the energy storage systems, and lack of awareness of our related products and services.
Our future growth depends on our ability to continue to develop and maintain our proprietary technology that supports our hardware and software-enabled services, including our Athena platform.
Our future growth depends on our ability to continue to develop and maintain our proprietary technology that supports our products and software-enabled services, including our Athena platform.
Regulatory Risks 29 The installation and operation of our energy storage systems are subject to environmental laws and regulations in various jurisdictions, and there is uncertainty with respect to the interpretation of certain environmental laws and regulations to our energy storage systems, especially as these regulations evolve over time.
The installation and operation of our energy storage systems are subject to environmental laws and regulations in various jurisdictions, and there is uncertainty with respect to the interpretation of certain environmental laws and regulations to our energy storage systems, especially as these regulations evolve over time.
For example, the amount of revenue we recognize in a given period is materially dependent on the volume of purchases of our energy storage systems and software-enabled services in that period, as well as on a small number of customers.
For example, the amount of revenue we recognize in a given period has been materially dependent on the volume of purchases of our energy storage systems and software-enabled services in that period, as well as on a small number of customers.
Unexpected changes in business conditions, the macroeconomic environment, geopolitical instability, materials pricing, including inflation of raw material costs, labor issues, wars, natural disasters, health epidemics, such as the COVID-19 pandemic, trade and shipping disruptions, port congestions and other factors beyond our or our suppliers’ control could also affect these suppliers’ ability to deliver components to us or to remain solvent and operational.
Unexpected changes in business conditions, the macroeconomic environment, geopolitical instability, materials pricing, including inflation of raw material costs, labor issues, wars, natural disasters, health epidemics, trade and shipping disruptions, port congestions and other factors beyond our or our suppliers’ control could also affect these suppliers’ ability to deliver components to us or to remain solvent and operational.
Our ability to achieve profitability in the future will depend on a number of factors, including: • increasing sales to existing customers and attracting new customers for our hardware and software-enabled services; • improving our gross margins; • growing our sales volume; • managing operating expenses; • improving our ability to procure energy storage systems from OEMs on cost-effective terms; • improving the effectiveness of our sales and marketing activities; • attracting and retaining key talent in a competitive marketplace; • operating our systems profitably for the benefit of our customers; and • the availability of incentives, including those associated with the IRA.
Our ability to achieve profitability in the future will depend on a number of factors, including: • executing our new strategy; • increasing sales to existing customers and attracting new customers for our products and services; • improving our gross margins; • growing our sales volume; • managing operating expenses; • improving our ability to procure energy storage systems from OEMs on cost-effective terms; • improving the effectiveness of our sales and marketing activities; • attracting and retaining key talent in a competitive marketplace; • operating our systems profitably for the benefit of our customers; and • the availability of incentives, including those associated with the IRA.
Risks Related to Our Intellectual Property and Technology If we are unsuccessful in developing and maintaining our proprietary technology, including our Athena platform, our ability to attract and retain partners could be impaired, our competitive position could be adversely affected and our revenue could be reduced.
Risks Related to Our Intellectual Property and Technology If we are unsuccessful in developing and maintaining our proprietary technology, our ability to attract and retain partners could be impaired, our competitive position could be adversely affected and our revenue could be reduced.
The market for renewable, distributed energy generation is emerging and rapidly evolving, and its future success is uncertain. If renewable energy generation proves unsuitable for widespread commercial deployment or if demand for our renewable energy hardware and software-enabled services fails to develop sufficiently, our revenue, market share and profitability would be adversely impacted.
The market for renewable, distributed energy generation is emerging and rapidly evolving, and its future success is uncertain. If renewable energy generation proves unsuitable for widespread commercial deployment or if demand for our renewable energy products and services fails to develop sufficiently, our revenue, market share and profitability would be adversely impacted.
Further, we face significant specific counterparty risk under long-term supply agreements when dealing with certain suppliers without a long, stable production and financial history. Given the uniqueness of our product, some of our suppliers do not have a long operating history and may not have sufficient capital resources.
Further, we face significant specific counterparty risk under long-term supply agreements when dealing with certain suppliers without a long, stable production and financial history. Some of our suppliers do not have a long operating history and may not have sufficient capital resources.
If our estimates of useful life for our energy storage systems and related hardware and software-enabled services are inaccurate, or if our OEM suppliers do not meet service and performance warranties and guarantees, our business and financial results could be adversely affected. We sell hardware and software-enabled services to our customers.
If our estimates of useful life for our energy storage systems and related hardware and software-enabled services are inaccurate, or if our OEM suppliers do not meet service and performance warranties and guarantees, our business and financial results could be adversely affected.
Our technology, including the Athena platform, could have undetected defects, errors or bugs in hardware or software which could reduce market adoption, damage our reputation with current or prospective customers and/or expose us to product liability and other claims that could materially and adversely affect our business.
Our technology could have undetected defects, errors or bugs in hardware or software which could reduce market adoption, damage our reputation with current or prospective customers and/or expose us to product liability and other claims that could materially and adversely affect our business.
In addition to the other risks described herein, the following factors could also cause our financial condition and results of operations to fluctuate on a quarterly basis: • the timing of customer installations of our hardware, which may depend on many factors such as availability of inventory, product quality or performance issues, or local permitting requirements, utility requirements, environmental, health and safety requirements, weather and customer facility construction schedules, and availability and schedule of our third-party general contractors; • the sizes of particular customer hardware installations and the number of sites involved in any particular quarter; • delays or cancellations of energy storage system purchases and installations; • fluctuations in our service costs, particularly due to unaccrued costs of servicing and maintaining energy storage systems; • weaker than anticipated demand for our energy storage systems due to changes in government incentives and policies; • interruptions in our supply chain; • the timing and level of additional purchases by existing customers; • unanticipated expenses or installation delays incurred by customers due to changes in governmental regulations, permitting requirements by local authorities at particular sites, utility requirements and environmental, health and safety requirements; and • disruptions in our sales, production, service or other business activities resulting from our inability to attract and retain qualified personnel.
In addition to the other risks described herein, the following factors could also cause our financial condition and results of operations to fluctuate on a quarterly basis: • the demand in, or timing of, customer installations of our hardware, which may depend on many factors such as availability of inventory, product quality or performance issues, or local permitting requirements, utility requirements, environmental, health and safety requirements, weather and customer facility construction schedules, and availability and schedule of our third-party general contractors; • delays or cancellations of energy storage system purchases and installations; • fluctuations in our service costs, particularly due to unaccrued costs of servicing and maintaining energy storage systems; • interruptions in our supply chain; • the timing and level of additional purchases by existing customers; • unanticipated expenses or installation delays incurred by customers due to changes in governmental regulations, permitting requirements by local authorities at particular sites, utility requirements and environmental, health and safety requirements; and • disruptions in our sales, production, service or other business activities resulting from our inability to attract and retain qualified personnel.
Because this is an emerging industry, broad acceptance of our hardware and software-enabled services is subject to a high level of uncertainty and risk. If the market develops more slowly than we anticipate, our business may be adversely affected.
Because this is an emerging industry, broad acceptance of our products and services is subject to a high level of uncertainty and risk. If the market develops more slowly than we anticipate, our business may be adversely affected.
We have incurred significant losses in the past and may incur net losses through at least 2024. Since our inception in 2009, we have incurred significant net losses and have used significant cash in our business. As of December 31, 2023, we had an accumulated deficit of approximately $772.5 million .
We have incurred significant losses in the past and may incur net losses through at least 2025. Since our inception in 2009, we have incurred significant net losses and have used significant cash in our business. As of December 31, 2024, we had an accumulated deficit of approximately $1,626.5 million .
Accordingly, in order to build and maintain our business, we must maintain confidence among customers, suppliers, analysts, ratings agencies and other parties in our hardware and software-enabled services, long-term financial viability and business prospects.
