STEM 10-K & 10-Q changes, risk factors and insider trading

We urge you to consider carefully the risks described below, which discuss the material factors that make an investment in our securities speculative or risky, as well as in other reports and materials that we file with the SEC and the other information included or incorporated by reference in this Annual Report on Form 10-K. The occurrence of any of the following risks and uncertainties, or additional risks and uncertainties not currently known to us or that we currently deem immaterial, could, in circumstances we may or may not be able to accurately predict, materially adversely affect our business, operations, reputation, financial condition, results of operations, cash flows, liquidity, growth, prospects and stock price. The disclosures in this section reflect our beliefs and opinions as to factors that would be reasonably expected to materially and adversely affect us in the future. References to past events are provided by way of example only and are not intended to be a complete listing or a representation as to whether or not such factors have occurred in the past.

•IfOur future growth will depend on continuing to expand and diversify our new product and new market opportunities, and if we do not successfully execute on our new product and new market opportunities,plans, or if our new product and new market opportunities are more limited than we expect, our operating results and future growth prospects could be adversely affected.

Additional Risks Related to Our Securities and Capital Structure

From our inception in 2009 through 2012, we were focused principally on research and development activities relating to our energy storage systems technology. We did not sell any of our battery hardware and software-enabled services and did not recognize any significant revenue until much later. Moreover, in October 2024, we announced a new business strategy that reflects a renewed focus on developing and marketing our AI-enabled software and services offerings. Our newThis strategy willhas requirerequired significant operational changes, including reduction of what has historically been the source of most of our revenue (battery resales), adjustments to the way we develop and market our products and services, and realignment of our business processes. As a result, we have a limited history operating our business at its current scale and under our newcurrent strategy, and therefore a limited history upon which you can base an investment decision.

We compete for customers, financing partners and incentive dollars with other providers of asset performance monitoring and control solutions and energy storage systems. Many providers of electricity, such as traditional utilities and other companies offering distributed generation products, have longer operating histories, customer incumbency advantages, access to and influence with local and state governments, and more capital resources than we do. Significant developments in alternative energy storage and management technologies or improvements in the efficiency or cost of traditional energy sources, including coal, oil, natural gas used in combustion or nuclear power, may materially and adversely affect our business and prospects in ways we cannot anticipate. We may also face new competitors who are not currently in the market, including as a result of the IRA and itsOBBB and their anticipated impactsimpact and benefits toon our industry. If we fail to adapt to changing market conditions and to compete successfully with new competitors, we will limit our growth and adversely affect our business results. Additionally, in connection with our new business strategy, we are renewing our focus on developing and marketing our AI-enabled software and services offerings. Our competitors may be able to develop new AI-enabled offerings that negatively impact demand for our offerings, or incorporate AI into their offerings more successfully than we do and achieve greater and faster adoption. As a result, even if our services and offerings are more effective than the products and services that our competitors offer, potential customers might select competitive products and services in lieu of purchasing our services, which would limit our growth and adversely affect our business results.

Our future growth will depend on expandingcontinuing to expand and diversifyingdiversify our new product and new market opportunities, and if we do not successfully execute on our new product and new market plans, or if our new product and new market opportunities are more limited than we expect, our operating results and future growth prospects could be adversely affected.

WeAt arethe attemptingend toof enhance2024, ourwe future growth opportunities bybegan implementing aour new business strategy that reflects a renewed focus on developing and marketing our AI-enabled software and services offerings,offerings and investing in the research and development of new offerings.offerings in order to enhance our future growth opportunities. Additionally, we are seekingcontinuing to seek to expand the markets in which we sell our products and services. If we do not appropriately allocate our resources in line with the market and developing opportunities, our results of operations and future growth prospects could be adversely affected.

WeOur strategy may not beachieve ableanticipated to implement our new strategy.benefits. Our failure to do so could adversely affect our business, financial condition, and results of operations.

Our total hardware revenue in fiscal years 20242025 and 20232024 werewas $76.8$68.6 million and $399.0$76.8 million, which comprised 43.9% of our total revenue in fiscal year 2025 and 53.1% of our total revenue in fiscal year 2024 and 86.4% of our total revenue in fiscal year 2023,2024, respectively. Our transition away from hardware resales is expected tocould lead to decreased revenue in the short term, as we work to adjust our revenue streams and our customer base. This decline in revenue could strain our cash flow and temporarily worsen our cash position, which in turn may limit our ability to invest in the necessary technologies, talent and infrastructure required to fully implement the new strategy. If we are unable to generate sufficient cash flow or secure additional funding, we may experience delays in executing our new strategy, which could have a material adverse effect on our business, financial condition, and results of operations.

This transition willhas entailentailed significant operational changes, including reduction of what has historically been the source of most of our revenue (battery resales), adjustments to the way we develop and market our products and services, and realignment of our business processes. These changes couldhave leadled to reduced revenue, restructuring-related costs and disruptions in our operations, which may negatively impact our ability to effectively scale our software and services offerings and achieve our financial and operational targets. Failure to successfullyachieve andthe timelyintended implementbenefits of these changes may have a material adverse effect on our business, financial condition, and results of operations.

