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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 March 31, 2023
OR
 ☐
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)
(Commission File Number)(IRS Employer
Identification No.)
100 California St., 14th Fl., 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 filer☒Accelerated 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 April 25, 2023
Common Stock, $0.0001 par value per share
155,528,457



STEM, INC.
Quarterly Report on Form 10-Q
For the Period Ended March 31, 2023

TABLE OF CONTENTS


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Part I - Financial Information
STEM, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(in thousands, except share and per share amounts)
March 31, 2023December 31, 2022
ASSETS
Current assets:
Cash and cash equivalents$117,883 $87,903 
Short-term investments87,678 162,074 
Accounts receivable, net of allowances of $4,392 and $3,879 as of March 31, 2023 and December 31, 2022, respectively
232,764 223,219 
Inventory, net43,231 8,374 
Deferred costs with suppliers22,594 43,159 
Other current assets (includes $66 and $74 due from related parties as of March 31, 2023 and December 31, 2022, respectively)
6,975 8,026 
Total current assets511,125 532,755 
Energy storage systems, net87,750 90,757 
Contract origination costs, net11,662 11,697 
Goodwill547,168 546,649 
Intangible assets, net161,596 162,265 
Operating lease right-of-use assets14,553 12,431 
Other noncurrent assets60,316 65,339 
Total assets$1,394,170 $1,421,893 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable$112,541 $83,831 
Accrued liabilities59,104 85,258 
Accrued payroll7,025 12,466 
Financing obligation, current portion16,271 15,720 
Deferred revenue, current portion75,421 64,311 
Other current liabilities (includes $704 and $687 due to related parties as of March 31, 2023 and December 31, 2022, respectively)
5,547 5,412 
Total current liabilities275,909 266,998 
Deferred revenue, noncurrent72,574 73,763 
Asset retirement obligation4,223 4,262 
Notes payable, noncurrent1,679 1,603 
Convertible notes, noncurrent448,397 447,909 
Financing obligation, noncurrent61,065 63,867 
Lease liabilities, noncurrent12,634 10,962 
Other liabilities444 362 
Total liabilities876,925 869,726 
Commitments and contingencies (Note 15)
Stockholders’ equity:
Preferred stock, $0.0001 par value; 1,000,000 shares authorized as of March 31, 2023 and December 31, 2022; zero shares issued and outstanding as of March 31, 2023 and December 31, 2022
— — 
Common stock, $0.0001 par value; 500,000,000 shares authorized as of March 31, 2023 and December 31, 2022; 155,508,303 and 154,540,197 issued and outstanding as of March 31, 2023 and December 31, 2022, respectively
16 15 
Additional paid-in capital1,193,621 1,185,364 
Accumulated other comprehensive loss(2)(1,672)
Accumulated deficit(676,859)(632,081)
Total Stem’s stockholders’ equity516,776 551,626 
Non-controlling interests469 541 
Total stockholders’ equity517,245 552,167 
Total liabilities and stockholders’ equity$1,394,170 $1,421,893 
The accompanying notes are an integral part of these condensed consolidated financial statements.
3

STEM, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(in thousands, except share and per share amounts)
Three Months Ended
March 31,
20232022
Revenue
Services and other revenue$14,673$9,965
Hardware revenue52,73231,123
Total revenue67,40541,088
Cost of revenue
Cost of services and other revenue11,504 8,633 
Cost of hardware revenue54,907 28,811 
Total cost of revenue66,411 37,444 
Gross margin994 3,644 
Operating expenses:
Sales and marketing12,406 9,142 
Research and development13,444 8,943 
General and administrative17,797 20,512 
Total operating expenses43,647 38,597 
Loss from operations(42,653)(34,953)
Other expense, net:
Interest expense, net(1,777)(3,218)
Other (expense) income, net(439)475 
Total other expense, net(2,216)(2,743)
Loss before benefit from income taxes(44,869)(37,696)
Benefit from income taxes91 15,213 
Net loss$(44,778)$(22,483)
Net loss per share attributable to common stockholders, basic and diluted$(0.29)$(0.15)
Weighted-average shares used in computing net loss per share to common stockholders, basic and diluted154,966,163 150,491,041 

