10-Q 1 stem-20240930.htm 10-Q stem-20240930
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
—————————————————
FORM 10-Q
—————————————————
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2024
OR
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________

STEM, INC.
(Exact name of registrant as specified in its charter)
Delaware001-3945585-1972187
(State or Other Jurisdiction
of Incorporation or Organization)
(Commission File Number)(IRS Employer
Identification No.)
4 Embarcadero Ctr., Suite 710, San Francisco, California 94111
(Address of principal executive offices, including zip code)
1-877-374-7836
(Registrant’s telephone number, including area code)

Not Applicable
(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, par value $0.0001
STEM
New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filer Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
Class
Outstanding as of October 23, 2024
Common Stock, $0.0001 par value per share
162,754,034




STEM, INC.
Quarterly Report on Form 10-Q
For the Period Ended September 30, 2024

TABLE OF CONTENTS


Page





















Part I - Financial Information
STEM, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(in thousands, except share and per share amounts)
September 30, 2024December 31, 2023
ASSETS
Current assets:
Cash and cash equivalents$75,364 $105,375 
Short-term investments 8,219 
Accounts receivable, net of allowances of $2,341 and $4,904 as of September 30, 2024 and December 31, 2023, respectively
92,659 302,848 
Inventory33,950 26,665 
Deferred costs with suppliers15,237 20,555 
Other current assets10,320 9,303 
Total current assets227,530 472,965 
Energy storage systems, net63,663 74,418 
Contract origination costs, net9,746 11,119 
Goodwill 547,205 
Intangible assets, net148,183 157,146 
Operating lease right-of-use assets12,065 12,255 
Other noncurrent assets76,648 81,869 
Total assets$537,835 $1,356,977 
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current liabilities:
Accounts payable$47,363 $78,277 
Accrued liabilities57,648 76,873 
Accrued payroll10,265 14,372 
Financing obligation, current portion15,037 14,835 
Deferred revenue, current portion70,766 53,997 
Other current liabilities5,905 12,726 
Total current liabilities206,984 251,080 
Deferred revenue, noncurrent86,799 88,650 
Asset retirement obligation4,150 4,052 
Convertible notes, noncurrent525,345 523,633 
Financing obligation, noncurrent44,662 52,010 
Lease liabilities, noncurrent12,807 10,455 
Other liabilities643 416 
Total liabilities881,390 930,296 
Commitments and contingencies (Note 12)
Stockholders’ equity (deficit):
Preferred stock, $0.0001 par value; 1,000,000 shares authorized as of September 30, 2024 and December 31, 2023; zero shares issued and outstanding as of September 30, 2024 and December 31, 2023
  
Common stock, $0.0001 par value; 500,000,000 shares authorized as of September 30, 2024 and December 31, 2023; 162,714,738 and 155,932,880 issued and outstanding as of September 30, 2024 and December 31, 2023, respectively
16 16 
Additional paid-in capital1,230,957 1,198,716 
Accumulated other comprehensive income (loss)302 (42)
Accumulated deficit(1,575,371)(772,494)
Total Stem’s stockholders’ equity (deficit)(344,096)426,196 
Non-controlling interests541 485 
Total stockholders’ equity (deficit)(343,555)426,681 
Total liabilities and stockholders’ equity (deficit)$537,835 $1,356,977 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
3


STEM, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(in thousands, except share and per share amounts)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2024202320242023
Revenue
Services and other revenue$22,143$16,597$52,086$47,630
Hardware revenue7,148117,14336,673246,461
Total revenue29,291133,74088,759294,091
Cost of Revenue
Cost of services and other revenue15,687 13,684 36,626 36,944 
Cost of hardware revenue7,408 140,347 60,753 264,573 
Total cost of revenue23,095 154,031 97,379 301,517 
Gross profit (loss)6,196 (20,291)(8,620)(7,426)
Operating expenses:
Sales and marketing8,216 11,605 30,286 37,691 
Research and development11,086 14,420 40,503 42,020 
General and administrative27,212 21,955 61,618 58,656 
Impairment of parent company guarantees104,134  104,134  
Impairment of goodwill  547,152  
Total operating expenses150,648 47,980 783,693 138,367 
Loss from operations(144,452)(68,271)(792,313)(145,793)
Other (expense) income, net:
Interest expense(4,512)(4,405)(13,850)(10,085)
Gain on extinguishment of debt, net   59,121 
Change in fair value of derivative liability (5,155)1,477 (7,731)
Other income, net793 713 2,153 2,114 
Total other (expense) income, net(3,719)(8,847)(10,220)43,419 
Loss before (provision for) benefit from income taxes(148,171)(77,118)(802,533)(102,374)
(Provision for) benefit from income taxes(129)46 (344)(354)
Net loss$(148,300)$(77,072)$(802,877)$(102,728)
Net loss per share attributable to common stockholders, basic and diluted$(0.91)$(0.49)$(4.99)$(0.66)
Weighted-average shares used in computing net loss per share to common stockholders, basic and diluted162,633,996 155,829,348 160,997,019 155,474,725 

The accompanying notes are an integral part of these condensed consolidated financial statements.
4


STEM, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(UNAUDITED)
(in thousands)
Three Months Ended September 30,Nine Months Ended September 30,
2024202320242023
Net loss$(148,300)$(77,072)$(802,877)$(102,728)
Other comprehensive loss:
Unrealized gain on available-for-sale securities 60 3 1,650 
Foreign currency translation adjustment208 51 341 45 
Total other comprehensive loss$(148,092)$(76,961)$(802,533)$(101,033)
The accompanying notes are an integral part of these condensed consolidated financial statements.
5


STEM, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)
(UNAUDITED)
(in thousands, except share amounts)
Common StockAdditional Paid-In CapitalAccumulated Other Comprehensive (Loss) IncomeAccumulated DeficitNon-controlling InterestsTotal Stockholders’ Equity (Deficit)
Shares Amount
Balance as of January 1, 2024155,932,880 $16 $1,198,716 $(42)$(772,494)$485 $426,681 
Issuance of common stock upon release of restricted stock units2,632,464 — — — — — — 
Issuance of fully vested restricted stock units for employee bonuses (Note 9)2,961,438 — 8,114 — — — 8,114 
Stock-based compensation— — 9,367 — — — 9,367 
Unrealized gain on available-for-sale securities— — — 3 — — 3 
Foreign currency translation adjustments— — — 193 — — 193 
Net loss— — — — (72,307)— (72,307)
Balance as of March 31, 2024161,526,782 16 1,216,197 154 (844,801)485 372,051 
Issuance of common stock upon release of restricted stock units1,060,744 — — — — — — 
Stock-based compensation— — 7,542 — — — 7,542 
Foreign currency translation adjustments— — — (60)— — (60)
Net loss— — — — (582,270)— (582,270)
Balance as of June 30, 2024162,587,526 16 1,223,739 94 (1,427,071)485 (202,737)
Issuance of common stock upon release of restricted stock units127,212 — — — — — — 
Stock-based compensation— — 7,218 — — — 7,218 
Foreign currency translation adjustments— — — 208 — — 208 
Contributions from non-controlling interests— — — — — 56 56 
Net loss— — — — (148,300)— (148,300)
Balance as of September 30, 2024162,714,738 $16 $1,230,957 $302 $(1,575,371)$541 $(343,555)