In addition, executingcontinuing to execute on the new strategy requires investment in new capabilities and resources, particularly in software development, data management, and AI. We may face challenges in recruiting, retaining, and training employees who have the necessary skill sets to support our new business model. A failure to build or acquire these capabilities in a timely manner could delay the successful execution of the strategy and weaken our competitive position.

We purchase our components and materials from international and domestic vendors, and are exposed to supply chain risks arising from logistics disruptions. Unexpected changes in business conditions, the macroeconomic environment, geopolitical instability, materials pricing, including inflation of raw material costs, labor issues, wars, natural disasters, health epidemics, trade and shipping disruptions, port congestions and other factors beyond our or our suppliers’ control could also affect these suppliers’ ability to deliver components to us or to remain solvent and operational. In addition, international supply is also exposed to risks related to tariffs and sanctions, as well as political, social, and economic instability in regions where we source products and material. ForSince example,April President2025, Trump hasnew, indicatedsubstantial thattariffs hehave intendsbeen imposed on imports to imposethe additionalU.S. tariffs,In includingresponse, aseveral 60%countries tariffhave imposed, or threatened to impose, reciprocal tariffs on goods importedimports from Chinathe U.S. and a 20% tariff on all other U.S.retaliatory imports,measures. whichThese couldtariffs resulthave caused increases in aour tradesupply war.chain costs, have led us to find alternative suppliers when possible and have also led to increased costs for our customers. These or other tariffs could continue to adversely affect our hardware component prices and negatively affect any plans to sell products in any impacted international markets. Disruptions in the availability of key equipment, components or materials such as lithium may adversely affect our business, prospects and operations, and volatility in prices and availability of such items may negatively affect our customer relationships and ability to plan for future growth.

Our sales cycle is typically six to 12twelve months for our hardware and software-enabled services, but can vary considerably. In order to make a sale, we must typically provide a significant level of education to prospective customers regarding the use and benefits of our hardware and software-enabled services.

Currently, the time between the entry into a sales contract with a customer and the installation of our energy storage systems can range from nine to 18eighteen months, or more. This lengthy sales and installation cycle is subject to a number of significant risks over which we have little or no control. We characterize contracts that have been signed but not yet installed as a booking that becomes part of our backlog. Because of both the long sales and installation cycles, we may expend significant resources without generating a sale or producing revenue from our bookings and backlog.

We believe that our success and our ability to reach our strategic objectives are highly dependent on the contributions of our key management, technical, engineering, finance and sales personnel. In 2024,2024 and 2025, several key executives departed the Company, including our Chief Executive Officer, Chief Financial Officer, Chief Strategy Officer, Chief Technology Officer and Chief TechnologyAccounting Officer. Also, in September 2024, ourOur Board of Directors appointed a new Chief FinancialExecutive Officer; and in January 2025, a new Chief ExecutiveFinancial Officer.Officer in July 2025 and a new Chief Accounting Officer in December 2025. Executive leadership and senior management transitions, reductions in workforce and employee turnover can be time-consuming, difficult to manage, create instability, cause disruption to our business and result in the loss of institutional knowledge. Any of these outcomes could impede the execution of our day-to-day operations and our ability to fully implement our business strategy. These effects could also make it more difficult to attract and retain talent. The failure to successfully hire and retain key executives and employees or the further loss of any key executives, senior management andor employees could have a significant impact on our operations, including declining product identity and competitive differentiation, eroding employee morale and productivity or an inability to maintain internal controls, regulatory or other compliance related requirements, any and all of which could in turn adversely impact our business, financial condition, and results of operations.

In addition, our ability to manage our growth effectively, including our ability to expand our market presence in international markets, is impacted by our ability to successfully retain our management team, and hire and train new personnels.personnel. Our success in hiring, attracting and retaining senior management and other experienced and highly skilled employees will depend in part on our ability to provide competitive compensation packages and a high-quality work environment and maintain a desirable corporate culture. To help attract, retain, and motivate qualified employees, we use stock-based awards, such as restricted stock units,units and performance-based cash incentive awards.awards, and in the case of our executive officers, we also use performance stock units. Further sustained declines in our stock price, or lower stock price performance relative to our competitors, can further reduce the retention value of our stock-based awards. We may not be able to attract, integrate, train, motivate or retain current or additional highly qualified personnel, and our failure to do so could adversely affect our business, financial condition and operating results.

Since our inception in 2009, we have incurred significant net losses and have used significant cash in our business. As of December 31, 2024,2025, we had an accumulated deficit of approximately $1,626.5$1,488.7 million. We expect to continue to expand our operations, including by investing in sales and marketing, research and development, staffing systems and infrastructure to support our growth. In October 2024, we announced a new business strategy, which is expected to resultresulted in reduced revenues and short-term disruptions in our operations in the near term.operations. Under our current plans, we expect to continue to incur net losses on a GAAP basis through at least 2025.2026. Our ability to achieve profitability in the future will depend on a number of factors, including:

•executingcontinuing to implement our new strategy;

•the availability of incentives, including those associated with the IRA.IRA and OBBB.

