STEM, INC.STEM

STEM, INC. Fair Value Disclosure

10-KFiled Mar 5, 20252 min read
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 December 31, 2024 and 2023, the carrying amount of accounts receivable, other current assets, accounts payable, and accrued and other current liabilities approximated their estimated fair value due to their relatively short maturities.
The following table provides the financial instruments measured at fair value on a recurring basis (in thousands):
December 31, 2024
Level 1Level 2Level 3Total
Assets
Cash equivalents:
Money market fund$37,108$— $—$37,108
Total financial assets$37,108 $— $— $37,108 

December 31, 2023
Level 1Level 2Level 3Total
Assets
Cash equivalents:
Money market fund$47,297 $— $— $47,297 
Commercial paper— 3,971 — 3,971
Debt securities:
Commercial paper— 1,978 — 1,978
U.S. government bonds— 2,741 — 2,741
Other— 3,500 — 3,500 
Total financial assets$47,297 $12,190 $— $59,487 
Liabilities
Derivative liability
$— $— $7,731 $7,731 
The Company’s money market funds are classified as Level 1 because they are valued using quoted market prices. The Company’s short-term investments consist of available-for-sale securities and are classified as Level 2 because their value is based on valuations using significant inputs derived from or corroborated by observable market data. As of December 31, 2023, the Company’s other current liabilities includes a derivative liability that is attributable to a derivative feature within a revenue
contract, whereby final settlement is indexed to the price per ton of lithium carbonate. The balance will be valued using a third party forecast for lithium carbonate. As the derivative instrument is not traded on an exchange it is classified within Level 3 of the fair value hierarchy. During the years ended December 31, 2024, the derivative liability was settled resulting in a gain of $1.5 million.
Fair Value of Convertible Promissory Notes
The convertible notes are recorded at face value less unamortized debt issuance costs (see Note 13 — Convertible Notes for additional details) on the consolidated balance sheet as of December 31, 2024. As of December 31, 2024 and 2023, the estimated fair value of the 2028 Convertible Notes was $77.3 million and $149.1 million, respectively, based on Level 2 quoted bid prices of the convertible notes in an over-the-counter market on the last trading date of the reporting period. As of December 31, 2024 and 2023, the estimated fair value of the 2030 Convertible Notes was $65.4 million and $175.8 million, respectively, based on Level 2 quoted bid prices of the convertible notes in an over-the-counter market on the last trading date of the reporting period.

About Fair Value Disclosures

Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.

Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.

Other Available Disclosures

Income TaxesRevenueEarnings Per SharePP&EGoodwill & IntangiblesLeasesSegmentsDebtCommitmentsStock CompensationNew Standards