Accordingly, in order to build and maintain our business, we must maintain confidence among customers, suppliers, analysts, ratings agencies and other parties in our products and services, long-term financial viability and business prospects.
Our software-enabled services are essential to the operation of these hardware products. As a result, in connection with the sales of energy storage hardware, we enter into recurring long-term services agreements with customers for the usage of our Athena platform for approximately 3 to 20 years.
Our software and services offerings are essential to the operation of our hardware products that we sell to customers. As a result, in connection with the sales of energy storage hardware, we enter into recurring long-term services agreements with customers for the usage of our Athena platform for approximately 3 to 20 years.
Additional Risks Related to Our Securities • If we fail to maintain an effective system of disclosure controls and internal control over financial reporting, our ability to produce timely and accurate consolidated financial statements or comply with applicable regulations could be impaired. • We may issue a significant number of shares in the future in connection with investments or acquisitions. • Analysts may not publish sufficient or any research about our business or may publish inaccurate or unfavorable research. • The trading price of our common stock is volatile. • Certain provisions of our organizational documents may have an anti-takeover effect. • Our exclusive forum provision may limit our stockholders’ ability to obtain a favorable judicial forum for disputes. • The capped call transactions entered into in connection with the pricing of our 2028 and 2030 Convertible Notes may adversely affect the market price of our stock.
Additional Risks Related to Our Securities • We may fail to qualify for continued listing on the NYSE, which could make it more difficult for our stockholders to transact in our shares and reduce the value of their stock. • If we fail to maintain an effective system of disclosure controls and internal control over financial reporting, our ability to produce timely and accurate consolidated financial statements or comply with applicable regulations could be impaired. • We may issue a significant number of shares in the future in connection with investments or acquisitions. • Analysts may not publish sufficient or any research about our business or may publish inaccurate or unfavorable research. • The trading price of our common stock is volatile. • Certain provisions of our organizational documents may have an anti-takeover effect. 11 • Our exclusive forum provision may limit our stockholders’ ability to obtain a favorable judicial forum for disputes. • The capped call transactions entered into in connection with the pricing of our 2028 and 2030 Convertible Notes may adversely affect the market price of our stock.
Our disclosures on these matters or a failure to satisfy evolving stakeholder expectations for ESG practices and reporting may potentially harm our reputation and impact employee retention, customer relationships and access to capital.
Our disclosures on these matters or a failure to satisfy evolving stakeholder expectations for ESG practices and reporting, which may conflict with one another, may potentially harm our reputation and impact employee retention, customer relationships and access to capital.
Some products that we import may also be affected by the Uyghur Forced Labor Prevention Act (the “UFLPA”), which was signed into law by President Biden on December 23, 2021. According to U.S.
Some products that we import may also be affected by the Uyghur Forced Labor Prevention Act (the “UFLPA”), which was signed into law by former President Biden in 2021. According to U.S.
The rates at which electricity is available from a customer’s local electric utility company is subject to change and any changes in such rates may affect the relative benefits of our energy storage systems.
The rates at which electricity is available from a customer’s local electric utility company is subject to change and any changes in such rates may affect the relative benefits of our products and services.
The loss of any one of our significant customers, their inability to perform under their contracts, their termination or failure to renew their contracts with us, or their default in payment could cause our revenue and our working capital to decline materially. As of December 31, 2023, we had $302.8 million of accounts receivable including $190.2 million of unbilled receivables.
The loss of any one of our significant customers, their inability to perform under their contracts, their termination or failure to renew their contracts with us, or their default in payment could cause our revenue and our working capital to decline materially. As of December 31, 2024, we had $59.3 million of accounts receivable including $7.8 million of unbilled receivables.
We may be subject to claims that our hardware and software-enabled services, including the Athena platform have malfunctioned and persons were injured or purported to be injured. Any insurance that we carry may not be sufficient or it may not apply to all situations.
We may be subject to claims that our product and service offerings, including the Athena platform, have malfunctioned and persons were injured or purported to be injured. Any insurance that we carry may not be sufficient or it may not apply to all situations.
Securities litigation against us could result in substantial costs and divert our management’s time and attention from other business concerns, which could have a material adverse effect on our business, regardless of the outcome of such litigation.
Securities litigation against us could result in substantial costs and divert our management’s time and attention from other business concerns, which could have a material adverse effect on our business, regardless of the outcome of such litigation. We may be the target of additional litigation of this type in the future.
The implementation and use of distributed generation at scale is still relatively nascent, and we cannot be sure that potential customers will accept such solutions broadly, or our hardware and software-enabled services more specifically.
The implementation and use of distributed generation at scale is still relatively nascent, and we cannot be sure that potential customers will accept our services and solutions broadly.
We may be the target of additional litigation of this type in the future. 33 Our financial condition and results of operations and other key metrics are likely to fluctuate on a quarterly basis in future periods, which could cause our results for a particular period to fall below expectations, resulting in a severe decline in the price of our common stock.
Our financial condition and results of operations and other key metrics are likely to continue to fluctuate on a quarterly basis in future periods, which could cause our results for a particular period to fall below expectations, resulting in a severe decline in the price of our common stock.
Losing or delaying return of all or a portion of our investments in our DevCo Projects could have a material adverse effect on our business, financial condition and results of operations. We depend on significant customers for a substantial portion of our revenue.
Losing or delaying return of all or a portion of our investments in our DevCo Projects could have a material adverse effect on our business, financial condition and results of operations.
If, for whatever reason, there is a sustained increase in the price of battery storage systems, solar PV system components or related hardware, our business and financial condition will be negatively affected.
If, for whatever reason, there is a sustained increase in the price of battery storage systems, solar PV system components or related hardware, our business and financial condition will be negatively affected. Future product recalls could materially adversely affect our business, financial condition and operating results.
If any of our customers face unexpected situations such as financial difficulties, we may not be able to receive full or any payment of the uncollected sums or enforce any judgment debts against such clients, and our business, results of operations and financial condition could be materially and adversely affected.
If any of our customers face unexpected situations such as financial difficulties, we may not be able to receive full or any payment of the uncollected sums or enforce any judgment debts against such clients, and our business, results of operations and financial condition could be materially and adversely affected. 15 Our hardware and software-enabled services involve a lengthy sales and installation cycle.
These provisions, among other things: • establish a staggered board of directors divided into three classes serving staggered three-year terms, such that not all members of our board of directors will be elected at one time; • authorize our board of directors to issue new series of preferred stock without stockholder approval and create, subject to applicable law, a series of preferred stock with preferential rights to dividends or our assets upon liquidation, or with superior voting rights to our existing common stock; • eliminate the ability of stockholders to call special meetings of stockholders; • eliminate the ability of stockholders to fill vacancies on our board of directors; • establish advance notice requirements for nominations for election to our board of directors or for proposing matters that can be acted upon by stockholders at our annual stockholder meetings; • permit our board of directors to establish the number of directors; • provide that our board of directors is expressly authorized to make, alter or repeal our Amended and Restated Bylaws; • provide that stockholders can remove directors only for cause and only upon the approval of not less than 66 2∕3 of all outstanding shares of our voting stock; 34 • require the approval of not less than 66 2∕3 of all outstanding shares of our voting stock to amend our Amended and Restated Bylaws and specific provisions of our Amended and Restated Charter; and • limit the jurisdictions in which certain stockholder litigation may be brought.