In order to operate more efficiently and cost effectively, we have, and we may from time to time, adjust employment levels, optimize our footprint and/or implement other restructuring activities. For example, in April 2025, we announced an approximately 27% reduction of our global workforce, as part of our broader efforts to prioritize investments in software, reduce operating costs, increase efficiency, drive profitable growth and increase stockholder value. These activities are complex and may involve or require significant changes to our operations. If we do not successfully manage these activities, expected efficiencies and benefits might be delayed or not realized. Risks associated with these actions and other workforce management issues include: unfavorable political responses and reputational harm; unforeseen delays in the implementation of the restructuring activities; additional costs; adverse effects on employee morale; the failure to meet operational targets due to the loss of employees or work stoppages; and difficulty managing our operations during or after facility consolidations, any of which may harm our business or reputation, impair our ability to achieve anticipated cost reductions, harm our business or reputation, or have a material adverse effect on our competitive position, results of operations, cash flows or financial condition.

The energy storage systems we pair with our Athena®PowerTrack Optimizer platform are complex energy solutions. We rely on our OEM suppliers to control the quality of the battery storage equipment and other components that make up the energy storage system sold to our customers. We are not involved in the manufacture of the batteries or other components of the energy storage systems. As a result, our ability to seek recourse for liabilities and recover costs from our OEM suppliers depends on our contractual rights as well as the financial condition and integrity of such OEM suppliers that supply us with the batteries and other components of our energy storage systems. Such systems may contain undetected or latent errors or defects. In the past, we have discovered latent defects in energy storage systems. In connection with such defects, we could incur significant expenses or disruptions of our operations, including to our energy storage network, that would prevent us from performing the automated data engineering required to support our AI processes and energy storage network. Any manufacturing defects or other failures of our energy storage systems to perform as expected could cause us to incur significant re-engineering costs, divert the attention of our personnel from operating and maintenance efforts, expose us to adverse regulatory action and litigation and significantly and adversely affect customer satisfaction, market acceptance and our business reputation. Furthermore, our OEM suppliers may be unable to correct manufacturing defects or other failures of any energy storage systems in a manner satisfactory to our customers, which could adversely affect customer satisfaction, market acceptance and our business reputation.

Our software and services offerings are essential to the operation of our hardware products that we sell to customers. As a result, in connection with the sales of energy storage hardware, we enter into recurring long-term services agreements with customers for the usage of our AthenaPowerTrack Optimizer platform for approximately 3 to 20 years. Our pricing of services contracts is based upon the value we expect to deliver to our customers, including considerations such as the useful life of the energy storage system and prevailing electricity prices. We also provide performance warranties and guarantees covering the efficiency and output performance of our software-enabled services. We do not have a long history with a large number of field deployments, and our estimates may prove to be incorrect. Failure to meet these performance warranties and guarantee levels may require us to refund our service contract payments to the customer, or require us to make cash payments to the customer based on actual performance, as compared to expected performance.

Further, the occurrence of any defects, errors, disruptions in service, or other performance problems, interruptions, or delays associated with our energy storage systems or the AthenaPowerTrack Optimizer platform, whether in connection with day-to-day operations or otherwise, could result in:

We primarily rely on Amazon Web Services to deliver our services to users on our AthenaPowerTrack Optimizer platform, and any disruption of, or interference with, our use of Amazon Web Services could adversely affect our business, financial condition and results of operations.

We currently host our AthenaPowerTrack Optimizer platform and support our energy storage network operations on one or more data centers provided by Amazon Web Services (“AWS”), a third-party provider of cloud infrastructure services. We do not have control over the operations of the facilities of AWS that we use. AWS’ facilities are vulnerable to damage or interruption from natural disasters, cybersecurity attacks, terrorist attacks, power outages, and similar events or acts of misconduct.

Our AthenaPowerTrack Optimizer platform’s continuing and uninterrupted performance is critical to our success. We have experienced, and expect that in the future we will experience, interruptions, delays, and outages in service and availability from time to time due to a variety of factors, including infrastructure changes, human or software errors, website hosting disruptions and capacity constraints. In addition, any changes in AWS’ service levels may adversely affect our ability to meet the requirements of users on our AthenaPowerTrack Optimizer platform. Since our AthenaPowerTrack Optimizer platform’s continuing and uninterrupted performance is critical to our success, sustained or repeated system failures would reduce the attractiveness of our hardware and software-enabled services to customers. It may become increasingly difficult to maintain and improve our performance, as we expand and our energy storage network grows, increasing customer reliance on the AthenaPowerTrack Optimizer platform. Any negative publicity arising from any disruptions to AWS’ facilities, and as a result, our AthenaPowerTrack Optimizer platform could adversely affect our reputation and brand and may adversely affect the usage of our hardware and software-enabled services. Any of the above circumstances or events may adversely affect our reputation and brand, reduce the availability or usage of our hardware and software- enabled services, lead to a significant short-term loss of revenue, increase our costs, and impair our ability to attract new users, any of which could adversely affect our business, financial condition and results of operations.

