STEM (STEM) risk factors, FY2025 10-K

Risks Related to Our Business and Industry

1. 01Our limited operating history at current scale and our nascent industry make evaluating our business and prospects difficult
2. 02The distributed generation industry is emerging and our distributed generation offerings may not receive widespread market acceptance
3. 03If renewable energy technologies are not suitable for widespread adoption, or if sufficient demand for our software-enabled services does not develop or takes longer to develop than we anticipate, our sales may decline and we may be unable to achieve or sustain profitability
4. 04If the estimates and assumptions we use to determine the size of our total addressable market are inaccurate, our future growth rate may be negatively affected and the potential growth of our business may be limited
5. 05We currently face and will continue to face significant competition65% rewritten
6. 06We use artificial intelligence in our business, and challenges with properly managing its use could result in harm to our brand, reputation, business or customers, and adversely affect our results of operationsNew

Risks Relating to Our Operations

1. 07Our strategy may not achieve anticipated benefits. Our failure to do so could adversely affect our business, financial condition, and results of operationsNew
2. 08cybersecurity threats or contain errors, bugs, or other issues affecting their functionality, which could negatively affect customer satisfaction and adoptionNew
3. 09We are subject to supply chain risk and our suppliers may fail to deliver components according to schedules, prices, quality and volumes that are acceptable to us, which could negatively affect our results of operations43% rewritten
4. 10We face risks resulting from supplier concentration and limited supplier capacity
5. 11We have entered into long-term supply agreements that could result in insufficient inventory and negatively affect our results of operations
6. 12We depend on significant customers for a substantial portion of our revenue. If we fail to retain or expand our customer relationships or significant customers reduce their purchases, our revenue could decline significantly
7. 13Our sales cycle is typically six to twelve 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
8. 14If we are unable to attract and retain key employees and hire qualified management, technical, engineering and sales personnel, our ability to compete and successfully grow our business could be adversely affected42% rewritten
9. 15We have incurred significant losses in the past and may incur net losses through at least 202630% rewritten
10. 16We may not realize expected benefits from our cost reduction and restructuring efforts, and our profitability or our business otherwise might be adversely affected34% rewritten
11. 17Any future acquisitions we undertake may disrupt our business, adversely affect operations, dilute our stockholders, and expose us to significant costs and liabilities
12. 18Our current and planned foreign operations expose us to additional business, financial, regulatory and geopolitical risks, and any adverse event could have a material adverse effect on our results of operations
13. 19As a result of these risks, any future international expansion efforts that we may undertake (as well as our acquisition of AlsoEnergy) may not be successful and may negatively affect our results of operations and profitability
14. 20Our platform performance may not meet our customers’ expectations or needs
15. 21If any energy storage systems procured from OEM suppliers and provided to our customers contain manufacturing defects, our business and financial results could be adversely affected
16. 22If our estimates of useful life for our energy storage systems and related hardware and software-enabled services are inaccurate, or if our OEM suppliers do not meet service and performance warranties and guarantees, our business and financial results could be adversely affected
17. 23The failure of renewable energy hardware costs to continue to decline would have a negative effect on our business and financial condition
18. 24Future product recalls could materially adversely affect our business, financial condition and operating results
19. 25We primarily rely on Amazon Web Services to deliver our services to users on our PowerTrack 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
20. 26Any failure to offer high-quality technical support services may adversely affect our relationships with our customers and adversely affect our financial results
21. 27Our business currently depends on the availability of rebates, tax credits and other financial incentives to our customers. The reduction, modification, or elimination of government economic incentives could cause our revenue to decline and adversely affect business, financial condition and results of operations65% rewritten
22. 28The economic benefit of our offerings to our customers depends on the cost of electricity available from alternative sources, including local electric utility companies, which cost structure is subject to change
23. 29Our battery resale business is subject to risks associated with construction, utility interconnection and delays, including those related to obtaining government permits and other contingencies that may arise in the course of completing installations25% rewritten
24. 30installation of our energy storage systems and could therefore adversely affect the timing of the recognition of revenue related to hardware acceptance by our customer, which could adversely affect our operating results in a particular periodNew
25. 31Our business depends on customers renewing their services subscriptions. If customers do not continue to use our subscription offerings or if we fail to expand the availability of products and services available to our customers, our business and operating results will be adversely affected
26. 32Changes in subscriptions or pricing models may not be reflected in near-term operating results
27. 33Severe weather events, including the effects of climate change, are inherently unpredictable and may have a material adverse effect on our financial results and financial condition
28. 34Increased scrutiny from stakeholders and regulators regarding sustainability practices and disclosures, including those related to sustainability, and disclosure could result in additional costs and adversely impact our business and reputation37% rewritten