These provisions, among other things: • establish a staggered board of directors divided into three classes serving staggered three-year terms, such that not all members of our board of directors will be elected at one time; • authorize our board of directors to issue new series of preferred stock without stockholder approval and create, subject to applicable law, a series of preferred stock with preferential rights to dividends or our assets upon liquidation, or with superior voting rights to our existing common stock; • eliminate the ability of stockholders to call special meetings of stockholders; • eliminate the ability of stockholders to fill vacancies on our board of directors; • establish advance notice requirements for nominations for election to our board of directors or for proposing matters that can be acted upon by stockholders at our annual stockholder meetings; • permit our board of directors to establish the number of directors; • provide that our board of directors is expressly authorized to make, alter or repeal our Amended and Restated Bylaws; • provide that stockholders can remove directors only for cause and only upon the approval of not less than 66 2∕3 of all outstanding shares of our voting stock; • require the approval of not less than 66 2∕3 of all outstanding shares of our voting stock to amend our Amended and Restated Bylaws and specific provisions of our Amended and Restated Charter; and • limit the jurisdictions in which certain stockholder litigation may be brought. 35 As a Delaware corporation, we are subject to the anti-takeover provisions of Section 203 of the Delaware General Corporation Law (the “DGCL”), which prohibits a Delaware corporation from engaging in a business combination specified in the statute with an interested stockholder (as defined in the statute) for a period of three years after the date of the transaction in which the person first becomes an interested stockholder, unless the business combination is approved in advance by a majority of the independent directors or by the holders of at least two-thirds of the outstanding disinterested shares.
In addition, our revenue, key operating metrics and other operating results in future quarters may fall short of the expectations of investors and financial analysts, which could have an adverse effect on the price of our common stock.
In addition, our revenue, key operating metrics and other operating results in future quarters may fall short of the expectations of investors and financial analysts, which could have an adverse effect on the price of our common stock. We may issue a significant number of shares in the future in connection with investments or acquisitions.
We must maintain customer confidence in our long-term business prospects in order to grow our business. Customers may be less likely to purchase our hardware and services if they do not believe that our business will succeed or that our services and support and other operations will continue in the long term.
Customers may be less likely to purchase our products and services if they do not believe that our business will succeed or that our services and support and other operations will continue in the long term.
Governments, often acting through state utility or public service commissions, may change or adopt different requirements for utilities and rates for commercial customers on a regular basis.
In the U.S., governments frequently modify these statutes and regulations. Governments, often acting through state utility or public service commissions, may change or adopt different requirements for utilities and rates for commercial customers on a regular basis.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeOur Compliance and Security Officer (“CSO”) is the head of our experienced cybersecurity team and is responsible for assessing and managing our cyber risk management program. Our CSO collaborates with our business, engineering, human resources, legal, and other functions to implement and enforce our cyber policies.
Biggest changeOur Compliance and Security Officer (“CSO”), who has extensive cybersecurity knowledge and skills gained from more than 20 years of work experience at the Company and elsewhere, is the head of our experienced cybersecurity team and is responsible for assessing and managing our cyber risk management program.
For a further explanation of the cybersecurity risks and threats that we could be subject, see “A failure of our information technology and data security infrastructure could adversely affect our business and operations” in Part I, Item 1A, “Risk Factors” of this Annual Report on Form 10-K.
For a further explanation of the cybersecurity risks and threats to which we could be subject, see “A failure of our information technology and data security infrastructure could adversely affect our business and operations” in Part I, Item 1A, “Risk Factors” of this Annual Report on Form 10-K.
In addition to our internal processes, our partnerships with various third-party vendors comprise a key component of our cyber risk management program. We engage several reputable third-party companies to monitor and maintain the performance 36 and effectiveness of our products and services, as well as to conduct System and Organization Controls (SOC) assessments and our mandatory cybersecurity training for employees.
We engage several reputable third-party companies to monitor and work to maintain the performance and effectiveness of our products and services, as well as to conduct System and Organization Controls (SOC) assessments and our mandatory cybersecurity training for employees.
In addition, cybersecurity risks are reviewed by the Board as part of the Company’s corporate risk mapping exercise. Although we have experienced, and will continue to experience, cyber incidents in the normal course of our business, prior cyber incidents have not had a material adverse effect on our business.
Although we have experienced, and will continue to experience, cyber incidents in the normal course of our business, as of the date of this report, prior cyber incidents have not had a material adverse effect on the Company, including our business strategy, results of operations, and financial conditions.
Added
In addition to our internal processes, our partnerships with various third-party vendors comprise a key component of our cyber risk management program.
Added
We are also implementing systems and processes designed to oversee, identify and reduce the potential impact of a security incident at a third-party vendor, service provider or customer or otherwise implicating the third-party technology and systems we use.
Added
The CSO receives reports on cybersecurity threats on an ongoing basis and regularly reviews risk management measures implemented by the Company to identify and mitigate data protection and cybersecurity risks. Our CSO collaborates with our business, engineering, human resources, legal, and other 37 functions to implement and enforce our cyber policies.
Added
In addition, cybersecurity risks are reviewed by the Board as part of the Company’s corporate risk mapping exercise.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeType of Space Location Approximate Square Footage Leased or Owned Office Gurugram, India 41,800 square feet Leased Office Boulder, Colorado 15,800 square feet Leased Warehouse Longmont, Colorado 13,950 square feet Leased We believe our space is adequate for our current needs and that suitable additional or substitute spaces will be available to accommodate the foreseeable expansion of our operations.
Biggest changeType of Space Location Approximate Square Footage Leased or Owned Office Gurugram, India 41,800 square feet Leased Office Broomfield, Colorado 13,600 square feet Leased Manufacturing Longmont, Colorado 24,100 square feet Leased We believe our space is adequate for our current needs and that suitable additional or substitute spaces will be available to accommodate the foreseeable expansion of our operations.
ITEM 2. PROPERTIES Our corporate headquarters is located in San Francisco, California. This facility comprises approximately 23,500 square feet of office space. We lease this facility. In addition, our other material properties are described below.
ITEM 2. PROPERTIES Our corporate headquarters is located in San Francisco, California. This facility comprises approximately 6,500 square feet of office space. We lease this facility. In addition, our other material properties are described below.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeITEM 3. LEGAL PROCEEDINGS The information with respect to this Item 3, “Legal Proceedings” is set forth in Note 20 — Commitments and Contingencies, 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 4.
Biggest changeITEM 3. LEGAL PROCEEDINGS The information with respect to this Item 3, “Legal Proceedings” is set forth in Note 21 — Commitments and Contingencies, 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 4.
MINE SAFETY DISCLOSURES Not applicable. 37 PART II.
MINE SAFETY DISCLOSURES Not applicable. 38 PART II.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe payment of cash dividends is subject to the discretion of the Board and may be affected by various factors, including our future earnings, financial condition, capital requirements, share repurchase activity, current and future planned strategic growth initiatives, levels of indebtedness, and other considerations our Board of Directors deems relevant.
Biggest changeThe payment of cash dividends is at the sole discretion of the Board and may be affected by various factors, including our future earnings, financial condition, capital requirements, share repurchase activity, current and future planned strategic growth initiatives, levels of indebtedness, and other considerations our Board deems relevant. Recent Sales of Unregistered Securities None.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information for Common Stock Our common stock is traded on The New York Stock Exchange under the symbol “STEM.” Holders As of February 21, 2024, there were 93 holders of record of our common stock.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information for Common Stock Our common stock is traded on The New York Stock Exchange under the symbol “STEM.” Holders As of February 25, 2025, there were 88 holders of record of our common stock.
Removed
Stock Performance Graph This performance graph shall not be deemed “soliciting material” or deemed to be “filed” with the SEC, for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities under that Section, and shall not be deemed to be incorporated by reference into any of our filings under the Securities Act.
Added
Because many of our shares of common stock are held by brokers and other institutions on behalf of stockholders, we are unable to estimate the total number of stockholders represented by these record holders.