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 March 31,
20232022
Net loss$(44,778)$(22,483)
Other comprehensive income (loss):
Unrealized gain (loss) on available-for-sale securities1,543 (611)
Foreign currency translation adjustment127 (28)
Total other comprehensive loss1,670 (639)
Comprehensive loss$(43,108)$(23,122)
The accompanying notes are an integral part of these condensed consolidated financial statements.
5

STEM, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(UNAUDITED)
(in thousands, except share amounts)
Common StockAdditional Paid-In CapitalAccumulated Other Comprehensive Income (Loss)Accumulated 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, net— — — — — (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 
Common StockAdditional Paid-In CapitalAccumulated Other Comprehensive Income (Loss)Accumulated DeficitNon-controlling InterestsTotal Stockholders’ Equity
Shares Amount
Balance as of January 1, 2022144,671,624 $14 $1,176,845 $20 $(509,052)$— $667,827 
Cumulative-effect adjustment upon adoption of ASU 2020-06 (Note 10)— — (130,979)— 1,598 — (129,381)
Cumulative-effect adjustment upon adoption of ASU 2016-13— — — — (573)— (573)
Common stock issued upon business combination (Note 6)8,621,006 1 108,882 — — — 108,883 
Stock option exercises, net of statutory tax withholdings425,167 — (426)— — — (426)
Stock-based compensation— — 6,787 — — — 6,787 
Unrealized loss on available-for-sale securities— — — (611)— — (611)
Foreign currency translation adjustments— — — (28)— — (28)
Contributions from non-controlling interests— — — — — 141 141 
Net loss— — — — (22,483)— (22,483)
Balance as of March 31, 2022153,717,797 $15 $1,161,109 $(619)$(530,510)$141 $630,136 


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

STEM, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in thousands)
Three Months Ended March 31,
20232022
OPERATING ACTIVITIES
Net loss$(44,778)$(22,483)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization expense11,107 8,725 
Non-cash interest expense, including interest expenses associated with debt issuance costs386 456 
Stock-based compensation7,202 6,265 
Non-cash lease expense661 546 
Accretion of asset retirement obligations61 60 
Impairment loss of energy storage systems851 171 
Net (accretion of discount) amortization of premium on investments(657)293 
Income tax benefit from release of valuation allowance(335)(15,100)
Provision for accounts receivable allowance522 180 
Net loss on investments1,561 — 
Other(117)(17)
Changes in operating assets and liabilities:
Accounts receivable(10,067)(3,532)
Inventory(34,857)(46,564)
Deferred costs with suppliers28,179 (9,157)
Other assets251 (23,127)
Contract origination costs, net(802)(1,670)
Project assets(1,402)— 
Accounts payable28,831 67,955 
Accrued expenses and other liabilities(31,746)(6,657)
Deferred revenue9,921 17,705 
Lease liabilities(593)(54)
Net cash used in operating activities(35,821)(26,005)
INVESTING ACTIVITIES
Acquisitions, net of cash acquired(1,847)(532,839)
Purchase of available-for-sale investments(49,152)(41,437)
Proceeds from maturities of available-for-sale investments50,270 36,271 
Proceeds from sales of available-for-sale investments73,917 — 
Purchase of energy storage systems(1,625)(108)
Capital expenditures on internally-developed software(3,570)(3,537)
Purchase of property and equipment(162)(1,278)
Net cash provided by (used in) investing activities67,831 (542,928)
FINANCING ACTIVITIES
Proceeds from exercise of stock options and warrants149 347 
Payments for taxes related to net share settlement of stock options— (773)
Proceeds from financing obligations— 311 
Repayment of financing obligations(2,133)(4,178)
Proceeds from issuance of notes payable— 6 
Redemption of non-controlling interests, net(72)— 
Repayment of notes payable(100)— 
Net cash used in financing activities(2,156)(4,287)
Effect of exchange rate changes on cash and cash equivalents126 (23)
Net increase (decrease) in cash and cash equivalents29,980 (573,243)
Cash and cash equivalents, beginning of year87,903 747,780 
Cash and cash equivalents, end of period$117,883 $174,537 
The accompanying notes are an integral part of these condensed consolidated financial statements.
7