In addition to upfront sale of hardware and network integration, we depend on customers continuing to subscribe to services enabled by our AthenaPowerTrack Optimizer platform. Therefore, it is important that customers renew their subscriptions when the contract term expires, increase their purchases of our hardware and network solutions and enhance their subscriptions. Customers may decide not to renew their subscriptions with a similar contract period, at the same prices or terms or with the same or a greater number of users or level of functionality. Customer retention may decline or fluctuate as a result of a number of factors, including satisfaction with software-enabled services and features, functionality of our energy storage hardware and software-enabled services, prices, the features and pricing of competing products, reductions in spending levels, mergers and acquisitions involving customers and deteriorating general economic conditions.

Increased scrutiny from stakeholders and regulators regarding ESGsustainability practices and disclosures, including those related to sustainability, and disclosure could result in additional costs and adversely impact our business and reputation.

Companies across all industries are facing increased scrutiny regarding their ESGsustainability practices and disclosures and some institutional and individual investors are increasingly using ESGsustainability screening criteria in making investment decisions. Our disclosures on these matters or a failure to satisfy evolving stakeholder expectations for ESGsustainability practices and reporting, which may conflict with one another, may potentially harm our reputation and impact employee retention, customer relationships and access to capital. For example, certain market participants use third-party benchmarks or scores to measure a company’s ESGsustainability practices in making investment decisions and customers and supplies may evaluate our ESGsustainability practices or require that we adopt certain ESGsustainability policies as a condition of awarding contracts. In addition, our failure or perceived failure to pursue or fulfill our goals, targets and objectives or to satisfy various reporting standards within the timelines we announce, or at all, could expose us to government enforcement actions and private litigation. Furthermore, complying or failing to comply with existing or future federal, state, local, and foreign legislation and regulations applicable to our ESGsustainability efforts, which may conflict with one another, could cause us to incur additional compliance and operational costs or actions andcosts, suffer reputational harm,harm or to become the target of litigation, investigations or other proceedings initiated by government authorities or private actors, which could materially and adversely affect our business, financial condition and results of operations.

Our ability to achieve any goal or objective, including with respect to environmental and diversity initiatives and compliance with ESGsustainability reporting standards, is subject to numerous risks, many of which are outside of our control. Examples of such risks include the availability and cost of technologies and products that meet sustainability and ethical supply chain standards, evolving regulatory requirements affecting ESGsustainability standards or disclosures, our ability to recruit, develop and retain diverse talent in our labor markets, and our ability to develop reporting processes and controls that comply with evolving standards for identifying, measuring and reporting ESGsustainability metrics. Methodologies for reporting ESGsustainability data may be updated and previously reported ESGsustainability data may be adjusted to reflect improvement in availability and quality of third-party data, changes in assumptions, changes in the nature and scope of our operations and other changes in circumstances. Our processes and controls for reporting ESGsustainability matters across our operations and supply chain are evolving along with multiple disparate standards for identifying, measuring, and reporting ESGsustainability metrics, including ESG-relatedsustainability-related disclosures that may be required by the SEC, European and other regulators, and such standards may change over time, which could result in significant revisions to our current goals, reported progress in achieving such goals, or ability to achieve such goals in the future. As ESGsustainability best-practices, reporting standards and disclosure requirements continue to develop, we may incur increasing costs related to ESGsustainability monitoring and reporting.

Customers may be less likely to purchase our products and services if they do not believe that our business will succeed or that our services and support and other operations will continue in the long term. Similarly, suppliers and other third parties will be less likely to invest time and resources in developing business relationships with us if they do not believe that our business will succeed. Accordingly, in order to build and maintain our business, we must maintain confidence among customers, suppliers, third-party general contractor partners, financing partners, analysts, ratings agencies and other parties in our products and services, long-term financial viability and business prospects. Maintaining such confidence may be particularly complicated by certain factors including those that are largely outside of our control, such as oura decline in our stock price, the potential delisting of our common stock on the New York Stock Exchange, changes in senior management, our recent change in business strategy, customer unfamiliarity with our products and services, delivery and service operations to meet demand, competition, future changes in the evolving distributed and renewable energy markets or uncertainty regarding sales performance compared with market expectations.

This MD&A generally discusses 2025 and 2024 items and year-to-year comparisons between 2025 and 2024. Discussions of 2023 items and year-to-year comparisons between 2024 and 2023. Discussions of 2022 items and year-to-year comparisons between 2023 and 2022 that are not included in this Annual Report on Form 10-K can be found in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in our Annual Report on Form 10-K filed with the SEC on FebruaryMarch 29,5, 2024.2025.

The information regarding the Merger set forth in the first paragraph of Part 1, Item 1, “Business — History” above is incorporated herein by reference. See also Note 1 — Business, in the accompanying notes to the consolidated financial statements included in Part II, Item 8, “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K. For financial reporting purposes, Legacy Stem is treated as the accounting acquirer.