Removed
The following graph compares (i) the cumulative total stockholder return on our common stock from August 20, 2020 (the date our common stock commenced trading on the New York Stock Exchange under our former symbol “STPK.”) through December 31, 2023 with (ii) the cumulative total return of the Russell 2000 Index and the NASDAQ Clean Edge Green Energy Index over the same period, assuming the investment of $100 in our common stock and in both of the other indices on August 20, 2020 and the reinvestment of dividends.
Removed
As discussed above, we have never declared or paid a cash dividend on our common stock and do not anticipate declaring or paying a cash dividend in the foreseeable future. 38 Recent Sales of Unregistered Securities Except as previously disclosed in a Current Report on Form 8-K filed with the SEC on April 3, 2023, no other unregistered sales of our common stock were made during the year ended December 31, 2023 .

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeOther Income, Net Other income, net consists primarily of income from equity investments and foreign exchange gains or losses. 47 Results of Operations Results of Operations for the Years Ended December 31, 2023 and 2022 Year Ended December 31, $ Change % Change 2023 2022 (In thousands, except percentages) Revenue Services and other revenue $ 62,548 $ 52,143 $ 10,405 20% Hardware revenue 398,967 310,837 88,130 28% Total revenue 461,515 362,980 98,535 27% Cost of revenue Cost of services and other revenue 50,298 43,153 7,145 17% Cost of hardware revenue 407,552 286,735 120,817 42% Total cost of revenue 457,850 329,888 127,962 39% Gross profit 3,665 33,092 (29,427) (89)% Operating expenses Sales and marketing 51,556 48,882 2,674 5% Research and development 56,508 38,303 18,205 48% General and administrative 74,915 77,028 (2,113) (3)% Total operating expenses 182,979 164,213 18,766 11% Loss from operations (179,314) (131,121) (48,193) 37% Other income (expense), net Interest expense, net (14,977) (10,468) (4,509) 43% Gain on extinguishment of debt, net 59,121 — 59,121 * Change in fair value of derivative liability (7,731) — (7,731) * Other income, net 2,921 2,374 547 23% Total other income (expense), net 39,334 (8,094) 47,428 (586)% Loss before (provision for) benefit from income taxes (139,980) (139,215) (765) 1% (Provision for) benefit from income taxes (433) 15,161 (15,594) (103)% Net loss $ (140,413) $ (124,054) $ (16,359) 13% *Percentage is not meaningful Revenue Total revenue increased by $98.5 million, or 27%, for the year ended December 31, 2023, as compared to the year ended December 31, 2022.
Biggest changeOther Income, Net Other income, net consists primarily of income from equity investments and foreign exchange gains or losses. 49 Results of Operations Results of Operations for the Years Ended December 31, 2024 and 2023 Year Ended December 31, $ Change % Change 2024 2023 (In thousands, except percentages) Revenue Services and other revenue $ 67,810 $ 62,548 $ 5,262 8% Hardware revenue 76,774 398,967 (322,193) (81)% Total revenue 144,584 461,515 (316,931) (69)% Cost of revenue Cost of services and other revenue 52,394 50,298 2,096 4% Cost of hardware revenue 103,248 407,552 (304,304) (75)% Total cost of revenue 155,642 457,850 (302,208) (66)% Gross (loss) profit (11,058) 3,665 (14,723) (402)% Operating expenses Sales and marketing 37,759 51,556 (13,797) (27)% Research and development 51,282 56,508 (5,226) (9)% General and administrative 88,071 74,915 13,156 18% Impairment of parent company guarantees 104,134 — 104,134 * Impairment of goodwill 547,152 — 547,152 * Total operating expenses 828,398 182,979 645,419 353% Loss from operations (839,456) (179,314) (660,142) 368% Other (expense) income, net Interest expense (18,293) (14,977) (3,316) 22% Gain on extinguishment of debt, net — 59,121 (59,121) * Change in fair value of derivative liability 1,477 (7,731) 9,208 * Other income, net 2,590 2,921 (331) (11)% Total other (expense) income, net (14,226) 39,334 (53,560) (136)% Loss before (provision for) benefit from income taxes (853,682) (139,980) (713,702) 510% (Provision for) benefit from income taxes (332) (433) 101 (23)% Net loss $ (854,014) $ (140,413) $ (713,601) 508% *Percentage is not meaningful Revenue Total revenue decreased by $316.9 million, or 69%, for the year ended December 31, 2024, as compared to the year ended December 31, 2023.
(5) Adjusted EBITDA for the year ended December 31, 2023 reflects the exclusion of other expenses of $7.9 million. Other expenses are comprised of $5.6 million in accruals for sales taxes, $1.3 million for expenses related to restructuring costs, $0.5 million for impairments, and $0.5 million of other non-recurring expenses.
Adjusted EBITDA for the year ended December 31, 2023 reflects the exclusion of other expenses of $7.9 million. Other expenses are comprised of $5.6 million in accruals for sales taxes, $1.3 million for expenses related to restructuring costs, $0.5 million for impairments, and $0.5 million of other non-recurring expenses.
Other Income (Expense), Net Interest Expense, Net Interest expense, net consists primarily of interest on our outstanding borrowings under our outstanding notes payable, convertible senior notes, and financing obligations and accretion on our asset retirement obligations.
Other (Expense) Income, Net Interest Expense Interest expense, net consists primarily of interest on our outstanding borrowings under our outstanding notes payable, convertible senior notes, and financing obligations and accretion on our asset retirement obligations.
Non-cash charges primarily consisted of depreciation and amortization of $46.3 million, non-cash interest expense of $2.6 million related to debt issuance costs, stock-based compensation expense of $45.1 million, change in fair value of derivative liability of $7.7 million, non-cash lease expense of $2.9 million, impairment of energy storage systems of $4.7 million, impairment loss of project assets of $0.2 million, provision for accounts receivable allowance of $1.4 million, and net recognized loss on investments of $1.6 million, partially offset by a net gain on debt extinguishment of $59.1 million, an income tax benefit of $0.3 million, net accretion of discount on investments of $1.8 million, and other non-cash items of $0.7 million.
Non-cash charges primarily consisted of depreciation and amortization of $46.3 million, non-cash interest expense of $2.6 million related to debt issuance costs, stock-based compensation expense of $45.1 million, change in fair value of derivative liability of $7.7 million, non-cash lease expense of $2.9 million, impairment of energy storage systems of $4.7 million, impairment loss of project assets of $0.2 million, provision for accounts receivable allowance of $1.4 million, and net recognized loss on investments of $1.6 million, partially offset by a net gain on debt extinguishment of $59.1 million, an income tax benefit of $0.3 million, and net accretion of discount on investments of $1.8 million, and other non-cash items of $0.7 million.
Financing Activities During the year ended December 31, 2023, net cash provided by financing activities was $90.2 million, primarily consisting of proceeds from issuance of convertible notes of $232.4 million, and proceeds from exercise of stock options of $0.3 million, partially offset by the repayment of $99.8 million for the partial cancellation of our 2028 Convertible Notes, the repayment of financing obligations of $12.7 million, the purchase of capped calls of $27.8 million, the repayment of notes payable of $2.1 million, and a redemption of non-controlling interest of $0.1 million.
During the year ended December 31, 2023, net cash provided by financing activities was $90.2 million, primarily consisting of proceeds from issuance of convertible notes of $232.4 million, and proceeds from exercise of stock options of $0.3 million, partially offset by the repayment of $99.8 million for the partial cancellation of our 2028 Convertible Notes, repayment of financing obligations of $12.7 million, the purchase of capped calls of $27.8 million, the repayment of notes payable of $2.1 million, and a redemption of non-controlling interest of $0.1 million.
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.
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. 52 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 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 Expense 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 and other costs.
These expenses may vary from period to period as a percentage of revenue, depending primarily upon when we choose to make more significant investments. 48 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 and other costs.