The accompanying notes are an integral part of these condensed consolidated financial statements.
6


Common StockAdditional Paid-In CapitalAccumulated Other Comprehensive (Loss) IncomeAccumulated DeficitNon-controlling InterestsTotal Stockholders’ Equity
Shares Amount
Balance as of January 1, 2023154,540,197 $15 $1,185,364 $(1,672)$(632,081)$541 $552,167 
Stock option exercises, net of statutory tax withholdings65,045 — 149 — — — 149 
Issuance of common stock upon release of restricted stock units903,061 1 — — — — 1 
Stock-based compensation— — 8,108 — — — 8,108 
Unrealized gain on available-for-sale securities— — — 1,543 — — 1,543 
Foreign currency translation adjustments— — — 127 — — 127 
Redemption of non-controlling interests— — — — — (72)(72)
Net loss— — — — (44,778)— (44,778)
Balance as of March 31, 2023155,508,303 16 1,193,621 (2)(676,859)469 517,245 
Stock option exercises, net of statutory tax withholdings39,528 — 80 — — — 80 
Issuance of common stock upon release of restricted stock units248,580 — — — — — — 
Stock-based compensation— — 10,817 — — — 10,817 
Purchase of capped call options (Note 8)— — (27,840)— — — (27,840)
Unrealized gain on available-for-sale securities— — — 47 — — 47 
Foreign currency translation adjustments— — — (133)— — (133)
Contributions from non-controlling interests— — — — — 6 6 
Net income— — — — 19,122 — 19,122 
June 30, 2023155,796,411 $16 $1,176,678 $(88)$(657,737)$475 $519,344 
Stock option exercises, net of statutory tax withholdings12,144 — 28 — — — 28 
Issuance of common stock upon release of restricted stock units74,533 — — — — — — 
Stock-based compensation— — 10,922 — — — 10,922 
Unrealized gain on available-for-sale securities— — — 60 — — 60 
Foreign currency translation adjustments— — — 51 — — 51 
Contributions from non-controlling interests— — — — — 10 10 
Net loss— — — — (77,072)— (77,072)
September 30, 2023155,883,088 $16 $1,187,628 $23 $(734,809)$485 $453,343 
The accompanying notes are an integral part of these condensed consolidated financial statements.
7


STEM, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in thousands)
Nine Months Ended September 30,
20242023
OPERATING ACTIVITIES
Net loss$(802,877)$(102,728)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization expense33,227 33,593 
Non-cash interest expense, including interest expenses associated with debt issuance costs1,565 1,969 
Stock-based compensation21,716 28,320 
Change in fair value of derivative liability(1,477)7,731 
Non-cash lease expense2,251 2,162 
Accretion of asset retirement obligations177 178 
Impairment loss of energy storage systems357 2,347 
Impairment loss of project assets641 158 
Impairment loss of right-of-use assets2,096  
Impairment of parent company guarantees104,134  
Impairment of goodwill547,152  
Net accretion of discount on investments(29)(1,672)
Income tax benefit from release of valuation allowance (335)
(Recovery of) provision for credit losses on accounts receivable(3,229)1,754 
Net loss on investments 1,561 
Gain on extinguishment of debt, net (59,121)
Other(157)(831)
Changes in operating assets and liabilities:
Accounts receivable106,920 (67,029)
Inventory(7,285)(57,282)
Deferred costs with suppliers5,318 30,579 
Other assets7,129 (17,947)
Contract origination costs, net(927)(4,184)
Project assets(7,382)(2,827)
Accounts payable(30,675)1,771 
Accrued expenses and other liabilities(19,935)(28,910)
Deferred revenue21,531 27,630 
Lease liabilities(2,181)(2,135)
Net cash used in operating activities(21,940)(205,248)
INVESTING ACTIVITIES
Acquisitions, net of cash acquired (1,847)
Purchase of available-for-sale investments (58,034)
Proceeds from maturities of available-for-sale investments8,250 119,650 
Proceeds from sales of available-for-sale investments 73,917 
Purchase of energy storage systems (2,912)
Capital expenditures on internally-developed software(8,868)(10,123)
Purchase of property and equipment(228)(395)
Net cash (used in) provided by investing activities(846)120,256 
FINANCING ACTIVITIES
Proceeds from exercise of stock options and warrants 257 
Repayment of financing obligations(6,998)(7,766)
Proceeds from issuance of convertible notes, net of issuance costs of $0 and $7,601 for the nine months ended September 30, 2024 and 2023, respectively
 232,399 
Repayment of convertible notes (99,754)
Purchase of capped call options (27,840)
Investment from (redemption of) non-controlling interests, net56 (56)
Repayment of notes payable (2,101)
Net cash (used in) provided by financing activities(6,942)95,139 
Effect of exchange rate changes on cash, cash equivalents and restricted cash403 114 
Net (decrease) increase in cash, cash equivalents and restricted cash(29,325)10,261 
Cash, cash equivalents and restricted cash, beginning of year106,475 87,903 
Cash, cash equivalents and restricted cash, end of period$77,150 $98,164 
The accompanying notes are an integral part of these condensed consolidated financial statements.
8


SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest$9,387 $4,070 
NON-CASH INVESTING AND FINANCING ACTIVITIES
Change in asset retirement costs and asset retirement obligation$79 $354 
Purchases of energy storage systems in accounts payable$255 $78 
Right-of-use asset obtained in exchange for lease liability$4,166 $2,782 
Stock-based compensation capitalized to internal-use software$2,425 $3,033 
RECONCILIATION OF CASH, CASH EQUIVALENTS, AND RESTRICTED CASH WITHIN THE UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS TO THE AMOUNTS SHOWN IN THE STATEMENTS OF CASH FLOWS ABOVE:
Cash and cash equivalents$75,364 $97,064 
Restricted cash included in other noncurrent assets1,786 1,100 
Total cash, cash equivalents, and restricted cash$77,150 $98,164 
The accompanying notes are an integral part of these condensed consolidated financial statements.
9