WeEach year since our inception, we have incurred net operating losses and negative cash flows from operations each year since our inception.operations. We have financed our operations primarily through cash flows from customers,customers proceeds fromand the Merger, convertible senior notes, and issuance of convertible preferredsenior stock.notes.

Our total revenue decreasedincreased from $461.5 million for the year ended December 31, 2023 to $144.6 million for the year ended December 31, 2024.2024 to $156.3 million for the year ended December 31, 2025. For the years ended December 31, 20242025 and 2023,2024, we incurredgenerated net lossesincome of $854.0$137.8 million and $140.4incurred a net loss of $854.0 million, respectively. As of December 31, 2024,2025, we had an accumulated deficit of $1,626.5$1,488.7 million.

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

Our New Strategy

In October 2024, we announced a new business strategy that reflects a renewed focus on developing and marketing our AI-enabled softwaresoftware, edge and services offerings. This transition willhas entailentailed significant operational changes,changes during calendar years 2024 and 2025, including reduction of what hashad historically been the source of most of our revenue (battery resales), adjustments to the way we develop and market our products and services, and realignment of our business processes. These changes arehave expected to resultresulted in reduced revenue, increased restructuring-related costscosts, reduced operating expenses, and short-term disruptions in our operations, which may negatively affect our ability to effectively scale our software and services offerings and achieve our financial and operational targets. Failure to successfullyachieve andthe timelyanticipated implementbenefits of our new strategy may have a material adverse effect on our business, financial condition, and results of operations. See “WeOur strategy may not beachieve ableanticipated to successfully implement our recently announced new strategy.benefits.” in Part I. Item 1A. “Risk Factors” in this Report for additional information about certainsome risks related to our new strategy.

The execution of our new business strategy has required, and is expected to requirecontinue significantto require, investment in our humansoftware, capitalour employees and infrastructure. As of December 31, 2024,2025, we had cash and cash equivalents of $56.3$48.9 million (as compared to $75.4$43.1 million as of September 30, 20242025 and $105.4$56.3 million as of December 31, 20232024), while our operating expenses for the year ended December 31, 20242025 were $828.4$115.6 million. Our cash reserves may constrain our ability to make the investments required to execute our new strategy. Moreover, our cash reserves may not be sufficient to fund operations. If our cash flow from operations does not improve as quickly as expected, or if we are unable to secure additional sources of capital if or when the need arises, itwe may havebe aconstrained material adverse effect onin our business,ability financialto condition,make andthe resultsinvestments required to continue execution of operations.our new strategy.

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

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

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

We, through an indirect wholly-owned development subsidiary, have entered into strategic joint ventures with qualified third parties to develop select energy storage generation projects (“DevCo Projects”), as more fully described below under Note 12 — BusinessSummary of Significant Accounting Policies in the accompanying notes to the consolidated financial statements included in Part II, Item 8, “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K. TheseWe projectshave requirenot significantmade upfrontan investment byin us and involve a high degree of risk. If aany DevCo Project failssince to2024, reach completion or is significantly delayed,and we couldare losenot allmaking orfurther a portion of our development capital investment. See “We Face Risks Related to our DevCo Business Model”investments in Part I, Item 1A, “Risk Factors” of this Annual Report on Form 10-K for additional information about certain risks related to these DevCo Projects. As of December 31, 2025 we have sold, or written off, all project assets associated with the DevCo Projects.

Deployment of intermittent resources has accelerated over the last decade, and today, wind and solar have become a low cost energy source. We expect the cost of generating renewable energy to continue to decline and deployments of energy storage systems to increase. As renewable energy sources of energy production are expected to represent a larger proportion of energy generation, grid instability rises due to their intermittency, which can be addressed by energy storage solutions. The IRA is expected to further increase the deployment of renewable energy assets, provided that the law or its implementation is not modified or restricted in a way that counters these effects. We are continuing to evaluate the IRA and its requirements, including Treasury Department guidance, and its application to our business and our customers.

Our key competitors include energy monitoring and optimization software providers, energy storage and edge device OEMs,OEMs and hardware integration providers,providers. renewableOur project developers, EPC firms, and consulting firms. In storage, our competitors are typically focused on the development and marketing of single-purpose built solutions with captive hardware offerings, while our AI-poweredPowerTrack software is hardware agnostic,agnostic and benefits from operational data across a multitude of hardware types, geographies, utilities,utilities and grid operator service areas. In solar, our competitors provide monolithic software and edge devices, whereas PowerTrack™ and ourOur edge devices provide customers with a flexible solution that meets their individual project needs.

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

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

During the years ended December 31, 2024 and 2023,2024, we incurred costs of $1.0 million and $2.7 million, respectively, above initially agreed prices on the acquisition of certain hardware systems from one of our suppliers, which resulted from production delays by such supplier. This in turn caused fulfillment and delivery delays on an order to one of our customers, as a result of which we further incurred liquidated damages of $4.8 million during the year ended December 31, 2023, under the customer contract. Because we had not previously incurred costs above initially agreed prices with a hardware supplier and were subsequently required to pay liquidated damages to a customer,supplier, we excluded thesethis two itemsitem from adjusted EBITDA and non-GAAP gross profit to better facilitate comparisons of our underlying operating performance across periods.