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 .
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 . 57
Goodwill Goodwill is tested for impairment on annual basis. If circumstances change during interim periods between annual tests that would more likely than not reduce the fair value of a reporting unit below its carrying value, we will test goodwill for impairment.
Goodwill Goodwill is tested for impairment on an annual basis. If circumstances change during interim periods between annual tests that would more likely than not reduce the fair value of a reporting unit below its carrying value, we will test goodwill for impairment.
The IRA was signed into law in August 2022 and includes incentives and tax credits aimed at reducing the effects of climate change, such as a tax credit for stand-alone battery storage projects.
The IRA, which was signed into law in August 2022, includes incentives and tax credits aimed at reducing the effects of climate change, such as a tax credit for stand-alone battery storage projects.
Gross profit, 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.
Gross (loss) profit, 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.
Cost of hardware revenue related to the sale of energy storage systems is recognized when the delivery of the product is completed. Gross Profit Our gross profit fluctuates significantly from quarter to quarter.
Cost of hardware revenue related to the sale of energy storage systems is recognized when the delivery of the product is completed. Gross (Loss) Profit Our gross (loss) profit fluctuates significantly from quarter to quarter.
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, 2023 (in thousands).
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, 2024 (in thousands).
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 2023 and 2022 items and year-to-year comparisons between 2023 and 2022.
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 2024 and 2023 items and year-to-year comparisons between 2024 and 2023.
Th 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 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.
(2) Total value of bookings in dollars, as reflected on a specific date. Backlog increases as new contracts are executed (bookings) and decreases as integrated storage systems are delivered and recognized as revenue. (3) Total GWh of systems in operation or under contract.
(2) Total value of bookings in dollars, as reflected on a specific date. Backlog increases as new contracts are executed (bookings) and decreases as integrated storage systems are delivered and recognized as revenue. (3) Total GW of systems in operation or under contract.
Investing Activities During the year ended December 31, 2023, net cash provided by investing activities was $135.7 million, primarily consisting of $155.7 million in net proceeds of available-for-sale investments, partially offset by $1.8 million used for acquisitions, net of cash acquired, $2.6 million used for the purchase of energy systems, $14.1 million in capital expenditures on internally-developed software, and $1.5 million used for the purchase of property and equipment.
During the year ended December 31, 2023, net cash provided by investing activities was $135.7 million, primarily consisting of $155.7 million in net proceeds of available-for-sale investments, and $0.1 million used for the purchase of equity method investment, partially offset by $1.8 million used for acquisitions, net of cash acquired, $2.6 million used for the purchase of energy systems, $14.1 million in capital expenditures on internally-developed software, and $1.5 million used for the purchase of property and equipment.
The cost of lithium-ion energy storage hardware has generally declined over the last decade, but increased demand and global supply chain constraints could cause price increases in the future. The market for energy storage is rapidly evolving, and while we believe costs will continue to decline over time, there is no guarantee.
The cost of lithium-ion energy storage hardware has generally declined over the last decade, but increased demand and global supply chain constraints or trade and tariff actions could cause price increases in the future. The market for energy storage is rapidly evolving, and while we believe costs will continue to decline over time, there is no guarantee.
Discussions of 2021 items and year-to-year comparisons between 2022 and 2021 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 February 17, 2023.
Discussions of 2022 items and year-to-year comparisons between 2023 and 2022 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 February 29, 2024.
Parent Company Guarantees In certain customer contracts, we previously agreed to provide a guarantee that the value of purchased hardware will not decline for a certain period of time, as more fully described above 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.
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.
The increase was primarily driven by an increase of $7.2 million in interest on our 2028 and 2030 Convertible Notes, partially offset by the accretion of discount on short-term investments of $1.8 million, a decrease of $0.7 million in interest on financing obligations, and a decrease in other interest expense of $0.2 million.
The increase was primarily driven by an increase of $2.5 million in interest on our 2028 and 2030 Convertible Notes, and the accretion of discount on short-term investments of $2.0 million, partially offset by a decrease of $1.2 million in interest on financing obligations.
Failure to generate sufficient revenues, 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.
Failure to successfully implement our new 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.
Because we had not previously incurred costs above initially agreed prices with a hardware supplier and were subsequently required to pay liquidated damages to a customer, we excluded these two items from adjusted EBITDA and non-GAAP gross profit to better facilitate comparisons of our underlying operating performance across periods. 42 The following table provides a reconciliation of gross profit and margin (GAAP) to non-GAAP gross profit and margin (in millions, except for percentages): Years Ended December 31, 2023 2022 Revenue $ 461.5 $ 363.0 Cost of revenue (457.9) (329.9) GAAP gross profit $ 3.6 $ 33.1 GAAP gross margin (%) 1 % 9 % Non-GAAP Gross Profit GAAP Revenue $ 461.5 $ 363.0 Add: Revenue constraint (1) 10.2 — Add: Revenue reduction, net (2) 35.1 — Add: Liquidated damages (3) 4.8 — Subtotal 511.6 363.0 Less: Cost of revenue (457.9) (329.9) Add: Amortization of capitalized software & developed technology 13.5 10.7 Add: Impairments 5.2 3.5 Add: Excess supplier costs (3) 2.7 — Non-GAAP gross profit $ 75.1 $ 47.3 Non-GAAP gross margin (%) 15 % 13 % (1) Refer to the discussion of revenue constraint in “— Non-GAAP Gross Profit and Margin” above.
Because we had not previously incurred costs above initially agreed prices with a hardware supplier and were subsequently required to pay liquidated damages to a customer, we excluded these two items from adjusted EBITDA and non-GAAP gross profit to better facilitate comparisons of our underlying operating performance across periods. 44 The following table provides a reconciliation of gross profit and margin (GAAP) to non-GAAP gross profit and margin (in millions, except for percentages): Years Ended December 31, 2024 2023 Revenue $ 144.6 $ 461.5 Cost of revenue (155.7) (457.9) GAAP gross (loss) profit $ (11.1) $ 3.6 GAAP gross margin (%) (8) % 1 % Non-GAAP Gross Profit GAAP Revenue $ 144.6 $ 461.5 Add: Revenue constraint (1) — 10.2 Add: Revenue reduction, net (2) 38.7 35.1 Add: Liquidated damages (3) — 4.8 Subtotal 183.3 511.6 Less: Cost of revenue (155.7) (457.9) Add: Amortization of capitalized software & developed technology 16.2 13.5 Add: Impairments 18.9 5.2 Add: Excess supplier costs (3) 1.0 2.7 Non-GAAP gross profit $ 63.7 $ 75.1 Non-GAAP gross margin (%) 35 % 15 % (1) Refer to the discussion of revenue constraint in “— Non-GAAP Gross Profit and Margin” above.
The implementation of the IRA is expected to further reduce the cost of battery storage systems for certain customers; however, there are numerous restrictions and requirements associated with qualifying for the tax credits and other incentives available under the IRA, and we continue to assess how the IRA may affect our business.
The implementation of the IRA is expected to further reduce the cost of battery storage systems for certain customers; however, there are numerous restrictions and requirements associated with qualifying for the tax credits and other incentives available under the IRA, and we continue to assess Treasury Department and other guidance on how the IRA impacts our business.
This in turn caused fulfillment and delivery delays on an order to one of our customers, as a result of which we further incurred liquidated damages of $4.8 million under the customer contract.
This in turn caused fulfillment and delivery delays on an order to one of our customers, as a result of which we further incurred liquidated damages of $4.8 million during the year ended December 31, 2023, under the customer contract.
For instance, our revenue recognized in the third and fourth quarters of the fiscal year ended December 31, 2023 accounted for 65% of the total revenue recognized in the fiscal year ended December 31, 2023 .