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest$1,481 $1,869 
NON-CASH INVESTING AND FINANCING ACTIVITIES
Change in asset retirement costs and asset retirement obligation$99 $27 
Purchases of energy storage systems in accounts payable$88 $— 
Right-of-use asset obtained in exchange for lease liability$2,782 $— 
Stock-based compensation capitalized to internal-use software$906 $522 
The accompanying notes are an integral part of these condensed consolidated financial statements.
8
STEM, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

1.BUSINESS
Description of the Business
Stem, Inc., together with its consolidated subsidiaries (“Stem,” the “Company,” “we,” “us,” or “our”), maintains one of the world’s largest digitally connected, intelligent renewable energy networks, providing customers (i) with an energy storage system, sourced from leading, global battery original equipment manufacturers (“OEMs”), that the Company delivers through its partners, including developers, distributors, and engineering, procurement and construction 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, (iii) ongoing software platform and professional services to operate integrated energy storage, and solar systems, through its Athena® artificial intelligence (“AI”) platform (“Athena”), and (iv) solar asset performance monitoring and control, through Athena’s PowerTrack application. In addition, in all the markets where the Company helps manage its customers’ clean energy assets, the Company has agreements to use the Athena platform to participate in such markets and to share the revenue from such market participation.
The Company delivers its battery hardware and software-enabled services through its Athena platform to its customers. The Company’s hardware and recurring software-enabled services mitigate 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. The resulting network created by the Company’s 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 such customers. Additionally, the Company’s energy storage solutions support renewable energy generation by alleviating grid intermittency issues, thereby reducing customer dependence on traditional, fossil fuel resources.
The Company’s Athena PowerTrack application provides a vertically integrated solution that incorporates on-site power monitoring equipment that aggregates and communicates data to enable remote control of solar generation assets. PowerTrack provides direct access to individual site performance to measure and benchmark expected energy production, maximizing asset value for our customers.
From time to time, the Company, through an indirect wholly-owned development subsidiary (“DevCo”) formed in January 2022, will enter into strategic joint ventures (each a “DevCo JV”) with qualified third parties for the development of select renewable energy projects (“DevCo Projects”). In this structure, DevCo forms a new DevCo JV entity as the majority owner, with the developer as the minority owner. The purpose of the DevCo JV is to develop and sell DevCo Projects and secure Company hardware and software services for those projects. In DevCo Projects, the Company makes development capital contributions to fund project development, and recovers those capital contributions plus a fee when the developer takes ownership of the project. The Company will in some cases also elect to make cash advances to hardware suppliers to accelerate project construction timelines given long lead times to secure hardware. This business model is intended to allow the Company to advance development capital to key partners in strategic markets and securing hardware upfront, in order to generate higher-margin software and services and other revenue via exclusive long-term services contracts under the DevCo Projects.
On February 1, 2022, the Company acquired all of the issued and outstanding capital stock of Also Energy Holdings, Inc. (“AlsoEnergy”), which has been consolidated since the date of acquisition. Through AlsoEnergy, the Company provides end-to-end turnkey solutions that monitor and manage renewable energy systems through its PowerTrack software. PowerTrack includes data acquisitions and monitoring, performance modeling, 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 largest customer bases are in the United States, Germany and Canada. See Note 6 — Business Combinations.
The Company operated as Rollins Road Acquisition Company (f/k/a Stem, Inc.) (“Legacy Stem”) 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.
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STEM, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Liquidity
