Good afternoon, everyone, and thank you for standing by. My name is Zala, and I will be your conference operator today. Today's call is being recorded. I would like to welcome everyone to Nextracker's First Quarter Fiscal Year 2025 Earnings Call. After the speakers' remarks, there will be a question-and-answer session. At this time for opening remarks, I'd like to pass the call over to Ms. Mary Lai, Vice President of Investor Relations. Mary, you may begin.

Thank you, and good afternoon, everyone. Welcome to Nextracker's first quarter and full fiscal year 2025 earnings call. I'm Mary Lai, Vice President of Investor Relations. I'm joined by Dan Shugar, our CEO and Founder; Howard Wenger, our President; and Chuck Boynton, our CFO. We're excited to have launched a new shareholder letter format, along with our press release. On today's call, we will open with a brief message from Dan and then immediately transition into a Q&A session. As a reminder, there will be a replay of this call posted on the IR website along with our press release and shareholder letter. Today's call contains statements regarding our business, financial performance, and operations, including our business and our industry that may be considered forward-looking statements, and such statements involve risks and uncertainties that may cause actual results to differ materially from our expectations. Those statements are based on current beliefs, assumptions, and expectations and speak only as of the current date. For more information on those risks and uncertainties, please review our earnings press release, shareholder letter, and our SEC filings, including our most recently filed Form 10-K, which are available on our IR website. This information is subject to change, and we undertake no obligation to update any forward-looking statements as a result of new information, future events, or changes in our expectations. Please note, we will provide GAAP and non-GAAP measures on today's call. The full non-GAAP to GAAP reconciliations can be found in the appendix to the press release and the shareholder letter, as well as the financial section of the IR website. And now, I will turn the call over to our CEO and Founder. Dan?

Thank you, Mary. Welcome to Nextracker's first quarter fiscal 2025 earnings call. I would like to extend a warm welcome to our new Chief Financial Officer, Chuck Boynton, who joined Nextracker several months ago and will be participating in our question-and-answer session today. Our fiscal year is off to a strong start with another quarter of solid execution. Our first quarter had a 50% year-on-year growth in revenue and record adjusted EBITDA. It was our sixth consecutive quarter of year-over-year growth, with year-over-year double-digit revenue growth. In Q1, we saw healthy demand in both the US and international markets. Our backlog increased quarter-over-quarter and is over $4 billion. In the quarter, we also shared new product solutions, such as our agri PV solution and our NX low carbon tracker and celebrated several factory expansions with our manufacturing partners. And today, we announced we are taking orders for solar tractor solutions with 100% U.S. domestic content capability with an expected shipment date in early calendar 2025. We are also thrilled to welcome the teams from Ojjo and Solar Pile International to Nextracker; we have extensive experience with foundation design, supply chain, installation, and the technologies we acquired broadened the geotechnical use cases for solar. We believe there is value to our customers in combining tracker systems and foundations to form an integrated solution. With these two acquisitions, we can provide a holistic integrated solution for a broad range of soil conditions for utility-scale projects globally. I'm so proud of our team; fiscal 2025 is off to a great start, and we remain focused on executing our plan. As the world transitions to renewable energy, we are well-positioned with our culture, strategy, team, and market positions. This concludes my comments. We now look forward to your questions. Let me pass the call back to the operator.

We will now begin our question-and-answer session. Our first question comes from Mark Strouse with JPMorgan. Mark?

Yes. Good evening. Thank you very much for taking our questions, and I appreciate the new format. Welcome. So I wanted to start with kind of the domestic content. Can you talk about how your customer conversations are shaping up? If you're seeing firm orders yet, just kind of talk about maybe the pipeline activity? Are things firing on all cylinders yet? Are customers kind of waiting for the language to be finalized? Are they waiting for the election? Just any update there? And then I've got a quick follow-up. Thank you.

Hey, Mark. This is Howard Wenger. I'm going to start and then Dan is going to finish. So demand is healthy for trackers and for trackers with domestic content. We'll start there. We have firm orders for domestic content in a wide range of domestic content, typically between 40% all the way up to 100%. Now we're taking orders, and we actually have an order for a 100% domestic content tracker. And customers are not hesitating with respect to placing those orders. They're not waiting for additional guidance. The guidance came out from treasury. It's very clear. It's favorable for trackers and for Nextracker. And we, as we've discussed previously, stood up over 20 facilities with manufacturing partners to deliver domestic content with an annual capacity of over 30 gigawatts. So we're really in a very good position to deliver. Dan?