Risks Related to Third-Party Partners

1. 35Our hardware and certain of our software-enabled services rely on interconnections to distribution and transmission facilities that are owned and operated by third parties, and as a result, are exposed to interconnection and transmission facility development and curtailment risks
2. 36Our growth depends in part on the success of our relationships with third parties, including contractors and project developers
3. 37We must maintain customer confidence in our long-term business prospects in order to maintain and grow our business20% rewritten

Risks Related to Our Intellectual Property and Technology

1. 38If we are unsuccessful in developing and maintaining our proprietary technology, our ability to attract and retain partners could be impaired, our competitive position could be adversely affected and our revenue could be reduced
2. 39A failure of our information technology (“IT”) and data security infrastructure could adversely affect our business and operations
3. 40Our technology could have undetected defects, errors or bugs in hardware or software which could reduce market adoption, damage our reputation with current or prospective customers and/or expose us to product liability and other claims that could materially and adversely affect our business
4. 41Our failure to adequately secure, protect and enforce our intellectual property rights may undermine our competitive position, and litigation to protect our intellectual property rights may be costly
5. 42Our patent applications may not result in issued patents, and our issued patents may not provide adequate protection, which may have a material adverse effect on our ability to prevent others from commercially exploiting products similar to ours
6. 43We may need to defend ourselves against claims that we infringe, have misappropriated or otherwise violate the intellectual property rights of others, which may be time consuming and would cause us to incur substantial costs
7. 44Any of the foregoing could adversely affect our business, financial condition and operating results. In addition, any litigation or claims, whether or not valid, could adversely affect our reputation, result in substantial costs, and divert resources and management attention

Regulatory Risks

1. 45Negative attitudes toward renewable energy projects from the U.S. government, other lawmakers and regulators, and activists could adversely affect our business, financial condition and results of operations
2. 46Existing regulations and changes to such regulations impacting the electric power industry may create technical, regulatory and economic barriers which could significantly reduce demand for our energy storage systems
3. 47Opposition to our customers’ project requests for permits or successful challenges or appeals to permits issued for their projects could adversely affect our operating plans
4. 48Changes in the U.S. trade environment, including the imposition of import tariffs, could adversely affect the amount or timing of our revenues, results of operations or cash flows74% rewritten
5. 49over time pursuant to annual reviews conducted by the U.S. Department of Commerce (“USDOC”), and an increase in duty rates could have an adverse impact on our operating resultsNew
6. 50Analysts may downgrade our common stock or drop its coverage. If analysts do not publish research about our business or publish inaccurate or unfavorable research, our stock price and trading volume could decline further30% rewritten
7. 51Our common stock price has been, and may continue to be, subject to significant volatility
8. 52These broad market and industry fluctuations may adversely affect the market price of our common stock, regardless of our actual operating performance26% rewritten
9. 53Our financial condition and results of operations and other key metrics are likely to continue to fluctuate on a quarterly basis in future periods, which could cause our results for a particular period to fall below expectations, resulting in a severe decline in the price of our common stock
10. 54We may issue a significant number of shares in the future in connection with investments or acquisitions
11. 55If we fail to maintain an effective system of disclosure controls and internal control over financial reporting, our ability to produce timely and accurate consolidated financial statements or comply with applicable regulations could be impaired
12. 56The capped call transactions we entered into in connection with the pricing of our 2028 and 2030 Convertible Notes may adversely affect the market price of our common stock
13. 57We are subject to counterparty risk with respect to the capped call transactions
14. 58Our stockholders and warrantholders may experience substantial dilution in the value of their investment or may otherwise have their interests impaired if we issue additional shares of our capital stock, including as a result of the exercise of the WarrantsNew
15. 59Future litigation or administrative proceedings could have a material adverse effect on our business, financial condition, and results of operations
16. 60Our operating results may be adversely affected by unfavorable macroeconomic, geopolitical, and market conditions