As of March 31, 2023, the Company had cash and cash equivalents of $117.9 million, short-term investments of $87.7 million, an accumulated deficit of $676.9 million and net working capital of $235.2 million, with $16.3 million of financing obligations coming due within the next 12 months. During the three months ended March 31, 2023, the Company incurred a net loss of $44.8 million and had negative cash flows from operating activities of $35.8 million. The Company believes that its cash position is sufficient to meet capital and liquidity requirements for at least the next 12 months after the date that the financial statements are available to be issued.
The Company’s business prospects are subject to risks, expenses, and uncertainties frequently encountered by companies in the early stages of commercial operations. The attainment of profitable operations is dependent upon future events, including securing new customers and maintaining current ones, securing and maintaining adequate supplier relationships, building the Company’s customer base, successfully executing its business and marketing strategy, obtaining adequate financing to complete the Company’s development activities, 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 the Company to modify, delay or abandon some of its planned future expansion or development, to seek additional equity or debt financing, or to otherwise enact operating cost reductions available to management, which could have a material adverse effect on the Company’s business, operating results and financial condition.
Supply Chain Constraints and Risk
The Company’s industry continues to face 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 can be attributed in part to the evolving macroeconomic, geopolitical and business environment, including the effects of increased global inflationary pressures and interest rates, potential import tariffs, the ongoing effects of the COVID-19 pandemic and geopolitical pressures, including the Russia-Ukraine armed conflict, rising tensions between China and Taiwan and unknown effects of current and future trade regulations. If these shortages and delays persist through 2023, they could adversely affect the timing of when battery energy storage systems can be delivered and installed, and when (or if) the Company can begin to generate revenue from those systems. The Company cannot predict the full effects the macroeconomic, geopolitical and business environment will continue to have on our business, cash flows, liquidity, financial condition and results of operations. In addition, he COVID-19 pandemic caused, and any new outbreaks or resurgence of COVID-19 and its variants could again cause, a significant reduction in global economic activity, significantly weakening demand for our products and services.
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 condensed consolidated balance sheet at December 31, 2022 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 Stem 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, 2022. Operating results for the three months ended March 31, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023 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 condensed consolidated balance sheets, and the amount of consolidated net loss that is attributable to Stem and the non-controlling interest in its condensed consolidated statements of operations. All intercompany balances and transactions have been eliminated in consolidation.
10
STEM, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
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 formed DevCo JVs with the purpose of originating potential battery storage facility projects in the specific locations and conducting early-stage planning and development activities. The Company determined that the DevCo JVs are VIEs as they lack sufficient equity to finance their activities without additional financial support. The Company determined that it has both (1) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance, and (2) the obligation to absorb losses or receive benefits from the VIE that could potentially be significant. Accordingly, the Company has determined that it is the primary beneficiary of the DevCo JVs, and as a result, the DevCo JVs’ operating results, assets and liabilities are consolidated by the Company, with third party minority owners’ share presented as noncontrolling interest. The Company applied the hypothetical liquidation at book value method in allocating recorded net income (loss) to each owner based on the change in the reporting period, of the amount of net assets of the entity to which each owner would be entitled to under the governing contracts in a liquidation scenario.
The following table summarizes the carrying values of the assets and liabilities of the DevCo JVs that are consolidated by the Company as of March 31, 2023 (in thousands):