Mark, thanks for asking about domestic content. Building on Howard's answer, it was very hopeful when treasury came out with the new safe harbor table. Their original rules still can be elected by customers, but what's helpful here is they call out specific components: torque, fasteners, slew drive, motors, controllers, rails. If you can build those components to that guideline, then there's an additional credit that comes in with the production labor. Customers do value that. We stood up and had these public factory openings at eight factories, including our electronic controller. We had an event in Silicon Valley with a partner. It’s very tangible; customers get it, and we're getting great feedback. Thanks, Mark.

Our next question comes from Philip Shen with ROTH Capital Partners. Philip, your line is now open.

Hey, guys, thanks for taking my questions. To what degree are you guys dealing with the Southeast Asia AD/CVD impacts and the potential for that to be slowing the market down? Our work, as you may know, suggests a 2025 slowdown. Have you seen some projects pushed out? Our checks also suggest that you guys are winning a substantial amount of share as well. So just curious if you're able to offset the challenges with the tariff and maybe some other uncertainty with the share gain? And then from a booking standpoint, do you expect that the strength in the book-to-bill to continue to be above one in the coming quarters? Thanks.

Phil, Dan Shugar here. I'll take the first half of your question dealing with the AD/CVD, and Howard will then comment on bookings. We read your reports, which are always great, and your team is very comprehensive. We would characterize the AD/CVD issues as a secondary headwind. It could be an issue on some projects happening later than the customer would otherwise want them to. We've seen the primary impact of the schedule of projects relating to construction permits or interconnection delays. Our perspective is it is taking longer for projects to be fulfilled in real life due to those factors, secondarily for the projects that we've chatted with customers about AD/CVD issues. So it is a factor, but we've seen that those other issues be larger factors. Howard, do you want to comment on bookings?

Sure. So we had a really strong quarter in execution and delivered $720 million revenue for Q1. And so we're off to a great start, as Dan mentioned in his remarks. With that, we increased our backlog quarter-over-quarter, and so it continues to be over $4 billion. That gives us a lot of visibility. One of the things we noted in the shareholder letter, which we encourage everybody to read, it's online and gives a lot more detail. One of the things we noted is that 80% of that backlog is expected to be realized over the next eight quarters. That gives us a lot of visibility. We did have a strong quarter in bookings once again. While we do not provide guidance on bookings and backlog, the market continues to be healthy, and we're getting at least our fair share of the market.

Our next question comes from Brian Lee with Goldman Sachs. Brian, your line is now open.

Hi, guys. Good afternoon. Thanks for taking the questions. Kudos on the start to the year. In that context, I was just curious, if I look at the guidance for the year, you had a strong start here in fiscal Q1, but the adjusted EBITDA midpoint at 22% of sales, that's remaining unchanged. You just did 24 in Q1. So it does imply some moderation through the year. Can you kind of speak to what's driving that? Is it price? Is it mix? Is it maybe some conservatism you're baking in? Just curious as to what's driving that cadence? And then in the shareholder letter, which is great, I think, Dan, you mentioned the grid-enhancing technologies, which I know is getting a lot more focus. Is there an opportunity for you guys to directly participate in that? Is that part of your sort of M&A wheel as, if at all, I just would be curious if that's something you can help the industry out with directly. Thanks, guys.

Great. I'll address the first part, and Dan or Howard can handle the second. It's good to hear from you, Brian. As we assess our strong first quarter, both our gross margin and EBITDA margin are impressive, and we take pride in those results. Looking ahead to the latter half of the year, we anticipate a greater share of international business. It's challenging to evaluate just one quarter since we analyze our performance annually or even over multiple years. We expect to see increased revenue contributions from our international markets. As you know, the margin profile in the US is quite strong. Overall, we're starting off on a positive note. We do recognize that timing can fluctuate. The first quarter provided significant support for us, and we anticipate a robust year, although it will be more balanced with our international presence. In our shareholder letter, we mentioned that we expect about two-thirds of our business to come from the US and one-third from international markets. In the first quarter, that was more in the range of 71% to 29%. Thank you, Brian.