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

Forward-looking statements address matters that are, to varying degrees, uncertain, such as statements about our financial and operating performanceperformance, guidance, targets and other forecasts or expectations regarding, or dependent on, our business outlook and strategy; and expectations around our software and services-centricsoftware-centric business; our ability to secure sufficient and timely inventory from suppliers; our ability to meet contracted customer demand; our ability to manage manufacturing or delivery delays; our ability to manage our supply chain and distribution channels; our acquisitions, joint ventures, partnerships and other alliances; forecasts or expectations regarding the energy transition and global climate change; the integration and optimization of energy resources; our business strategies and those of our customers; our ability to retain or upgrade current customers, further penetrate existing markets or expand into new markets; the effects of natural disasters and other events beyond our control; the impacts of the One Big Beautiful Bill Act (“OBBB”) on our business and that of our customers; the direct or indirect effects on our business of macroeconomic factors and geopolitical instability, such as the warsarmed inconflicts between Russian and Ukraine and in the Middle East; and our outlook and future results of operations, including revenue, adjusted EBITDA, and other metrics.

Such forward-looking statements are subject to risks, uncertainties, and other factors that could cause actual results or outcomes to differ materially from those expressed or implied by such forward-looking statements, including but not limited to our inability to execute on, and achieve the expected benefits from, our operational and strategic initiatives, including from our cost reduction, workforce reduction and restructuring efforts; our inability to successfully execute on our new software and services-centricsoftware-centric strategy; the effects of the OBBB on our business and that of our customers; our inability to secure sufficient and timely inventory from our suppliers, as well as contracted quantities of equipment; our inability to meet contracted customer demand; supply chain interruptions and manufacturing or delivery delays; disruptions in sales, production, service or other business activities; general macroeconomic and business conditions in key regions of the world, including inflationary pressures, general economic slowdown or a recession, high interest rates, changes in monetary policy, changes in trade policies, including tariffs or other trade restrictions or the threat of such actions, government shutdowns and instability in financial institutions; the direct and indirect effects of widespread health emergencies on our workforce, operations, financial results and cash flows; geopolitical instability, such as the warsarmed inconflicts between Russian and Ukraine and in the Middle East; the results of operations and financial condition of our customers and suppliers; pricing pressures; severe weather and seasonal factors; our inability to continue to grow and manage our growth effectively; our inability to attract and retain qualified employees and key personnel; our inability to comply with, and the effect on our business of, evolving legal standards and regulations, including those concerning data protection, consumer privacy, sustainability, and evolving labor standards; risks relating to the development and performance of our software-enabled services; our inability to retain or upgrade current customers, further penetrate existing markets or expand into new markets; the risk that our business, financial condition and results of operations may be adversely affected by other political, economic, business and competitive factors; and other risks and uncertainties discussed in Part II. Item 1A. “Risk Factors” in this Report, in Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025, and in our other filings with the SEC. If one or more of these or other risks or uncertainties materialize (or the consequences of any such development changes), or should our underlying assumptions prove incorrect, our actual results or outcomes, or the timing of these results or outcomes, may vary materially from those reflected in our forward-looking statements. Forward-looking statements and other statements in this Report regarding our environmental, social, and other sustainability plans and goals are not an indication that these statements are necessarily material to the Company, investors or other stakeholders or required to be disclosed in our filings under U.S. securities laws or any other laws or requirements applicable to the Company. In addition, historical, current, and forward-looking environmental, social, and sustainability-related statements may be based on standards for measuring progress that are still developing, internal controls and processes that continue to evolve, and assumptions that are subject to change in the future. Forward-looking statements in this Report are made as of the date of such Report, and the Company disclaims any intention or obligation to update publicly or revise such forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law.

You should read the following management’s discussion and analysis of our financial condition and results of operations in conjunction with our unaudited condensed consolidated financial statements and related notes included in Part I, Item 1 of this Quarterly Report on Form 10-Q.Report. This discussion and analysis should also be read together with our audited consolidated financial statements and related notes, as well as the section entitled “Management’s Discussion and Analysis of Financial Condition and Results orof Operations” contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025. You should carefully read the sections entitled “Special Note Regarding Forward-Looking Statements” and “Risk Factors” herein to gain an understanding of the important factors that could cause actual results to differ materially from our forward-looking statements.

Our total revenue decreased from $32.5$38.4 million for the three months ended MarchJune 31,30, 2025 to $29.0$33.7 million for the three months ended MarchJune 31,30, 2026. ForWe incurred net losses of $14.4 million for the three months ended MarchJune 31,30, 2026 and recognized net income of $202.5 million for the three months ended June 30, 2025. Our total revenue decreased from $70.9 million for the six months ended June 30, 2025 to $62.7 million for the six months ended June 30, 2026. For the six months ended June 30, 2026 and 2025, we incurred a net loss of $18.9$33.3 million and $25.0recognized net income of $177.5 million, respectively. As of MarchJune 31,30, 2026, we had an accumulated deficit of $1,507.7$1,522.1 million.