STEM, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

1.BUSINESS
Description of the Business
Stem, Inc. (“Stem,” the “Company,” “we,” “us,” or “our”) is a global leader in artificial intelligence (“AI”)-driven software and services that enable its customers to plan, deploy, and operate clean energy assets. We offer a comprehensive suite of solutions that transform how solar and energy storage projects are developed, built, and operated, including (i) an integrated suite of software and edge products, and (ii) full-lifecycle energy services from a team of experts. More than 16,000 global customers rely on Stem to maximize the value of their clean energy projects and portfolios.
Our suite of software applications is enabled by our AI platform, Athena®. Each application serves a different purpose in helping customers to maximize the value of their energy assets. Our asset performance management (APM) software, PowerTrack™ APM, is a unified solution that empowers asset owners and operators to efficiently manage complex storage, solar, and hybrid portfolios for optimal performance. Our Energy Management System (EMS) software, 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 optimization software, PowerBidder™ Pro, combines Athena’s wholesale market bidding engine with a web application, allowing users to leverage Athena AI and automation with our experience as a trusted operator. Our commercial- and utility-scale edge hardware solutions are original equipment manufacturers (“OEMs”)-agnostic devices used to connect customers’ solar and storage assets to our software applications in a unified view.
To help our customers achieve long-term performance and profitability goals for their energy projects, we also provide advisory services spanning development and engineering, procurement and integration, and performance and operation services. In the early stages of project planning, our experts help lay a solid foundation for our customers’ solar and storage projects by guiding the design and ensuring informed decision-making. During the building stage, we provide guidance for hardware procurement and integration for timely deployment. After assets are operational, we enable optimal economic and technical returns with managed energy services like trading and bidding strategies, wholesale market participation, performance reporting, system warranties, and more.
The Company operated as Rollins Road Acquisition Company (f/k/a Stem, Inc.) prior to the Merger with Star Peak Transition Corp. (“STPK”), an entity that was then listed on the New York Stock Exchange under the trade symbol “STPK,” and STPK Merger Sub Corp., a Delaware corporation and wholly-owned subsidiary of STPK (“Merger Sub”), providing for, among other things, and subject to the conditions therein, the combination of the Company and STPK pursuant to the merger of Merger Sub with and into the Company, with the Company continuing as the surviving entity (the “Merger”). Stem, Inc. was incorporated on March 16, 2009 in the State of Delaware and is headquartered in San Francisco, California.
Liquidity
As of September 30, 2024, we had cash and cash equivalents of $75.4 million, an accumulated deficit of $1,575.4 million, net accounts receivable of $92.7 million, and working capital, which we define as current assets less current liabilities, of $20.5 million. During the nine months ended September 30, 2024, we incurred a net loss of $802.9 million and had negative cash flows from operating activities of $21.9 million. As of September 30, 2024, our principal sources of liquidity were cash and cash equivalents totaling $75.4 million, which were held for working capital purposes and for investment growth opportunities. As of September 30, 2024, we believe that our cash position, as well as expected collections from accounts receivable, is sufficient to meet capital and liquidity requirements for at least the next 12 months.
Our business prospects are subject to various risks, expenses, and uncertainties, including those discussed in Part II. Item 1A. “Risk Factors” in this Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2024 and in Part I. Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023. The attainment of profitable operations is dependent upon future events, including successfully transitioning to a new software and services-oriented strategy, the successful delivery of AI-enabled software and edge device capabilities to our customers, regaining and maintaining compliance with the New York Stock Exchange’s continuing listing standards, securing new customers and maintaining current ones, securing and maintaining adequate supplier relationships, building our customer base, successfully executing our business and marketing strategy, and hiring and retaining appropriate personnel. 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.
10

STEM, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Supply Chain Constraints and Risk
We have in the past faced shortages and shipping delays affecting the supply of inverters, enclosures, battery modules and associated component parts for inverters and battery energy storage systems available for purchase. These shortages and delays were due in part to the macroeconomic, geopolitical and business environment, including the effects of global inflationary pressures and interest rates, general economic slowdown or a recession, changes in monetary policy, instability in financial institutions, potential import tariffs, geopolitical pressures, including the armed conflicts between Russia and Ukraine and in the Gaza Strip and nearby areas, as well as tensions between China and the United States and unknown effects of current and future trade regulations. We cannot predict the full effects the macroeconomic, geopolitical and business environment will have on our business, cash flows, liquidity, financial condition and results of operations.
2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim reporting and with the instructions to Form 10-Q and Article 10 of Regulation S-X, assuming the Company will continue as a going concern. Accordingly, the consolidated balance sheet at December 31, 2023 has been derived from the audited financial statements at that date, but certain notes or other information that are normally required by GAAP have been omitted if they substantially duplicate the disclosures contained in the Company’s annual audited consolidated financial statements. In the opinion of the Company’s management, all normal and recurring adjustments considered necessary for a fair statement of the results for the interim period presented have been included in the accompanying unaudited condensed consolidated financial statements. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited financial statements for the year ended December 31, 2023. Operating results for the three and nine months ended September 30, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2024 or for any other future interim period or year.
Principles of Consolidation
The unaudited condensed consolidated financial statements include the accounts of the Company, its wholly-owned subsidiaries, and consolidated variable interest entities (“VIEs”). The Company presents non-controlling interests within the equity section of its unaudited condensed consolidated balance sheets, and the amount of consolidated net loss that is attributable to the Company and the non-controlling interest in its unaudited condensed consolidated statements of operations. All intercompany balances and transactions have been eliminated in consolidation.
Variable Interest Entities
The Company forms special purpose entities (“SPEs”), some of which are VIEs, with its investors in the ordinary course of business to facilitate the funding and monetization of its energy storage systems. A legal entity is considered a VIE if it has either a total equity investment that is insufficient to finance its operations without additional subordinated financial support or whose equity holders lack the characteristics of a controlling financial interest. The Company’s variable interests arise from contractual, ownership, or other monetary interests in the entity. The typical condition for a controlling financial interest ownership is holding a majority of the voting interests of an entity; however, a controlling financial interest may also exist in entities, such as VIEs, through arrangements that do not involve controlling voting interests.
The Company consolidates a VIE if it is deemed to be the primary beneficiary. The Company determines it is the primary beneficiary if it has the power to direct the activities that most significantly impact the VIEs’ economic performance and has the obligation to absorb losses or has the right to receive benefits of the VIE that could potentially be significant to the VIE. The Company evaluates its relationships with its VIEs on an ongoing basis to determine whether it is the primary beneficiary.
Beginning in January 2022, the Company entered into strategic joint ventures through indirect wholly-owned development subsidiaries of the Company (“DevCo JVs”) with the purpose of originating potential battery storage facility projects in specific locations and conducting early-stage planning and development activities. The Company determined that the DevCo JVs are VIEs, as they lack sufficient equity to finance their activities without additional financial support. The Company determined that it has both (1) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance, and (2) the obligation to absorb losses or receive benefits from the VIE that could potentially be significant. Accordingly, the Company has determined that it is the primary beneficiary of the DevCo JVs, and as a result, the DevCo JVs’ operating results, assets and liabilities are consolidated by the Company, with third party minority owners’ share presented as noncontrolling interest. The Company applied the hypothetical liquidation at book value method in allocating recorded net income (loss) to
11