Okay. Brian, thanks for the question about the grid-enhancing technologies. When we look at such a strong percentage of the interconnection cubing, solar and solar plus storage, we've covered in previous calls, over 7,000 projects have applied to the interconnector to the grid. 2,000 gigawatts, much more than the interconnected amount of the entire US grid. Of that, 80% of the queue is being dominated by solar and solar plus storage. The biggest single issue governing those projects is connection with the grid. Historically, it takes a long time to build a transmission line. I started my career as an electrical engineer as a transmission planner. It's a big deal to build a new line. You need rights of way, there's eminent domain, and folks don't like to see long transmission lines built. There are three grid-enhancing technologies that have become commercialized over the years that can use existing lines or the existing corridors of transmission, often with the same transmission towers to get vastly more power transmitted. Those relate to using dynamic thermal rating, where you put a device on the line to measure the temperature of the line in real-time. If the wind is blowing perpendicular across the line, the lines coolers can transmit vastly more power through it. There's also new conductors where you can take the same power and just put a new wire on the line that could get 50% to 100% more power on the same corridor. The U.S. has lagged in the international adoption of these technologies. We've seen India and Europe significantly advance in this area. We think there's a tremendous opportunity. Recently, I spoke at a major conference where U.S. utility executives were engaged. There's a tremendous push from the Federal Energy Regulatory Commission and the U.S. Department of Energy. We're seeing some utility commissions pushing on it, and we believe it can really accelerate renewables. We featured all this in our shareholder letter because in the renewable industry it is very important, and it could provide a big part of the solution to getting these projects connected quicker. Thanks for your question, Brian. Next question, please.

Our next question comes from Vikram Bagri with Citi. Vikram, your line is now open.

Good afternoon, everyone. I wanted to talk about the acquisitions that you guys did. You obviously have a much stronger footing with these two acquisitions, Solar Pile and Ojjo in the space. I was wondering what's the attach rate of these two companies combined with your systems? Where do you see that attach rate going forward? If you can share the philosophy around acquisitions also, the later stage of the acquisitions will be accretive over time. I was wondering how much time and what do you think is the acquisition multiple over that time period once the full potential of these acquisitions is shown in your financials? And then I had one housekeeping question. The letter mentioned gross margin was impacted by higher costs, I imagine for supply chain costs, if you can quantify that too? Thank you.

Thank you, Vikram. We're very excited about the acquisitions of Ojjo and Solar Pile International because they increased the geotechnical and difficult soil areas where solar can be practically installed. We're seeing an increase in the prevalence of difficult sites. Ojjo has very unique means and methods and intellectual property and machines to address hard rock type applications. Solar Pile International focuses on softer soils and frost-free areas. As solar has proliferated from California in the Southwest to other areas in the U.S. and overseas, we have seen a higher percentage of these types of difficult soil conditions. We've heard from our customers the same thing. Now, we're not speaking to attach rate. But what I can share is that both of these technologies are fairly early in the adoption curve in the market. When we first saw the Ojjo technology, we leaned in and supported them. We became the first UL-certified tracker of the Ojjo foundation technology. We participated in some of their early projects. Howard and I sat down with several customers, and there was a lot of excitement about the combination. Ojjo had fantastic technology, but the company was not well capitalized. They saw Nextracker as being able to significantly support the company, and the comfort factor of customers was much stronger. In regard to your housekeeping question about the gross margin, Chuck, can you handle that?

Yes. Vikram, on the cost side for supply chain, the backdrop is that the revenue we recognized in Q1 was booked many quarters ago. These are long-term projects generally. The costs you have seen in transport, freight, and logistics have gone up in the last three quarters. The Suez Canal incident created an issue where shipping rates spiked. Fast costs have increased, as we grapple with the price of steel; generally, that is negated with our customers. However, many of the supply chain costs can be variable. This quarter, as opposed to last quarter, we saw a slight increase in costs. Thank you. Next question, please.