In 2024, we announced a new business strategy that reflects a renewed focus on developing and marketing our AI-enabled software, edge and services offerings. This transition hasresulted entailedin significant operational changes during calendar years 2024 and 2025, including reduction of what had historically been the source of most of our revenue (battery resales), adjustments to the way we develop and market our products and services, and realignment of our business processes. These changes have resulted in reduced revenue, increased restructuring-related costs, reduced operating expenses, and short-term disruptions in our operations, which may negatively affect our ability to effectively scale our software and services offerings and achieve our financial and operational targets. Failure to achieve the anticipated benefits of our strategy may have a material adverse effect on our business, financial condition, and results of operations. See “Our strategy may not achieve anticipated benefits.” in Part I. Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025 for additional information about some risks related to our strategy.

The execution of our business strategy has required, and is expected to continue to require, investment in our software, our employees and infrastructure. As of MarchJune 31,30, 2026, we had cash and cash equivalents of $36.6$38.4 million, while our operating expenses for the three months ended MarchJune 31,30, 2026 were $25.1$21.6 million. If our cash flow from operations does not improve as expected, or if we are unable to secure additional sources of capital if or when the need arises, we may be constrained in our ability to make the investments required to continue execution of our new strategy.

In July 2025, the OBBB was enacted, which introduced material changes to clean energy tax credit programs that are significant to our business and may affect our financial condition, results of operations and future prospects. Included in this legislation are provisions that allow for the immediate expensing of domestic United States research and development expenses, immediate expensing of certain capital expenditures, and other changes to the U.S. taxation of profits derived from foreign operations. The OBBB did not result in any material changes to tax expense or cash tax for 2025,three and six months ended June 30, 2026, primarily as a result of the valuation allowance we have on our deferred tax assets.

The OBBB scales back the Investment Tax Credit (the “ITC”) available under Section 25D of the Internal Revenue Code (the “Code”) for residential solar and storage systems purchased through cash or loans. Under the OBBB, the Section 25D credit expired on December 31, 2025. In addition, the OBBB imposes new timing requirements for eligibility under Section 48E of the Code, which governs ITCs for leased solar and storage systems. Previously under the IRA, Section 48E credits were available through 2032 or such later period when the U.S. power sector emitted 75% less carbon emissions than 2022 levels. Under the OBBB, these credits will no longer be available for solar-only projects placed in service after December 31, 2027, unless construction begins on or before July 4, 2026, pursuant to a grandfathering rule. Projects that qualify under this rule must still meet continuity requirements to remain eligible. Energy storage projects are not subject to this placed-in-service deadline; however, the ITC for storage systems will begin to phase down in 2034 -down, decreasing to 75% in 2034, 50% in 2035 and phasing0% out entirely byin 2036.

The OBBB also amends the domestic content bonus credit rules for Section 48E projects. Projects commencing construction after June 16, 2025 and before January 1, 2026 must meet a 45% domestic cost threshold.threshold, Ifincreasing to 50% for construction beginsbeginning in 2026, the project’s domestic cost threshold is 50%,2026 and if55% construction begins after 2026, the project’s domestic cost threshold is 55%.thereafter.

Additionally, the OBBB introduces new compliance requirements under the Foreign Entity of Concern (“FEOC”) provisions for both Section 48E and the Advanced Manufacturing Production Tax Credit (“AMPTC”) under Section 45X. These provisions limit “material assistance” from FEOCs in projects otherwise eligible for tax credits under Section 48E and Section 45X and establish an escalating threshold of non-FEOC content that must be met by solar and storage projects beginning construction inafter 20262025 and by manufactured components produced beginning inafter 2026.2025.

On July 7, 2025, the President issued an Executive Order directing the Secretary of the Treasury to issue updated guidance on the “beginning of construction” requirements applicable to Section 48E projects under the OBBB and also to implement the FEOC restrictions set forth inunder the OBBB. On August 15, 2025, the Treasury Department released Notice 2025-42, which modifies the rules for determining when construction begins for purposes of qualifying for the Section 48E credits. The guidance eliminates the longstanding 5 percent5% safe harbor and makes the physical work test the sole method for establishing the beginning of construction for solar projects larger than 1.5 megawatts (AC), effective for projects that begin construction on or after September 2, 2025. ProjectsOn thatFebruary began12, construction prior to that date continue to be governed by prior IRS guidance. The 5 percent safe harbor remains available for solar facilities of 1.5 MW or smaller. Under2026, the newTreasury rules,Department released Notice 2026-15, providing interim guidance on the physicalFEOC work“material testassistance” isrestrictions nowunder theSections sole45Y, method for establishing that construction has begun for affected solar projects larger than 1.5 MW48E and for all wind projects. The test requires that “physical work of a significant nature” be performed, without regard to cost, and may include certain on-site and off-site activities but excludes preliminary activities such as planning, permitting, and financing. We are currently evaluating the full impact of this legislation on our consolidated financial statements.45X.