STEM, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
each owner based on the change in the reporting period, of the amount of net assets of the entity to which each owner would be entitled to under the governing contracts in a liquidation scenario.
The following table summarizes the carrying values of the assets and liabilities of the DevCo JVs that are consolidated by the Company as of September 30, 2024 and December 31, 2023 (in thousands):

September 30, 2024December 31, 2023
Assets
Cash and cash equivalents$2,213 $2,191 
Other current assets5 30 
Other noncurrent assets15,166 8,424 
Total assets17,384 10,645 
Liabilities
Accounts payable291 1,405 
Other current liabilities225 1,892 
Total liabilities$516 $3,297 
The Company did not make any material capital investment contributions during the nine months ended September 30, 2024. For the nine months ended September 30, 2023, the Company contributed approximately $6.6 million in capital investments for hardware purchases. The net income from the DevCo JVs was immaterial during the three and nine months ended September 30, 2024, and was $1.2 million and $1.4 million during the three and nine months ended September 30, 2023, respectively.
Use of Estimates
The preparation of unaudited condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. The Company bases its estimates on historical experience and on various other assumptions believed to be reasonable. Actual results could differ from those estimates and such differences could be material to the financial position and results of operations.
Significant estimates and assumptions reflected in these unaudited condensed consolidated financial statements include, but are not limited to, depreciable life of energy storage systems; estimates of transaction price with variable consideration; the amortization of acquired intangibles; the amortization of financing obligations; deferred commissions and contract fulfillment costs; the valuation of energy storage systems, finite-lived intangible assets, internally developed software, and asset retirement obligations; and the fair value of equity instruments, equity-based instruments, derivative liability, accruals related to sales tax liabilities, and the fair value of assets acquired and liabilities assumed in a business combination; and the impairment of goodwill.
Segment Information
Operating segments are defined as components of an entity for which discrete financial information is available that is regularly reviewed by the Chief Operating Decision Maker (“CODM”) in deciding how to allocate resources to an individual segment and in assessing performance. The Company’s Interim Chief Executive Officer is the CODM. The CODM reviews financial information presented on a consolidated basis for purposes of making operating decisions, allocating resources, and evaluating financial performance. As such, management has determined that the Company operates as one operating segment that is focused exclusively on innovative technology services that transform the way energy is distributed and consumed. Net assets outside of the U.S. were less than 10% of total net assets as of September 30, 2024 and December 31, 2023.
12

STEM, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Concentration of Credit Risk and Other Uncertainties
Financial instruments that potentially subject the Company to concentration of credit risk consist of cash and cash equivalents and accounts receivable. The Company’s cash balances are primarily invested in money market funds or on deposit at high credit quality financial institutions in the U.S. The Company’s cash and cash equivalents are held at financial institutions where account balances may at times exceed federally insured limits. Management believes the Company is not exposed to significant credit risk due to the financial strength of the depository institution in which the cash is held. The Company has no financial instruments with off-balance sheet risk of loss.
At times, the Company may be subject to a concentration of credit risk in relation to certain customers due to the purchase of large energy storage systems made by such customers. The Company routinely assesses the creditworthiness of its customers. The Company wrote-off $104.1 million of billed and unbilled accounts receivables that were deemed to be uncollectible (See Note 3 Revenue). The Company did not experience material losses related to receivables from individual customers, or groups of customers during the nine months ended September 30, 2023. The Company does not require collateral. Due to these factors, no additional credit risk beyond amounts provided for credit losses is believed by management to be probable in the Company’s accounts receivable.
The net book value of unbilled receivables, current are $7.1 million and $161.3 million as of September 30, 2024 and December 31, 2023, respectively. Unbilled receivables, current are included in accounts receivable, net. The net book value of unbilled receivables, noncurrent are $6.0 million and $18.7 million as of September 30, 2024 and December 31, 2023, respectively. Unbilled receivables, noncurrent are included in other noncurrent assets.
Significant Customers
A significant customer represents 10% or more of the Company’s total revenue or accounts receivable, net balance at each reporting date. For each significant customer, revenue as a percentage of total revenue and accounts receivable as a percentage of total accounts receivable are as follows:
Accounts ReceivableRevenueRevenue
September 30,December 31,Three Months Ended September 30,Nine Months Ended September 30,
202420232024202320242023
Customers:
Customer A19 %41 %***18 %
Customer B38 %28 %****
Customer C***89 %*41 %
*Total less than 10% for the period.

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

Fair Value of Financial Instruments
Assets and liabilities recorded at fair value in the unaudited condensed consolidated financial statements are categorized based upon the level of judgment associated with the inputs used to measure their fair value. The fair value of the Company’s financial assets and liabilities reflects management’s estimate of amounts that the Company would have received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions about how market participants would price assets and liabilities).
Hierarchical levels which are directly related to the amount of subjectivity associated with the inputs to the valuation of these assets or liabilities are as follows:
Level 1 — Unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access as of the measurement date.
13