For instance, our revenue recognized in the third and fourth quarters of the fiscal year ended December 31, 2024 accounted for 59% of the total revenue recognized in the fiscal year ended December 31, 2024 .
The accounting policy and timing of revenue recognition for host customer contracts and partnership arrangements that qualify as contracts with customers under ASC 606, are described within 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 also have the contractual right to receive consideration for our performance obligations. 47 The accounting policy and timing of revenue recognition for host customer contracts and partnership arrangements that qualify as contracts with customers under ASC 606, are described within 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 .
Such an event could materially adversely affect our business, prospects, financial condition and results of operations. 40 DevCo Joint Ventures We, through an indirect wholly-owned development subsidiary, have entered into strategic joint ventures with qualified third parties to develop select energy storage generation projects (“DevCo Projects”), as more fully described above under Note 1 — Business 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.
DevCo Joint Ventures We, through an indirect wholly-owned development subsidiary, have 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 1 — Business 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.
Fees charged to customers for energy optimization services 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. Services and other revenue also includes 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.
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, 2023, our principal sources of liquidity were cash, cash equivalents, and short-term investments of $113.6 million, which were held for working capital purposes and for investment growth opportunities .
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, 2024, our principal sources of liquidity were cash and cash equivalents of $56.3 million, which were held for working capital purposes and for investment growth opportunities .
The net increase was primarily due to an increase of $0.9 million due to an increase in recognized accretion expense on assets, an increase of $0.3 million in income from equity investments, and an increase of $0.9 million in interest income from short-term investments , partially offset by a $1.6 million realized loss on short-term investments.
The net decrease was primarily due to a decrease of $0.7 million due to an increase in recognized accretion expense on assets, a decrease of $0.2 million in income from equity investments, and a decrease of $0.8 million in interest income from short-term investments , partially offset by a $1.4 million realized loss on short-term investments.
We have financed our operations primarily through cash flows from customers, proceeds received from the Merger, convertible senior notes, and the issuance of convertible preferred stock. Our total revenue grew from $363.0 million for the year ended December 31, 2022 to $461.5 million for the year ended December 31, 2023.
We have financed our operations primarily through cash flows from customers, proceeds from the Merger, convertible senior notes, and issuance of convertible preferred stock. Our total revenue decrease d from $461.5 million for the year ended December 31, 2023 to $144.6 million for the year ended December 31, 2024.
Restructuring expenses consisted of employee severance and other exit costs. 44 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, 2023 2022 (in millions) Key Financial Metrics Revenue $ 461.5 $ 363.0 GAAP gross profit $ 3.6 $ 33.1 GAAP gross margin (%) 1 % 9 % Non-GAAP gross profit $ 75.1 $ 47.3 Non-GAAP gross margin (%) 15 % 13 % Net loss $ (140.4) $ (124.1) Adjusted EBITDA $ (19.5) $ (46.0) Key Operating Metrics Bookings (1) $ 1,532.4 $ 1,056.9 Contracted backlog* (2) 1,929.3 969.0 Contracted storage AUM (in GWh)* (3) 5.5 3.1 Solar monitoring AUM (in GW)* (4) 27.5 25.0 CARR* (5) 91.0 65.3 * at period end (1) As described below.
Restructuring expenses consisted of employee severance and other exit costs. 46 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, 2024 2023 (in millions) Key Financial Metrics Revenue $ 144.6 $ 461.5 GAAP gross (loss) profit $ (11.1) $ 3.6 GAAP gross margin (%) (8) % 1 % Non-GAAP gross profit $ 63.7 $ 75.1 Non-GAAP gross margin (%) 35 % 15 % Net loss $ (854.0) $ (140.4) Adjusted EBITDA $ (22.8) $ (19.5) Key Operating Metrics Bookings (1) $ 435.9 $ 1,532.4 Contracted backlog* (2) 1,168.1 1,929.3 Contracted storage AUM (in GWh)* 5.6 5.5 Solar monitoring AUM (in GW)* (3) 29.9 27.5 CARR* (4) 86.0 91.0 * at period end (1) As described below.
We recorded impairment charges for energy storage systems amounting to $4.7 million in d uring the year ended December 31, 2023 .
We recorded impairment charges for energy storage systems amounting to $0.8 million in d uring the year ended December 31, 2024 .
However, executed customer contracts, without binding purchase orders, are cancellable without penalty by either party. 45 For partnership sales, once a purchase order has been executed, the booking is considered to be a contract in accordance with ASC 606, and therefore, gives rise to a remaining performance obligation as we have an obligation to transfer hardware and energy optimization services in our partnership agreements.
For partnership sales, once a purchase order has been executed, the booking is considered to be a contract in accordance with ASC 606, and therefore, gives rise to a remaining performance obligation as we have an obligation to transfer hardware and energy optimization services in our partnership agreements.
See also Note 1 — Business , 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 financial reporting purposes, Legacy Stem is treated as the accounting acquirer.
See also Note 1 — Business , 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 .
(4) Total GW of systems in operation or under contract. (5) Contracted Annual Recurring Revenue (CARR): Annual run rate for all executed software services contracts including contracts signed in the period for systems that are not yet commissioned or operating.
(4) Contracted Annual Recurring Revenue (“CARR”): Annual run rate for all executed software services contracts including contracts signed in the period for systems that are not yet commissioned or operating.
The net cash outflow from changes in operating assets and liabilities was primarily driven by an increase in accounts receivable of $155.8 million, an increase in deferred costs with suppliers of $37.1 million, an increase in other assets of $29.4 million, an increase in contract origination costs of $9.6 million, an increase in project assets of $3.7 million, a decrease in lease liabilities, net of $1.6 million, partially offset by a decrease in inventory of $18.6 million, an increase in accounts payable of $53.3 million, an increase in accrued expenses and other liabilities of $62.2 million, and an increase in deferred revenue of $51.0 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 of $20.3 million, a decrease in accounts payable of $48.1 million, and a decrease in lease liabilities, net of $2.8 million, and a decrease in deferred revenue of $6.9 million.
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.
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. 55 Critical Accounting Policies and Estimates Our discussion and analysis of financial condition and results of operations are based upon our consolidated financial statements.
Cost of services and other revenue also increased of $7.1 million , primarily due to solar cloud service costs and amortization of internally developed software costs . 48 Operating Expenses Sales and Marketing Sales and marketing expense increased by $2.7 million, or 5%, for the year ended December 31, 2023, as compared to the year ended December 31, 2022.
Cost of services and other revenue increased $2.1 million , primarily due to an increase in solar cloud service costs and amortization of internally developed software costs . 50 Operating Expenses Sales and Marketing Sales and marketing expense decreased by $13.8 million, or 27%, for the year ended December 31, 2024, as compared to the year ended December 31, 2023.
Research and Development Research and development expense increased by $18.2 million, or 48%, for the year ended December 31, 2023, as compared to the year ended December 31, 2022.
Research and Development Research and development expense decreased by $5.2 million, or 9%, for the year ended December 31, 2024, as compared to the year ended December 31, 2023.
General and Administrative General and administrative expense decreased by $2.1 million, or 3%, for the year ended December 31, 2023, as compared to the year ended December 31, 2022.
General and Administrative General and administrative expense increased by $13.2 million, or 18%, for the year ended December 31, 2024, as compared to the year ended December 31, 2023.
Other Expense, Net Interest Expense, Net Interest expense increased by $4.5 million, or 43%, for the year ended December 31, 2023, as compared to the year ended December 31, 2022.
Other (Expense) Income, Net Interest Expense Interest expense increased by $3.3 million, or 22%, for the year ended December 31, 2024, as compared to the year ended December 31, 2023.
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.
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.
A signed customer contract is considered a booking as this indicates the customer has agreed to place a purchase order in the foreseeable future, which typically occurs within three months of contract execution.