March 31, 2023December 31, 2022
Assets
Cash and cash equivalents$2,107 $6,686 
Other current assets9 38 
Other noncurrent assets4,610 3,208 
Total assets6,726 9,932 
Liabilities
Accounts payable275 356 
Other current liabilities236 97 
Total liabilities$511 $453 
For the three months ended March 31, 2023 and 2022, the Company contributed approximately $0.1 million and $4.9 million in capital investments for hardware purchases, respectively. The net income from the DevCo JVs was immaterial during the three months ended March 31, 2023 and 2022.

Reclassifications
Certain prior year amounts have been reclassified for consistency with the current year presentation. Such reclassifications have no impact on previously reported net (loss) income, stockholders’ equity, or cash flows. For the three months ended March 31, 2022, a $9.2 million net cash outflow was reclassified from changes in other assets to changes in deferred costs with suppliers and $6.2 million net cash outflow reclassified from change in accounts payable to other liabilities, and $0.2 million net cash inflow was reclassified from changes in accounts receivable to provision for accounts receivable allowance in the condensed consolidated statements of cash flows. This change had no impact to net cash used in operating activities.

11
STEM, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
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; the amortization of acquired intangibles; the amortization of financing obligations; deferred commissions and contract fulfillment costs; the valuation of energy storage systems, internally developed software, and asset retirement obligations; and the fair value of equity instruments, equity-based instruments, warrant liabilities, embedded derivatives and net assets acquired in a business combination.
Segment Information
Operating segments are defined as components of an entity for which discrete financial information is available that is regularly reviewed by the Chief Operating Decision Maker (“CODM”) in deciding how to allocate resources to an individual segment and in assessing performance. The Company’s Chief Executive Officer is the CODM. The CODM reviews financial information presented on a consolidated basis for purposes of making operating decisions, allocating resources, and evaluating financial performance. As such, management has determined that the Company operates as one operating segment that is focused exclusively on innovative technology services that transform the way energy is distributed and consumed. The operations acquired as part of the acquisition of AlsoEnergy have been included in the Company’s operating segment. Net assets outside of the U.S. were less than 10% of total net assets as of March 31, 2023 and December 31, 2022.
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 has not experienced material losses related to receivables from individual customers, or groups of customers during the three months ended March 31, 2023 and 2022. 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.
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 ReceivableRevenue
March 31,December 31,Three Months Ended March 31,
2023202220232022
Customers:
Customer A51 %54 %*38 %
Customer B15 %16 %**
Customer C18 %11 %61 %*
Customer D***11 %
*Total less than 10% for the respective period.
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STEM, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

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.
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 March 31, 2023 and December 31, 2022 include cash and cash equivalents, short-term investments, and convertible notes.
3.REVENUE
Disaggregation of Revenue
The following table provides information on the disaggregation of revenue as recorded in the condensed consolidated statements of operations (in thousands):
Three Months Ended
March 31,
20232022
Hardware revenue$52,732$31,123
Services and other revenue14,6739,965
Total revenue
$67,405$41,088
13
STEM, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The following table summarizes reportable revenue by geographic regions determined based on the location of the customers (in thousands):
Three Months Ended
March 31,
20232022
United States$65,330 $39,458 
Rest of the world2,075 1,630 
Total revenue$67,405 $41,088 
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 March 31, 2023, the Company had $541.1 million of remaining performance obligations, and the approximate percentages expected to be recognized as revenue in the future are as follows (in thousands, except percentages):
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$327,149 14 %48 %38 %
Hardware revenue213,993 100 %— %— %
Total revenue$541,142 
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 three months ended March 31, 2023 and 2022 (in thousands):
Three Months Ended March 31,
20232022
Beginning balance$138,074 $37,443 
Deferred revenue acquired upon business combination— 49,626 
Upfront payments received from customers30,700 35,050 
Upfront or annual incentive payments received1,275 2,895 
Revenue recognized related to amounts that were included in beginning balance of deferred revenue(8,463)(2,938)
Revenue recognized related to amounts that were included in acquired balance of deferred revenue— (3,338)
Revenue recognized related to deferred revenue generated during the period(13,591)(13,965)
Ending balance$147,995 $104,773 
14
STEM, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
4.SHORT-TERM INVESTMENTS
The following tables summarize the estimated fair value of the Company’s short-term investments and the gross unrealized holding losses and gains as of March 31, 2023 and December 31, 2022 (in thousands):

As of March 31, 2023
Amortized CostUnrealized GainUnrealized LossEstimated Fair Value
Corporate debt securities$13,467 $1 $(35)$13,433 
Commercial paper16,845 — — 16,845 
U.S. government bonds30,954 9 (111)30,852 
Certificate of deposits4,694 — — 4,694 
Treasury bills10,768 1 (6)10,763 
Agency bonds11,089 3 (1)11,091 
Total short-term investments$87,817 $14 $(153)$87,678 

As of December 31, 2022
Amortized CostUnrealized GainUnrealized LossEstimated Fair Value
Corporate debt securities$17,056 $— $(164)$16,892 
Commercial paper18,922 — — 18,922 
U.S. government bonds106,774 — (1,515)105,259 
Certificate of deposits9,986 — — 9,986 
Treasury bills9,518 3 (5)9,516 
Agency bonds1,500 — (1)1,499 
Total short-term investments$163,756 $3 $(1,685)$162,074 

The following table presents the contractual maturities of the Company’s short-term investments as of March 31, 2023 (in thousands):

As of March 31, 2023
Amortized costEstimated Fair Value
Due within one year$87,817 $87,678 
Total$87,817 $87,678 

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 marketable securities 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 three months ended March 31, 2023, the Company did not record an allowance for credit losses, as management believes any such losses would be immaterial based on the investment-grade credit rating for each of the short-term investments as of the end of each period.