STEM, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Level 2 — Inputs other than quoted prices included within Level 1 that are directly observable for the asset or liability or indirectly observable through corroboration with observable market data.
Level 3 — Unobservable inputs for the asset or liability only used when there is little, if any, market activity for the asset or liability at the measurement date.
This hierarchy requires the Company to use observable market data, when available, and to minimize the use of unobservable inputs when determining fair value. Assets and liabilities measured at fair value are classified in their entirety based on the lowest level of input that is significant to their fair value measurement. The Company’s assessment of the significance of a specific input to the fair value measurement in its entirety requires management to make judgments and consider factors specific to the asset or liability.
Financial assets and liabilities held by the Company measured at fair value on a recurring basis as of September 30, 2024 and December 31, 2023 include cash and cash equivalents, short-term investments, derivative liability, and convertible notes.
3.REVENUE
Disaggregation of Revenue
The following table provides information on the disaggregation of revenue as recorded in the unaudited condensed consolidated statements of operations (in thousands):
Three Months Ended
September 30,
Nine Months Ended
September 30,
2024202320242023
Hardware revenue$7,148$117,143$36,673$246,461
Services and other revenue22,14316,59752,08647,630
Total revenue
$29,291$133,740$88,759$294,091
The following table summarizes reportable revenue by geographic regions determined based on the location of the customers (in thousands):
Three Months Ended
September 30,
Nine Months Ended
September 30,
2024202320242023
United States$27,425 $129,800 $84,361 $280,010 
Rest of the world1,866 3,940 4,398 14,081 
Total revenue$29,291 $133,740 $88,759 $294,091 
Remaining Performance Obligations
Remaining performance obligations represent contracted revenue that has not been recognized, which include contract liabilities (deferred revenue) and amounts that will be billed and recognized as revenue in future periods. As of September 30, 2024 and September 30, 2023, the Company had $416.5 million and $545.3 million of remaining performance obligations, respectively, and the approximate percentages expected to be recognized as revenue in the future are as follows (in thousands, except percentages):
September 30, 2024
Total Remaining
Performance
Obligations
Percent Expected to be Recognized as Revenue
Less Than
One Year
Two to
Five Years
Greater Than
Five Years
Services and other revenue$336,591 16 %47 %37 %
Hardware revenue79,884 100 % % %
Total revenue$416,475 
14

STEM, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
September 30, 2023
Total Remaining
Performance
Obligations
Percent Expected to be Recognized as Revenue
Less Than
One Year
Two to
Five Years
Greater Than
Five Years
Services and other revenue$331,520 14 %48 %38 %
Hardware revenue213,813 100 % % %
Total revenue$545,333 
Contract Balances
Deferred revenue primarily includes cash received in advance of revenue recognition related to energy optimization services and incentives. The following table presents the changes in the deferred revenue balance during the nine months ended September 30, 2024 and September 30, 2023 (in thousands):
Nine Months Ended September 30,
20242023
Beginning balance$142,647 $138,074 
Upfront payments received from customers62,875 217,360 
Upfront or annual incentive payments received1,580 2,805 
Revenue recognized related to amounts that were included in beginning balance of deferred revenue(32,287)(26,538)
Revenue recognized related to deferred revenue generated during the period(10,636)(165,997)
Write-off of deferred revenue (1)
(6,614) 
Ending balance$157,565 $165,704 
(1) Deferred revenue write-off in connection to the parent company guarantee arrangements discussed below.

Parent Company Guarantees
Prior to July 2023, the Company agreed in certain customer contracts to provide a guarantee that the value of purchased hardware will not decline for a certain period of time. Under this guarantee, if these customers were unable to install or designate the hardware to a specified project within such period of time, the Company would be required to assist the customer in re-marketing the hardware for resale by the customer. If a resale does not occur, the hardware will be appraised utilizing a third party. The guarantee provided that, in such cases, if the customer resold the hardware for less than the amount initially sold to the customer or the appraisal value is less than the hardware purchase price, the Company would be required to compensate the customer for any shortfall in fair value for the hardware from the initial contract price. The Company accounts for such contractual terms and guarantees as variable consideration at each measurement date. The Company updates its estimate of variable consideration each quarter, including changes in estimates related to such guarantees, for facts or circumstances that have changed from the time of the initial estimate. As a result, the Company recorded a net revenue reductions of $5.6 million and $38.7 million in hardware revenue during the three and nine months ended September 30, 2024, respectively. The overall reduction in revenue was related to deliveries that occurred prior to the current fiscal year.
Impairment and Accounts Receivable Write-Off
For those contracts where the customers invoked parent company guarantee (“PCG”) protection pursuant to the applicable contract, the Company has worked actively to remarket the remaining systems subject to PCG with a wide variety of potential customers. The Company has been engaged in ongoing negotiations with several parties, including the original customers who hold title to the assets, for the purchase of the remarketed hardware. Despite such efforts, such negotiations have resulted in limited transactions with mutually agreed upon pricing and terms. Recent closed transactions have resulted in resales at prices significantly below carrying values. Under contracts containing a PCG provision, in the event that the Company and the customer are unable to remarket and sell the relevant assets, the customer shall engage a third party to appraise the fair market value of the remaining hardware. As of the date of this report, none of such customers have elected to obtain a third party hardware appraisal for the previously purchased hardware. Given the uncertainty of collection from the original customers of due and unpaid amounts in those cases where the Company believes it has enforceable rights of recovery, the Company believes the likelihood for collection of the accounts receivable outstanding relating to hardware subject to these PCG’s is no longer probable. Accordingly, the Company wrote-off the remaining receivables of $104.1 million during the three months
15

STEM, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
ended September 30, 2024, offset by $1.6 million for amounts previously provided for on these receivables and recorded within general and administrative expense in the unaudited condensed consolidated statements of operations. The Company is evaluating all potential remedies with respect to its enforceable rights under applicable contracts.
4.SHORT-TERM INVESTMENTS
The Company did not have short-term investments as of September 30, 2024. The following tables summarize the estimated fair value of the Company’s short-term investments and the gross unrealized holding gains and losses as of December 31, 2023 (in thousands).

As of December 31, 2023
Amortized CostUnrealized GainUnrealized LossEstimated Fair Value
Commercial paper$1,978 $ $ $1,978 
U.S. government bonds2,744  (3)2,741 
Agency bonds3,503  (3)3,500 
Total short-term investments$8,225 $ $(6)$8,219 

The Company periodically reviews the individual securities that have unrealized losses on a regular basis to evaluate whether or not any security has experienced, or is expected to experience, credit losses resulting in the decline in fair value. The Company evaluates, among other factors, whether the Company intends to sell any of these short-term investments and whether it is more likely than not that the Company will be required to sell any of them before recovery of the amortized cost basis. During the nine months ended September 30, 2024, the Company did not record an allowance for credit losses related to short-term investments.
5.FAIR VALUE MEASUREMENTS
Fair value accounting is applied for all financial assets and liabilities that are recognized or disclosed at fair value in the financial statements on a recurring basis. On September 30, 2024 and December 31, 2023, the carrying amount of accounts receivable, other current assets, accounts payable, and accrued and other current liabilities approximated their estimated fair value due to their relatively short maturities.
Assets and Liabilities Measured at Fair Value on a Recurring Basis
The following table provides the financial instruments measured at fair value (in thousands):
September 30, 2024
Level 1Level 2Level 3Fair Value
Assets:
Cash equivalents:
Money market fund$46,661$ $ $46,661
Total financial assets$46,661 $ $ $46,661 