A signed customer contract is considered a booking as this indicates the customer has agreed to place a purchase order in the foreseeable future, which typically occurs within three (3) months of contract execution. However, executed customer contracts, without binding purchase orders, are cancellable without penalty by either party.
Other Income, Net Other income, net increased by $0.5 million, or 23%, for the year ended December 31, 2023, as compared to the year ended December 31, 2022.
Other Income, Net Other income, net decreased by $0.3 million, or 11%, for the year ended December 31, 2024, as compared to the year ended December 31, 2023.
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. The IRA is expected to further increase the deployment of renewable energy assets.
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.
See Note 6 — Business Combinations, 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 . Overview Our mission is to maximize the economic, environmental, and resiliency value of renewable energy assets through our leading artificial intelligence (“AI”) platform.
See Note 6 — Business Combinations, 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 . Overview Our mission is to help our customers plan, deploy, and operate clean energy assets via artificial intelligence (“AI”) -enabled software and services.
In addition, we expect to continue to manage and reduce our general and administrative costs and expenses associated with scaling our business operations as well as being a public company, including legal, accounting, insurance, exchange listing and SEC compliance, investor relations, and other costs and expenses.
In addition, we expect to continue to manage and reduce our general and administrative expenses 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.
Because these contractual terms and guarantees had not previously resulted in a revenue reduction in prior periods, and because we do not intend to provide such parent company guarantees in customer contracts going forward, we believe that excluding the impact of the $35.1 million net reduction in revenue from adjusted EBITDA and non-GAAP gross profit enhances the comparability to these metrics in prior periods.
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 from adjusted EBITDA and non-GAAP gross profit enhances the comparability to these metrics in prior periods.
We calculate adjusted EBITDA as net loss attributable to us before depreciation and amortization, including amortization of internally developed software, net interest expense, further adjusted to exclude stock-based compensation and other income and expense items, including the net gain on extinguishment of debt, revenue constraint, reduction in revenue, excess supplier costs and resulting liquidated damages, change in fair value of derivative liabilities, transaction and acquisition-related charges, litigation settlement, restructuring costs and income tax provision or benefit. 43 The following table provides a reconciliation of adjusted EBITDA to net loss (in thousands): Years Ended December 31, 2023 2022 (in thousands) Net loss $ (140,413) $ (124,054) Adjusted to exclude the following: Depreciation and amortization (1) 51,134 48,783 Interest expense, net 14,977 10,468 Gain on extinguishment of debt, net (59,121) — Stock-based compensation 45,109 28,661 Revenue constraint (2) 10,200 — Revenue reduction, net (3) 35,051 — Excess supplier costs and resulting liquidated damages (4) 7,554 — Change in fair value of derivative liability 7,731 — Transaction costs in connection with business combination — 6,068 Litigation settlement — (727) Provision for (benefit from) income taxes 433 (15,161) Other expenses (5) 7,889 — Adjusted EBITDA $ (19,456) $ (45,962) (1) Depreciation and amortization includes depreciation and amortization expense, impairment loss of energy storage systems, and impairment loss of project assets.
We calculate adjusted EBITDA as net 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 net gain on extinguishment of debt, revenue constraint, reduction in revenue, excess supplier costs and resulting liquidated damages, change in fair value of derivative liabilities, impairment of goodwill, contract termination payment, impairment and accounts receivable write-off, transaction and acquisition-related charges, restructuring costs and income tax provision or benefit. 45 The following table provides a reconciliation of adjusted EBITDA to net loss (in thousands): Years Ended December 31, 2024 2023 (in thousands) Net loss $ (854,014) $ (140,413) Adjusted to exclude the following: Depreciation and amortization (1) 48,807 51,134 Interest expense 18,293 14,977 Gain on extinguishment of debt, net — (59,121) Stock-based compensation 18,471 45,109 Revenue constraint (2) — 10,200 Revenue reduction, net (3) 38,653 35,051 Excess supplier costs and resulting liquidated damages (4) 1,012 7,554 Change in fair value of derivative liability (1,477) 7,731 Impairment of goodwill 547,152 — Contract termination payment (5) 10,000 — Impairment and accounts receivable write-off (6) 104,134 — Impairment of inventory and other deferred costs (7) 18,059 — Impairment of deferred costs with suppliers (8) 13,409 — Provision for income taxes 332 433 Other expenses (9) 14,328 7,889 Adjusted EBITDA $ (22,841) $ (19,456) (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.
Cash Flows The following table summarizes our cash flows for the periods indicated (in thousands): Year Ended December 31, 2023 2022 Net cash used in operating activities $ (207,377) $ (106,030) Net cash provided by (used in) investing activities 135,727 (544,373) Net cash provided by (used in) financing activities 90,238 (9,272) Effect of exchange rate changes on cash, cash equivalents and restricted cash (16) (202) Net increase (decrease) in cash, cash equivalents and restricted cash $ 18,572 $ (659,877) Operating Activities During the year ended December 31, 2023, net cash used in operating activities was $207.4 million, primarily due to our net loss of $140.4 million, adjusted for non-cash charges of $50.6 million and a net cash outflow of $117.6 million from changes in operating assets and liabilities.
Cash Flows The following table summarizes our cash flows for the periods indicated (in thousands): Year Ended December 31, 2024 2023 Net cash used in operating activities $ (36,650) $ (207,377) Net cash (used in) provided by investing activities (3,517) 135,727 Net cash (used in) provided by financing activities (8,438) 90,238 Effect of exchange rate changes on cash, cash equivalents and restricted cash 215 (16) Net (decrease) increase in cash, cash equivalents and restricted cash $ (48,390) $ 18,572 Operating Activities 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 a net cash inflow of $59.8 million from changes in operating assets and liabilities.
Change in Fair Value of Derivative Liability Unrealized losses relating to our derivative liability increased by $7.7 million for the year ended December 31, 2023 as compared to the year ended December 31, 2022 due to the decrease in the price per ton of lithium carbonate.
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, as compared to unrealized losses of $7.7 million for the year ended December 31, 2023 due to the change in the price per ton of lithium carbonate.
The decrease was primarily driven by a decrease of $9.6 million of professional services and other expenses, as well as a decrease of $2.1 million in office-related expenses, partially offset by an increase of $4.0 million in personnel costs driven by additional stock-based compensation expense, and an increase of $5.6 million in business taxes related to state sales tax liabilities.
The increase was primarily driven by a one-time contract termination payment of $23.4 million, an increase of $7.2 million of professional services and other expenses, and an increase of $1.8 million in office-related expenses partially offset by a decrease of $13.6 million in personnel costs as a result of a decrease in headcount, and a decrease of $5.6 million in business taxes related to state sales tax liabilities.
The net cash outflow from changes in operating assets and liabilities was primarily driven by an increase in accounts receivable of $80.9 million, an increase in inventory of $18.3 million, an increase in other assets of $18.0 million, an increase in contract origination costs of $5.9 million, an increase in project assets of $5.4 million, a decrease in accrued expenses of $15.8 million, a decrease in accounts payable of $5.2 million, and a decrease in lease liabilities, net of $2.9 million, partially offset by a decrease in deferred costs with suppliers of $30.3 million, and an increase in deferred revenue of $4.6 million. 52 During the year ended December 31, 2022, net cash used in operating activities was $106.0 million, primarily due to our net loss of $124.1 million, adjusted for non-cash charges of $70.3 million and net cash outflow of $52.3 million from changes in operating assets and liabilities.