Our next question comes from Praneeth Satish with Wells Fargo. Praneeth, your line is open.

Thanks. Let me just say I'm a big fan of this new format and the expanded Q&A. So anyway, my question, I guess I just wanted to clarify one thing on your backlog. You mentioned that approximately 80% of the backlog will be recognized over the next eight quarters. Is that a shift at all from the prior commentary where I think you said the backlog would be realized within eight quarters as some of the deals got elongated? And then how long will it take to realize that remaining 20%?

Thanks for the question, Praneeth. This is Howard Wenger. It is a bit of a shift, honestly. The project life cycles are getting a little bit longer. Dan mentioned that permitting and interconnection are now the drivers for the long pole on the tent or getting projects perfected. This process is taking more time than it did two years ago or three years ago. In addition to issues like module availability, which is a secondary or maybe tertiary issue, project cycles are moving somewhat to the right. The flip side is that we're getting even more visibility, longer-term visibility, which is good for the company; that backlog is still solid. Projects are not dropping out. In fact, we did a review of our projects internally, and we had literally one project drop out in the last 12 months. So it's a very, very solid backlog. Of course, we talk about our high bar for what goes into our backlog, so yes. Project cycles are lengthening to a degree. We factor that into our outlook and feel really good about it. Chuck, did you have something you want to add?

No, well said, Howard. I think one project is less than 3%. So it's one out of hundreds and hundreds of projects. Yes. Just for context.

Yes, less than 1%, much less than 1%. Okay. Thank you for the question, Praneeth. Next question, please.

Absolutely. Our next question comes from Kashy Harrison with Piper Sandler. Kashy, your line is now open.

Good afternoon, and thanks for taking my question. Just a quick one on the guidance. Q1 was quite strong relative to your expectations, but I think the mid-single-digit growth in Q2 implies a sequential decline. Could you speak to the driver of the sequential decline into Q2, whether it's conservatism or if there's something else going on there? Thank you.

Yeah, Kashy, I'd say first and foremost, we’re a customer-driven company. We want to deliver for our customer schedules. They had many scheduled deliveries they wanted in Q1, and deals got pulled into Q1. That is the real driver. We're not pushing to drive an outcome with our customers. We're listening to them and driving to what our customers want. That's why you can't just look at one quarter. Q1 was a fantastic quarter. For Q2, we’re guiding mid-single-digit growth year-over-year. We still see growth, but it's driven by customer schedules, supported by strong backlog, and looking at this really on an annual basis. Thank you. Next question.

Our next question comes from Dimple Gosai with Bank of America. Dimple, your line is now open.

Good evening, everyone. Thank you for taking the time. Can you talk a little bit about these domestic add bonuses? How do I think about that in terms of factoring it into your pricing strategy? From a pricing power perspective, can you speak a little bit more on that?

This is Howard Wenger. It's a factor in the U.S., and of course, that's two-thirds of our business. It's the most attractive market in the world for Nextracker from a pricing and margin perspective and the strength of our relationships and the size of the market, it's a factor having domestic content. We made the decision during the pandemic when we experienced those delays in logistics, and steel costs were increasing overseas, we made the decision to re-shore and onshore manufacturing, which turned out to be a good decision. The IRA came along, and we accelerated this transition to having over 20 factories. We believe we are in a very good position. We think we're differentially able to offer high levels of domestic content, and we're proud to be the first company to be able to deliver, in early 2025, a 100% domestic content product. Appreciate the question. Thank you.

Our next question comes from Jordan Levy with Truist. Jordan, your line is open.

Afternoon. I appreciate all the commentary. I know you've worked in the AgriPV space before, and I appreciate everything you put in the shareholder letter about its specific product set. I wanted to get a sense of how you're thinking about the size and market opportunity there and the value you can bring.