16

STEM, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
December 31, 2023
Level 1Level 2Level 3Fair Value
Assets:
Cash equivalents:
Money market fund
$47,297 $ $ $47,297 
Commercial paper 3,971 3,971
Debt securities:
Commercial paper 1,978  1,978 
U.S. government bonds 2,741  2,741 
Other 3,500  3,500 
Total financial assets$47,297 $12,190 $ $59,487 
Liabilities:
Derivative liability$ $ $7,731 $7,731 
The Company’s money market funds are classified as Level 1 because they are valued using quoted market prices. The Company’s short-term investments consist of available-for-sale securities and are classified as Level 2 because their value is based on valuations using significant inputs derived from or corroborated by observable market data. As of December 31, 2023, the Company’s other current liabilities included a derivative liability that was attributable to a derivative feature within a revenue contract, whereby final settlement was indexed to the price per ton of lithium carbonate. The balance was valued using a third party forecast for lithium carbonate. As the derivative instrument was not traded on an exchange it was classified within Level 3 of the fair value hierarchy. During the nine months ended September 30, 2024, the derivative liability was settled resulting in a gain of $1.5 million.
Fair Value of Convertible Promissory Notes
The convertible notes are recorded at face value less unamortized debt issuance costs (see Note 8 Convertible Notes for additional details) on the unaudited condensed consolidated balance sheets as of September 30, 2024. As of September 30, 2024 and December 31, 2023, the estimated fair value of the 2028 Convertible Notes was $83.7 million and $149.1 million, respectively, based on Level 2 quoted bid prices of the convertible notes in an over-the-counter market on the last trading date of the reporting period. As of September 30, 2024 and December 31, 2023, the estimated fair value of the 2030 Convertible Notes was $71.6 million and $175.8 million, respectively, based on Level 2 quoted bid prices of the convertible notes in an over-the-counter market on the last trading date of the reporting period.
6.GOODWILL AND INTANGIBLE ASSETS, NET
Goodwill
Goodwill consists of the following (in thousands):
September 30,December 31,
20242023
Goodwill$547,158 $547,158 
Effect of foreign currency translation(6)47 
Impairment charges(547,152) 
Total goodwill$ $547,205 
17

STEM, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Goodwill is tested for impairment annually, or more often if an event or circumstance indicates that the carrying amount may not be recoverable. In connection with the preparation of the unaudited condensed consolidated financial statements for the three months ended June 30, 2024, the Company considered the decline in the Company’s stock price, market capitalization, and recent financial performance to be a triggering event for its single reporting unit and therefore completed a test for impairment of goodwill for the reporting unit as of June 30, 2024. The Company tested goodwill for impairment using a Step 1 quantitative test and compared the reporting unit’s fair value to its carrying value. An impairment is recorded for any excess carrying value above the reporting unit’s fair value, not to exceed the amount of goodwill. The Company estimates fair value of its reporting units using a discounted cash flow model, commonly referred to as the income approach. The income approach uses a reporting unit’s projection of estimated operating results and cash flows that is discounted using a weighted-average cost of capital that reflects current market conditions appropriate to the Company’s reporting unit. The discounted cash flow model uses management’s best estimates of economic and market conditions over the projected period using the best information available, including growth rates in revenues, costs and estimates of future expected changes in operating margins and cash expenditures. Other estimates and assumptions include terminal value growth rates, weighted average cost of capital and changes in future working capital requirements. The impairment test resulted in an impairment of $547.2 million.
Intangible Assets, Net
Intangible assets, net, consists of the following (in thousands):
September 30,December 31,
20242023
Developed technology$32,618 $32,618 
Trade name11,300 11,300 
Customer relationships106,800 106,800 
Internally developed software78,576 67,282 
Intangible assets229,294 218,000 
Less: Accumulated amortization(81,115)(60,868)
Add: Currency translation adjustment4 14 
Total intangible assets, net$148,183 $157,146 
Amortization expense for intangible assets was $7.0 million and $5.2 million for the three months ended September 30, 2024 and 2023, respectively, and $20.3 million and $18.5 million for the nine months ended September 30, 2024 and 2023, respectively.
7.ENERGY STORAGE SYSTEMS, NET
Energy Storage Systems, Net
Energy storage systems, net, consists of the following (in thousands):
September 30,December 31,
20242023
Energy storage systems placed into service$138,227 $141,181 
Less: accumulated depreciation(78,298)(70,918)
Energy storage systems not yet placed into service3,734 4,155 
Total energy storage systems, net$63,663 $74,418 
Depreciation expense for energy storage systems was approximately $3.5 million and $3.6 million for the three months ended September 30, 2024 and 2023, respectively, and approximately $10.0 million and $10.8 million for the nine months ended September 30, 2024 and 2023, respectively. Depreciation expense is recognized in cost of services and other revenue.
Impairment expense for energy storage systems was approximately $0.3 million and $0.3 million for the three months ended September 30, 2024 and 2023, respectively, and approximately $0.4 million and $2.3 million for the nine months ended September 30, 2024 and 2023, respectively. Impairment expense is recognized in cost of services and other revenue.
18