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

We calculate adjusted EBITDA as net (loss) income attributable to us before depreciation and amortization, including amortization of internally developed software, interest expense, further adjusted to exclude stock-based compensation and other income and expense items, including change in fair value of warrant liability, impairment of assets held for sale and income tax provision or benefit.

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

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

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

We generate hardware revenue through (i) edge hardware devices and (ii) salesresales of OEM energy storage systems. Performance obligations are satisfied when the energy storage system and edge hardware device along with all ancillary hardware components are delivered. The milestone payments received before the delivery of hardware are treated as deferred revenue. In certain customer contracts, we agreed to provide a guarantee that the value of purchased hardware will not decline for a certain period of time, as more fully described below under Note 3 — Revenue, of the Notes to the unaudited condensed consolidated financial statements in this Report.

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

(Remeasurement of) Impairment of Assets Held for Sale (Remeasurement of) impairment of assets held for sale represents impairment charges as a result of the carrying amount being greater than the fair value of the assets held for sale.sale and the remeasurement and reclassification of assets held for sale to held and used.

Other Expense,(Expense) Income, Net

Results of Operations for the Three Months Ended MarchJune 31,30, 2026 and 2025

Revenue decreased by $3.5$4.7 million, or 11%,12%, for the three months ended MarchJune 31,30, 2026, as compared to the three months ended MarchJune 31,30, 2025. The decrease was primarily driven by a $4.5$2.5 million decrease in hardware revenue that is primarily the result of a decrease in battery hardware resales being offset by increased edge hardware and service offerings as the Company continues to strategically de-emphasize battery hardware resales and pursue morehigher selectivemargin opportunities. Service and other revenue also increaseddecreased $1.0$2.2 million,million primarily due to ana increasedecrease in solarmanaged services subscriptionsrevenue fromrelated existingto the operations and newoptimization customers.of energy storage assets, primarily offset by increased PowerTrack subscriptions.

Cost of revenue decreased by $3.8$5.8 million, or 17%,23%, for the three months ended MarchJune 31,30, 2026, as compared to the three months ended MarchJune 31,30, 2025. The decrease was primarily driven by a decrease in cost of hardware revenue of $4.4$3.1 million primarily due to athe reductiondecrease in low margin battery hardware resalesresales. as the company continues to strategically de-emphasize this business line and pursue more selective opportunities. This decrease was partially offset by an increase in costCost of services and other revenue ofdecreased $0.5$2.7 millionmillion, primarily due to highera clouddecrease infrastructurerevenue costsfrom tolower supportmargin ourmanaged growing PowerTrack software platform.services.

Sales and marketing expense decreasedincreased by $0.3$0.2 million, or 4%,3%, for the three months ended MarchJune 31,30, 2026, as compared to the three months ended MarchJune 31,30, 2025. The decreaseincrease was drivenprimarily due to an increase of $0.8 million in the amortization of contract origination costs and professional services, partially offset by a decrease of $0.3$0.7 million in personnel related expenses mainly due to a decrease in headcount.

Research and development expense decreased by $4.8$3.5 million, or 42%,35%, for the three months ended MarchJune 31,30, 2026, as compared to the three months ended MarchJune 31,30, 2025. The decrease was primarily due to a decrease of $3.7$4.1 million in personnel related expenses as a result of lower headcount, andpartially aoffset decreaseby an increase of $1.1$0.6 million in professional services and otheroffice-related expenses.

General and administrative expense decreased by $4.9$0.7 million, or 36%,8%, for the three months ended MarchJune 31,30, 2026, as compared to the three months ended MarchJune 31,30, 2025. The decrease was primarily driven by a decrease of $2.3$1.9 million in personnel related expensescosts driven by a decrease in headcount,headcount and a decrease of $1.5$1.0 million in professional services, partially offset by an increase of $2.3 million in office-related and other expenses, and a decrease of $1.1 million in professional services, resulting from decreases in advisory services.expenses.

(Remeasurement of) Impairment of Assets Held for Sale

During the three months ended MarchJune 31,30, 2026, we recorded a $0.5 million remeasurement adjustment to the impairment of $3.3 million on assets held for salesale, ascomprised of $0.4 million gain on the carryingassets amountthat no longer met held for sale criteria and a $0.1 million remeasurement adjustment to the impairment of the assets held for sale exceeded its fair value.sale.

Interest expense, net increased by $3.1$6.5 million, or 72%,78%, for the threesix months ended MarchJune 31,30, 2026, as compared to the threesix months ended MarchJune 31,30, 2025. The increase was primarily driven by an increase of $3.4$6.8 million in interest on notes,notes due to the debt exchange executed in the second quarter of 2025, and an increase of $0.2 million on the unpaid sales and use tax liability, partially offset by a decrease of $0.3$0.5 million in interest on financing obligations.