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. At March 31, 2023 and December 31, 2022, 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.
15
STEM, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Assets and Liabilities Measured at Fair Value on a Recurring Basis
The following table provides the financial instruments measured at fair value (in thousands):
March 31, 2023
Level 1Level 2Level 3Fair Value
Assets
Cash equivalents:
Money market fund$62,416$— $—$62,416
Commercial paper— 6,961 — 6,961 
Treasury bills— 2,750 — 2,750 
Agency bonds— 5,027 — 5,027 
Debt securities:
Corporate debt securities— 13,433 — 13,433
Commercial paper— 16,845 — 16,845
U.S. government bonds— 30,852 — 30,852
Certificate of deposits— 4,694 — 4,694
Treasury bills— 10,763 — 10,763
Agency bonds— 11,091 — 11,091 
Total financial assets$62,416 $102,416 $— $164,832 

December 31, 2022
Level 1Level 2Level 3Fair Value
Assets
Cash equivalents:
Money market fund
$10,618 $— $— $10,618 
Commercial paper— 2,988— 2,988
Debt securities:
Corporate debt securities— 16,892 — 16,892 
Commercial paper— 18,922 — 18,922 
U.S. government bonds— 105,259 — 105,259 
Certificate of deposits— 9,986 — 9,986 
Treasury bills— 9,516 — 9,516 
Other— 1,499 — 1,499 
Total financial assets$10,618 $165,062 $— $175,680 
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.
Fair Value of Convertible Promissory Notes
The convertible notes are recorded at face value less unamortized debt issuance costs (see Note 10 — Convertible Notes for additional details) on the condensed consolidated balance sheets as of March 31, 2023. As of March 31, 2023 and December 31, 2022, the estimated fair value of the convertible notes was $260.9 million and $293.1 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.
16
STEM, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
6.BUSINESS COMBINATIONS
AlsoEnergy Acquisition
On February 1, 2022, Stem, Inc. acquired 100% of the outstanding shares of AlsoEnergy. AlsoEnergy provides end-to-end turnkey solutions that monitor and manage renewable energy systems. The total consideration to acquire AlsoEnergy was $652.0 million, comprised of $543.1 million in cash, net of a working capital adjustment for an escrow recovery, and $108.9 million in the form of 8,621,006 shares of the Company’s common stock. The Company incurred $6.1 million of transaction costs related to the acquisition of AlsoEnergy, which were recorded in general and administrative expense in the three months ended March 31, 2022.
Unaudited Pro Forma Financial Information
The following unaudited pro forma financial information summarizes the combined results of operations for the Company and AlsoEnergy, as if the acquisition had occurred on January 1, 2022. The pro forma financial information is as follows (in thousands):
(Unaudited)
Three Months Ended
March 31,
20232022
Total revenue$67,405 $44,924 
Net loss$(44,778)$(30,469)
The pro forma financial information for the periods presented above has been calculated after adjusting the results of AlsoEnergy to reflect the business combination accounting effects resulting from this acquisition, including the elimination of transaction costs incurred by the Company, amortization expense from acquired intangible assets, and settlement of stock option awards. The historical consolidated financial statements have been adjusted in the pro forma combined financial statements to give effect to pro forma events that are directly attributable to the business combination. The pro forma financial information is for informational purposes only, and is not indicative of either future results of operations, or results that may have been achieved had the acquisition been consummated as of the beginning of 2022.
7.GOODWILL AND INTANGIBLE ASSETS, NET
Goodwill
Goodwill consists of the following (in thousands):
March 31,December 31,
20232022
Goodwill$547,158 $547,556 
Recovery of escrow from AlsoEnergy acquisition— (915)
Effect of foreign currency translation10 8 
Total goodwill$547,168 $546,649 
17
STEM, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Intangible Assets, Net
Intangible assets, net, consists of the following (in thousands):
March 31,December 31,
20232022
Developed technology$32,000 $30,600 
Trade name11,300 11,300 
Customer relationships106,800 106,800 
Backlog3,900 3,900 
Internally developed software53,949 49,472 
Intangible assets207,949 202,072 
Less: Accumulated amortization(46,356)(39,809)
Add: Curre