STEM, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
8.CONVERTIBLE NOTES
2028 Convertible Notes and 2028 Capped Call Options
2028 Convertible Notes
On November 22, 2021, the Company issued $460.0 million aggregate principal amount of its 2028 Convertible Notes in a private placement offering to qualified institutional buyers (the “2021 Initial Purchasers”) pursuant to Rule 144A under the Securities Act of 1933, as amended.
The 2028 Convertible Notes are senior, unsecured obligations of the Company and bear interest at a rate of 0.5% per year, payable in cash semi-annually in arrears in June and December of each year, beginning in June 2022. The 2028 Convertible Notes will mature on December 1, 2028, unless earlier repurchased, redeemed or converted in accordance with their terms prior to such date. Upon conversion, the Company may choose to pay or deliver, as the case may be, cash, shares of common stock or a combination of cash and shares of common stock. The 2028 Convertible Notes are redeemable for cash at the Company’s option at any time given certain conditions (as discussed below), at an initial conversion rate of 34.1965 shares of common stock per $1,000 principal amount of 2028 Convertible Notes, which is equivalent to an initial conversion price of approximately $29.24 (the “2028 Conversion Price”) per share of the Company’s common stock. The conversion rate is subject to customary adjustments for certain events as described in the related indenture.
The Company may redeem for cash all or any portion of the 2028 Convertible Notes, at the Company’s option, on or after December 5, 2025 if the last reported sale price of the Company’s common stock has been at least 130% of the 2028 Conversion Price then in effect for at least 20 trading days at a redemption price equal to 100% of the principal amount of the 2028 Convertible Notes to be redeemed, plus accrued and unpaid interest.
The Company’s net proceeds from this offering were approximately $445.7 million, after deducting the 2021 Initial Purchasers’ discounts and debt issuance costs. To minimize the effect of potential dilution to the Company’s common stockholders upon conversion of the 2028 Convertible Notes, the Company entered into separate capped call transactions (the “2028 Capped Calls”) as described below. In connection with the issuance of the 2030 Convertible Notes during the second quarter of 2023, the Company used approximately $99.8 million of the net proceeds to purchase and surrender for cancellation approximately $163.0 million aggregate principal amount of the Company’s 2028 Convertible Notes, which resulted in a $59.4 million gain on debt extinguishment. See 2030 Convertible Notes below for further details of the 2030 Convertible Notes.
Upon adoption of ASU 2020-06, the Company allocated all of the debt discount to long-term debt. The debt discount is amortized to interest expense using the effective interest method, computed to be 0.9%, over the life of the 2028 Convertible Notes or approximately its seven-year term. The outstanding 2028 Convertible Notes balances as of September 30, 2024 and December 31, 2023 are summarized in the following table (in thousands):
September 30, 2024December 31, 2023
Long Term Debt
Outstanding principal$297,024 $297,024 
Unamortized 2021 Initial Purchasers’ debt discount and debt issuance cost(5,527)(6,501)
Net carrying amount$291,497 $290,523 
19

STEM, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The following table presents total interest expense recognized related to the 2028 Convertible Notes during the three and nine months ended September 30, 2024 and 2023 (in thousands):
Three Months Ended
September 30,
Nine Months Ended
September 30,
2024202320242023
Cash interest expense
Contractual interest expense$371 $371 $1,114 $1,322 
Non-cash interest expense
Amortization of debt discount and debt issuance cost326 323 975 1,163 
Total interest expense$697 $694 $2,089 $2,485 
2028 Capped Call Options
On November 17, 2021, in connection with the pricing of the 2028 Convertible Notes, and on November 19, 2021, in connection with the exercise in full by the 2021 Initial Purchasers of their option to purchase additional Notes, the Company entered into the 2028 Capped Calls with certain counterparties. The Company used $66.7 million of the net proceeds to pay the cost of the 2028 Capped Calls.
The 2028 Capped Calls have an initial strike price of $29.2428 per share, which corresponds to the initial conversion price of the 2028 Convertible Notes and is subject to anti-dilution adjustments. The 2028 Capped Calls have a cap price of $49.6575 per share, subject to certain adjustments.
The 2028 Capped Calls are considered separate transactions entered into by and between the Company and the 2028 Capped Calls counterparties, and are not part of the terms of the 2028 Convertible Notes. The Company recorded a reduction to additional paid-in capital of $66.7 million during the year ended December 31, 2021 related to the premium payments for the 2028 Capped Calls. These instruments meet the conditions outlined in Financial Accounting Standards Board (“FASB”) ASU 2022-01 Topic 815, Derivatives and Hedging (“ASC 815”) to be classified in stockholders’ equity and are not subsequently remeasured as long as the conditions for equity classification continue to be met.
2030 Convertible Notes and 2030 Capped Call Options
2030 Convertible Notes
On April 3, 2023, the Company issued $240.0 million aggregate principal amount of its 2030 Convertible Notes in a private placement offering to qualified institutional buyers (the “2023 Initial Purchasers”) pursuant to Rule 144A under the Securities Act of 1933, as amended.
The 2030 Convertible Notes are senior, unsecured obligations of the Company and bear interest at a rate of 4.25% per year, payable in cash semi-annually in arrears in April and October of each year, beginning on October 1, 2023. The 2030 Convertible Notes will mature on April 1, 2030, unless earlier repurchased, redeemed or converted in accordance with their terms prior to such date. Upon conversion, the Company may choose to pay or deliver cash, shares of common stock or a combination of cash and shares of common stock. The 2030 Convertible Notes are redeemable for cash at the Company’s option at any time given certain conditions (as discussed below), at an initial conversion rate of 140.3066 shares of common stock per $1,000 principal amount of the 2030 Convertible Notes, which is equivalent to an initial conversion price of approximately $7.1272 (the “2030 Conversion Price”) per share of the Company’s common stock. The conversion rate is subject to customary adjustments for certain events as described in the related indenture.
The 2030 Convertible Notes will be redeemable, in whole or in part, at the Company’s option, on or after April 5, 2027 if the last reported sale price of the Company’s common stock has been at least 130% of the 2030 Conversion Price then in effect for at least 20 trading days at a redemption price equal to 100% of the principal amount of the 2030 Convertible Notes to be redeemed, plus accrued and unpaid interest.
The Company’s net proceeds from this offering were approximately $232.4 million, net of $7.6 million in debt issuance costs primarily consisting of underwriters, advisory, legal, and accounting fees. The Company used approximately $99.8 million of the net proceeds to purchase and surrender for cancellation approximately $163.0 million aggregate principal amount of the Company’s 2028 Convertible Notes. See 2028 Convertible Notes above for further details on the impacts of the debt extinguishment.
20