Hey, Jordan, thanks for that. We've been passionate about AgriPV since the founding of the company, actually at our center of solar excellence in Fremont, which you visited once. So thank you for that. You saw at that time that we've been growing crops amidst the solar panels there. The uptake of AgriPV is going to be highly market-specific. In some markets, it could be negligible, but in others, it could be dominant. One of our customer projects, the MAM solar project, was developed by Doral in Indiana. Recently, they won the AgriPV Project of the Year. On that particular project, it's a combination of ranching and agriculture. For example, there are about 1,500 sheep on that project doing vegetation management, and they are starting a program to grow produce with local farmers. What we've seen is, depending on your location, there can be greater community acceptance, and it can create a dual income stream for existing communities involved in agricultural ranching. Nextracker has a robust R&D program in solar. We have an extensive center of solar excellence in Brazil and have been conducting extensive AgriPV R&D for several years. We're measuring things like yield per square area for different crop types and the impact of solar panels on crop health. So it's early days for AgriPV. We view it as an excellent use case, and we think our architecture with an impediment grows to navigate through the system without a mechanical impediment, facilitates more adoption in the AgriPV area. We're excited about the prospects and will report on it over time as we learn from our customers and introduce new technologies in this area. Next question, please.

Our next question comes from Joseph Osha with Guggenheim Partners. Joseph, your line is now open.

Hi there. Hi, Chuck, congratulations on being part of such a great team. I did - I wanted to - I guess the question related to what Phil asked. I think we all know that we have this December deadline looming on panels brought in under the tariff exclusion. I'm curious as to whether any of your customers are talking to you about potential complexities related to modules that aren't installed by that December deadline. Thank you.

Thanks for your shout-out to Chuck, Joe. We're thrilled to have Chuck join our amazing finance and accounting team. On the panel AD/CVD situation and this end-of-year deadline, we have spoken to customers. We engaged our commercial team in preparation for this investor call. We've seen that as a secondary factor where our customers are concerned. The larger factors have been construction permitting and electrical interconnection. We just haven't seen that be a primary factor. It's gratifying to see the ramp-up of many solar panel manufacturing operations in the United States with both legacy producers and new producers. So we encourage more of that, and we're doing everything we can to assist them as they validate their products on trackers and similar systems. Thank you, Joe. Next question, please.

Our next question comes from Jon Windham with UBS. Jon, your line is now open.

Perfect. I'll reiterate. I like the format and the extra time for questions. My question would be this on the two acquisitions, the strategic rationale makes sense. Why now would be my question? I can't help but notice that the total acquisition spend lines almost perfectly with the cumulative 45X tax credit that you received to-date. Should we view it that the 45X tax credits have given you a little bit of dry powder?

Yes. The rationale, look, we went public 1.5 years ago, and we completed our spinout just a few quarters ago. Our liquidity has grown and is now in a strong place. We mentioned in the shareholder letter we upsized our revolver, and so we have the ability to execute those strategic acquisitions. I will say, we're very disciplined. We approach things from a customer value and engineering standpoint. We want to see things tested in the field. We have a long history with both Ojjo and Solar Pile International. We've just seen an increased prevalence of these difficult geotechnical site conditions, and these two technologies offer real value for customers that help lower costs and reduce project uncertainties. In the case of Ojjo technology, it's light on land usage, which minimizes concerns about land disturbance and environmental impacts. So for all these reasons, there’s a market need we validated, and we're in a position where we can transact at value to customers. These were the strategic factors in our rationale. John, thank you. Next question please?

Our next question comes from Dylan Nassano with Wolfe Research. Dylan, your line is now open.

Hey, good afternoon. So I know you guys have shared your views in the past on IRA risks and election risks, but just curious in your conversations with customers, specifically, how do they view the election risk? And is there any way that it would impact their timelines, or is the wait certainty?

This is Howard Wenger. Of course, you're going to get some differences in views. But I would say the majority share the view that solar is bipartisan. From a manufacturing and jobs perspective, where the projects are going and where the manufacturing is taking place is predominantly in red states, which benefits both parties. We, as a company, have done well in all administrations; we did well in the Obama administration and the Trump administration previously. The fundamental belief is that solar is the lowest cost form of energy on the planet, which will continue to drive demand, alongside it being clean power. The electric demand that's increased in the U.S. is driven by server farms, data centers, and electric vehicles, which is part of the electric and clean power revolution supporting the Inflation Reduction Act. The tax credits, particularly the 30% ITC, are a fundamental pillar of the IRA, and historically, these credits have not been repealed; it would be unprecedented for that to happen. The vast majority of our customers continue to develop their pipelines and invest millions, tens of millions, and hundreds of millions of dollars into developments. We’re seeing more money going into development and power plant ownership. As we mentioned before, the demand for our products is still very healthy in the U.S., even with the upcoming election. Appreciate your question. Next question, please.

