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The call emphasized significant operational improvements, margin expansion, recurring software growth, product and M&A momentum, and reaffirmed full-year guidance. Offsetting items include a short-term revenue decline driven by no battery hardware resales in Q1, negative operating cash flow due to seasonal working capital timing, and managed services pressure from a supplier bankruptcy. Overall the positives around profitability, margins, PowerTrack growth, structural cost reductions and strategic product initiatives materially outweigh the near-term headwinds.
Management reaffirmed full‑year 2026 guidance: total revenue $140–$190M (software, services & edge hardware $130–$150M; up to $40M of battery hardware resales, expected weighted to H2), non‑GAAP gross margin 40%–50% (Q1 non‑GAAP gross margin was 52%, GAAP 38%), adjusted EBITDA $10–$15M (Q1 adjusted EBITDA $2M), operating cash flow $0–$10M (Q1 operating cash flow –$8M; cash $37M at quarter end), and year‑end ARR $65–$70M (Q1 ARR $61.2M; CARR $67M); additional Q1 metrics included $29M revenue, $27M bookings, $23M backlog, PowerTrack ARR up 2% sequentially (12% Y/Y), PowerTrack software revenue +16% Y/Y, solar AUM 37.5 GW and storage AUM 1.7 GWh, and management expects margins to compress toward the midpoint of the gross‑margin range as battery resales ramp while cash flow improves as bookings and billings increase.
Adjusted EBITDA of $2 million in Q1 2026, representing the fourth consecutive quarter of positive adjusted EBITDA and the company's first-ever positive adjusted EBITDA in a first fiscal quarter. This is a $7 million improvement versus Q1 2025 (from negative $5 million to positive $2 million), demonstrating operating leverage.
Non-GAAP gross margin reached a record 52% in Q1 2026 (vs. 46% in Q1 2025). GAAP gross margin was 38% (vs. 32% in Q1 2025). Margin expansion was driven by a revenue mix shift to software, services and edge hardware (no battery hardware resales in the quarter).
PowerTrack software revenue grew 16% year-over-year. PowerTrack ARR was reported up 2% sequentially and ~12% year-over-year, with total ARR at $61.2 million. Solar operating AUM increased to 37.5 GW (added ~1.5 GW in Q1, a 4% sequential increase).
Cash operating expenses were down 30% year-over-year and down approximately 10% sequentially, reflecting permanent structural efficiencies. Internal AI adoption is high (nearly 70% of employees using AI weekly), accelerating feature delivery and operational productivity.
Launched PowerTrack Sage (AI assistant) broadly; acquired raicoon to add automated fault detection and event management; PowerTrack EMS bookings more than doubled quarter-over-quarter; entered a co-marketing partnership with Nuvation Energy to expand BESS/hybrid solutions in North America.
Company reaffirmed full-year 2026 guidance: total revenue $140M–$190M (software, services and edge hardware $130M–$150M; up to $40M battery hardware resales), non-GAAP gross margin 40%–50%, adjusted EBITDA $10M–$15M, operating cash flow $0M–$10M, and year-end ARR $65M–$70M.
Greetings, and welcome to the Stem Inc. First Quarter 2026 Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce Erin Reed, Head of Investor Relations. Thank you. You may begin.
Thank you, operator. Welcome to Stem's First Quarter 2026 Earnings Call. This is Erin Reed, Head of Investor Relations. Before we begin, please note that some of the statements we will be making today are forward-looking. These statements involve risks and uncertainties that could cause our results to differ materially from those projected in these statements. For more information, we refer you to our latest 10-Q, 10-K, other SEC filings and supplemental presentation, which can be found on our Investor Relations website. Our comments today also include non-GAAP financial measures. Additional details and the reconciliations to the most directly comparable GAAP financial measures can be found in our first quarter 2026 earnings release and supplemental materials, which are available on the company's Investor Relations website.
Arun Naryanan, CEO; and Brian Musfeldt, CFO, will start the call today with prepared remarks, and then we will conduct a question-and-answer session. And now I'll turn the call over to Arun.
Thank you, Erin. Good afternoon, everyone, and thank you all for joining us today. When I spoke with you last during our fourth quarter and full year 2025 earnings call, I framed 2025 as a transformative year and 2026 as the year to demonstrate what that transformation was designed to deliver. One quarter in, I'm e...