STEM, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The outstanding 2030 Convertible Notes balances as of September 30, 2024 and December 31, 2023 are summarized in the following table (in thousands):
September 30, 2024December 31, 2023
Long Term Debt
Outstanding principal$240,000 $240,000 
Unamortized 2023 Initial Purchasers’ debt discount and debt issuance cost(6,152)(6,890)
Net carrying amount$233,848 $233,110 
The debt discount and debt issuance costs are amortized to interest expense using the effective interest method, computed to be 4.70%, over the life of the 2030 Convertible Notes or its approximately seven-year term.
The following table presents total interest expense recognized related to the 2030 Convertible Notes during the three and nine months ended September 30, 2024 (in thousands):
Three Months Ended
September 30,
Nine Months Ended
September 30,
2024202320242023
Cash interest expense
Contractual interest expense$2,550 $2,550 $7,650 $5,043 
Non-cash interest expense
Amortization of debt discount and debt issuance cost249 239 738 470 
Total interest expense$2,799 $2,789 $8,388 $5,513 
2030 Capped Call Options
On March 29, 2023 and March 31, 2023, in connection with the pricing of the 2030 Convertible Notes, and on April 3, 2023, in connection with the exercise in full by the 2023 Initial Purchasers of their option to purchase additional 2030 Convertible Notes, the Company entered into Capped Calls (the “2030 Capped Calls”) with certain counterparties. The Company used $27.8 million of the net proceeds from the 2030 Convertible Notes to pay the cost of the 2030 Capped Calls.
The 2030 Capped Calls have an initial strike price of $7.1272 per share, which corresponds to the initial conversion price of the 2030 Convertible Notes and is subject to anti-dilution adjustments. The 2030 Capped Calls have a cap price of $11.1800 per share, subject to certain adjustments.
The 2030 Capped Calls are considered separate transactions entered into by and between the Company and the 2030 Capped Calls counterparties, and are not part of the terms of the 2030 Convertible Notes. The Company recorded a reduction to additional paid-in capital of $27.8 million during the second quarter of 2023 related to the premium payments for the 2030 Capped Calls. These instruments meet the conditions outlined in ASC 815 to be classified in stockholders’ equity and are not subsequently remeasured as long as the conditions for equity classification continue to be met.
9.STOCK-BASED COMPENSATION
Equity Incentive Plans
In May 2024, the Company adopted the 2024 Equity Incentive Plan (the “2024 Plan”). Under the 2024 Plan, the Company may grant stock options, stock appreciation rights, restricted stock, restricted stock units (“RSUs”), and other awards that are settled in shares of the Company’s common stock.

21

STEM, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Stock Options
The following table summarizes the stock option activity for the period ended September 30, 2024:
Number of
Options
Outstanding
Weighted-
Average
Exercise Price
Per Share
Weighted-
Average
Remaining
Contractual
Life (years)
Aggregate
Intrinsic
Value
(in thousands)
Balances as of December 31, 20239,011,616 $6.99 6.0$8,686 
Options granted1,410,261 2.07 
Options forfeited and cancelled(800,270)9.54 
Balances as of September 30, 20249,621,607 $6.06 5.4$ 
Options vested and exercisable — September 30, 20247,188,666 $5.63 4.4$ 
As of September 30, 2024, the Company had approximately $6.9 million of remaining unrecognized stock-based compensation expense for stock options, which is expected to be recognized over a weighted average period of 1.1 years.
Restricted Stock Units
The following table summarizes the RSU activity for the period ended September 30, 2024:

Number of
RSUs
Outstanding (1)
Weighted-Average
Grant Date Fair Value
Per Share
Balances as of December 31, 202311,159,272$10.31 
RSUs granted10,807,9091.91 
RSUs vested(6,780,776)8.18 
RSUs forfeited(1,757,856)5.58 
Balances as of September 30, 202413,428,549$5.24 
(1) Includes certain RSUs with service and market-based vesting criteria.

As of September 30, 2024, the Company had approximately $49.2 million of remaining unrecognized stock-based compensation expense for RSUs, which is expected to be recognized over a weighted average period of 1.7 years.
During the three months ended March 31, 2024, the Company issued 3.0 million shares of fully vested RSU awards through the Company’s stock bonus program under the Company’s 2021 Equity Incentive Plan.
Stock-Based Compensation Expense
The following table summarizes stock-based compensation expense recorded in each component of operating expenses in the Company’s unaudited condensed consolidated statements of operations and comprehensive loss (in thousands):
Three Months Ended
September 30,
Nine Months Ended
September 30,
2024202320242023
Sales and marketing$130$1,614$2,488$4,109
Research and development2,0382,4676,1546,733
General and administrative4,3647,11713,07417,478
Total stock-based compensation expense$6,532$11,198$21,716$28,320
Stock-based compensation expense associated with research and development of $0.7 million and $1.2 million corresponding to internal-use software, were capitalized during the three months ended September 30, 2024 and 2023, respectively. Stock-based compensation expense associated with research and development of $2.4 million and $3.1 million were capitalized as internal-use software during the nine months ended September 30, 2024 and 2023, respectively.
During the nine months ended September 30, 2024 stock-based compensation expense included stock modifications in connection with the separation agreements for certain of the Company’s former executive officers. For the nine months ended
22

STEM, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
September 30, 2024, a net reduction of stock-based compensation expense of $2.0 million was recorded within general and administrative expense and an additional charge of $0.7 million was recorded within research and development expense.
10.NET LOSS PER SHARE
Net loss per share is computed by dividing net loss by the basic weighted-average number of shares outstanding during the period. Diluted net loss per share is computed by dividing net income by the diluted weighted-average number of shares outstanding during the period and, accordingly, reflects the potential dilutive effect of all issuable shares of common stock, including as a result of stock options, restricted stock units, warrants and convertible notes. The diluted weighted-average number of shares used in our diluted net loss per share calculation is determined using the treasury stock method for stock options, restricted stock units, and warrants, and the if-converted method for convertible notes. For periods in which we recognize losses, the calculation of diluted loss per share is the same as the calculation of basic loss per share.
The following table sets forth the computation of basic and diluted net loss per share attributable to common stockholders (in thousands, except share and per share amounts):
Three Months Ended
September 30,
Nine Months Ended
September 30,
2024202320242023
Numerator:
Net loss attributable to common stockholders$(148,300)$(77,072)$(802,877)$(102,728)
Denominator:
Weighted-average number of shares outstanding used to compute net loss per share attributable to common stockholders, basic and diluted162,633,996 155,829,348 160,997,019 155,474,725 
Net loss per share attributable to common stockholders, basic and diluted$(0.91)$(0.49)$(4.99)$(0.66)
The following table shows total outstanding potentially dilutive shares excluded from the computation of diluted net loss per share attributable to common stockholders as their effect would have been anti-dilutive, as of September 30, 2024 and 2023:
September 30, 2024September 30, 2023
Outstanding 2028 Convertible Notes (if converted)10,157,181 10,157,181 
Outstanding 2030 Convertible Notes (if converted)33,673,584 33,673,584 
Outstanding stock options9,621,607 9,062,081 
Outstanding warrants2,533 2,533 
Outstanding RSUs13,428,549 11,244,359 
Total
66,883,454 64,139,738 
11.INCOME TAXES
The following table reflects the Company’s provision for income taxes and the effective tax rates for the periods presented below (in thousands, except effective tax rate):