Our next question comes from Maheep Mandloi with Mizuho. Maheep, your line is now open.

Hey, thanks for the questions, and apologize, some background noise here. On the Ojjo and Solar Pile International acquisitions, could you talk about the market share over there? I'm trying to think if there are any anti-trust concerns with that acquisition? And separately, in the prepared remarks, other than the technologies we discussed, are there any directives that would lead to new acquisitions?

Thanks for your question, Maheep. With respect to the market share from the two acquisitions, it's a very small percentage, a de minimis percentage in those markets. As we noted in the Ojjo press release, we do plan to make that technology available to other trackers that have been qualified for its use moving forward. We think it can really broaden the range for solar. I'm sorry, what was the second half of your question?

Our next question comes from Sean McLoughlin with HSBC. Sean, your line is now open.

Thank you. Good afternoon. Appreciate the time to ask questions. I compliment you on your advanced set of numbers. I had a two-part question, if I may. Firstly, you talked about higher supply chain costs. Can you specify where cost inflation is concentrated, and how do you think about your ability to pass through the costs? Secondly, how do I square that with price reductions? Is this a temporary adjustment? Are you working with suppliers and customers to factor in gains from tax credits? Is this related to international volumes? Or am I missing something?

I appreciate the question. We'll have a two-part answer. I'll take the first part about the supply chain situation, and then Howard will address the commercial aspects. I’d like to flashback four or five years ago; we saw a significant disruption in the supply chain. Logistic costs tripled in less than two quarters, and steel prices roughly doubled in that time. Nextracker was largely protected due to our mature sourcing experience and how we place orders in a back-to-back manner with customer orders. But the logistics piece caught many companies off guard. We developed a hybrid strategy to build out significant supply chains in key markets. We’ve done a similar project in India, where we built out 10 gigawatts of traffic capacity, so we can supply local markets and also export or do a hybrid. We feel we have a strong position on that, and it provides customers the confidence and certainty without contract changes after execution. Howard, can you elaborate more on the commercial aspects?

I want to add on the reference to higher supply chain costs. The 45X manufacturing credit for U.S. production is intended to make U.S. production more competitive and offset international imports. So we do face higher costs in the U.S., but the 45X credit is designed to help offset that. There’s variability in some supply chain costs quarter-by-quarter, so we work hard to lock in our supply chain costs with customers since we share the pipeline visibility with our team. It helps us forecast and secure costs. We’ve proven over time we can reduce steel costs while maintaining a high-quality product that we fully back, lowering costs, price, and TAM while scaling. This formula has worked; solar's been the number one source of new power generation globally for the last two to three years. We’re proud to celebrate our ninth year of market leadership. We appreciate your question, Sean; we have time for one more.

Our next question comes from Sean Milligan with Janney. Sean, your line is now open.

Thanks, everyone, for taking the question today. I was looking at the backlog commentary, over $4 billion and 80% over eight quarters, kind of thinking there may be a little bit less coverage than I thought previously. I was curious if you could comment on historical expected intra-year book-to-ship; what that looks like? Because it seems like in any given year, you’re also booking and shipping a lot of revenue? Just trying to grasp what that could be.

As we've discussed in previous calls, most of our backlog is in the two to five-quarter window, with the remaining extending beyond five quarters. We’re giving this slightly different perspective where 80% is over the next eight quarters, but you can still think of it as a long tail to the backlog. The further you get out in six, seven, eight, or nine quarters, it’s a much lower percentage. That should address your question. Okay, great, and thank you for that. We really appreciate all the positive feedback on our shareholder letter. Our team worked hard on this, moving to this new format. It allows for more time for questions and provides clarity on our business. We’re excited about what’s to come this year and look forward to advancing the clean energy transition with customers and partners. Thank you for joining our call today. Mary?

Thank you. This concludes our earnings call.

Thank you.

That will conclude today's conference call. Thank you for your participation, and enjoy the rest of your day.