The net cash outflow from changes in operating assets and liabilities was primarily driven by an increase in accounts receivable of $80.9 million, an increase in inventory of $18.3 million, an increase in other assets of $18.0 million, an increase in contract origination costs of $5.9 million, an increase in project assets of $5.4 million, a decrease in accounts payable of $5.2 million, a decrease in accrued expenses and other liabilities of $15.8 million, a decrease in lease liabilities, net of $2.9 million, partially offset by a decrease in deferred costs with suppliers of $30.3 million, and an increase in deferred revenue of $4.6 million. 54 Investing Activities 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.
See “We Face Risks Related to our DevCo Business Model” in Part I, Item 1A, “Risk Factors” of this Annual Report on Form 10-K for additional information about certain risks related to these DevCo Projects.
See “We Face Risks Related to our DevCo Business Model” in Part I, Item 1A, “Risk Factors” of this Annual Report on Form 10-K for additional information about certain risks related to these DevCo Projects. Decline in Lithium-Ion Battery Costs Our revenue growth is directly tied to the continued adoption of energy storage systems by our customers.
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.
We expect our sales and marketing expense to increase in future periods to support the overall growth in our business.
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.
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 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. 51 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.
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.
During the year ended December 31, 2022, net cash used in financing activities was $9.3 million, primarily consisting of payments for withholding taxes related to net share settlement of stock options of $2.3 million, repayment of financing obligations of $10.3 million, partially offset by proceeds from exercise of stock options of $1.3 million, proceeds from financing obligations of $1.5 million, and an investment from non-controlling interest of $0.5 million.
Financing Activities During the year ended December 31, 2024, net cash used in financing activities was $8.4 million, primarily consisting of the repayment of financing obligations of $8.5 million, partially offset by an investment from non-controlling interest of $0.1 million.
As a result, we recorded a net revenue reduction of $35.1 million in hardware revenue during the year ended December 31, 2023 . Specifically, $16.9 million of the overall reduction in revenue was related to deliveries that occurred during fiscal year 2022, and $18.2 million is related to deliveries that occurred during fiscal 2023.
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.
We recorded the full cost of hardware revenue for these indexed contracts in the first quarter of 2023. In the fourth quarter of 2023, we incurred costs of $2.7 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.
During the years ended December 31, 2024 and 2023, we incurred costs of $1.0 million and $2.7 million, respectively, above initially agreed prices on the acquisition of certain hardware systems from one of our suppliers, which resulted from production delays by such supplier.
The attainment of profitable operations is dependent upon future events, including obtaining adequate financing to complete our development activities, obtaining adequate supplier relationships, building our customer base, successfully executing our business and marketing strategy and hiring appropriate personnel.
The attainment of profitable operations is dependent upon future events, including successfully implementing our new business strategy, hiring and retaining our key executives and personnel with the requisite experience to develop our software and AI-based solutions, obtaining adequate financing to complete our development activities, developing an adequate network of suppliers, and building our customer base.
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.
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.
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. 46 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.
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.
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: Seasonality Our results of operations have typically fluctuated due to seasonal trends, which we expect to recur in future periods.
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: 40 Our New Strategy In October 2024, we announced a new business strategy that reflects a renewed focus on developing and marketing our AI-enabled software and services offerings.
Acquisition of AlsoEnergy On February 1, 2022, we acquired 100% of the issued and outstanding capital stock of AlsoEnergy. The transaction combined our storage optimization capabilities with AlsoEnergy’s solar asset performance monitoring and control software. Through AlsoEnergy, we provide end-to-end turnkey solutions that monitor and manage renewable energy systems through AlsoEnergy’s PowerTrack software.
For financial reporting purposes, Legacy Stem is treated as the accounting acquirer. 39 Acquisition of AlsoEnergy On February 1, 2022, we acquired 100% of the issued and outstanding capital stock of AlsoEnergy. The transaction combined our storage optimization capabilities with AlsoEnergy’s solar asset performance monitoring and control software.
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 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.
Non-cash charges primarily consisted of depreciation and amortization of $45.4 million, non-cash interest expense of $1.9 million related to debt issuance costs, stock-based compensation expense of $28.7 million, non-cash lease expense of $2.3 million, impairment of energy storage systems of $2.6 million, loss on disposal of property and equipment of $0.3 million, impairment loss of project assets of $0.5 million, provision for accounts receivable allowance of $3.6 million, and other non-cash items of $0.2 million, partially offset by an income tax benefit of $15.1 million, and net accretion of discount on investments of $0.1 million.
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 , and provision for accounts receivable allowance of $4.0 million, partially offset by a change in fair value of derivative liability of $1.5 million.
PowerTrack includes data acquisitions and monitoring, performance modelling, agency reporting, internal reports, work order tickets, and supervisory control and data acquisition (“SCADA”) controls. AlsoEnergy has deployed systems at various international locations, but its primary customer base is in the United States, Germany and Canada.
AlsoEnergy has deployed systems at various international locations, but its primary customer base is in the United States, Germany and Canada.
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.
These statutes and regulations, like the IRA, 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.
(Provision for) Benefit from Income Taxes During the year ended December 31, 2023, we recorded $0.4 million of income tax expense. During the year ended December 31, 2022, we recorded an income tax benefit of $15.2 million due to the partial release of our deferred tax asset valuation due to the acquisition of AlsoEnergy.
During the year ended December 31, 2023, we recorded a provision for income taxes of 51 $0.4 million primarily as a result of foreign and state income tax expense from the gain on extinguishment of debt related to our 2028 Convertible Notes during the second quarter of 2023, which was offset by a partial release of our deferred tax asset valuation due to an acquisition during the first quarter of 2023.
While we are committed to diversifying our customer base, we may continue to derive a significant portion of our revenue from a small number of customers.
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.
For the years ended December 31, 2023 and 2022, we incurred net losses of $140.4 million and $124.1 million, respectively. As of December 31, 2023, we had an accumulated deficit of $772.5 million.
For the years ended December 31, 2024 and 2023, we incurred net losses of $854.0 million and $140.4 million, respectively. As of December 31, 2024, we had an accumulated deficit of $1,626.5 million. We expect to continue to exercise discipline and moderate expenses associated with sales and marketing, research and development, regulatory and related functions.
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. Customer Concentration We depend 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.
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. 42 Supply Chain Constraints and Risk We rely on a very small number of suppliers of energy storage systems and other equipment.
Loss of a significant customer, the inability to close a significant contract at any time, or a significant reduction in pricing or order volume from a significant customer, could materially reduce our revenue in a given quarter and have a material adverse effect on our operating results.
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.
The 2030 Convertible Notes are redeemable for cash at our option at any time given certain conditions. See Note 13 — Convertible Notes , 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 .
See Note 13 — Convertible Notes , 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 . 53 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.
The change was primarily driven by a $88.1 million increase in hardware revenue primarily due to an increase in demand for systems related to both FTM and BTM partnership agreements. Services and other revenue increased by $10.4 million compared to the year ended December 31, 2022, primarily due to an increase in solar services subscriptions from existing and new customers.
The decrease was partially offset by an increase in services and other revenue of $5.3 million compared to the year ended December 31, 2023, primarily due to an increase in solar services subscriptions from existing and new customers.
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, like the IRA, affect 41 electricity pricing, net metering, incentives, taxation, competition with utilities, and the interconnection of customer-owned electricity generation.
If our market share declines due to increased competition, our revenue and ability to generate profits in the future may be adversely affected. 43 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.
Cost of Revenue Cost of revenue increased by $128.0 million, or 39%, for the year ended December 31, 2023, as compared to the year ended December 31, 2022. The increase was primarily driven by an increase of cost of hardware revenue of $120.8 million due to the increase in system costs.
Cost of Revenue Cost of revenue decreased by $302.2 million, or 66%, for the year ended December 31, 2024, as compared to the year ended December 31, 2023. The decrease was primarily driven by a decrease of cost of hardware revenue of $304.3 million due to a change in the mix of hardware and service offerings.

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Other STEM 10-K year-over-year comparisons