Nextpower Inc. (NXT) Q1 2026 Earnings Call Transcript

Good afternoon, everyone, and thank you for standing by. My name is Jason, and I will be your conference operator today. Today's call is being recorded. I would like to welcome everyone to NextTracker's first quarter fiscal year 2026 earnings call. After the speaker's remarks, there will be a Q&A session. At this time, for opening remarks, I'd like to pass the call over to Ms. Sarah Lee of Investor Relations. Sarah, you may begin.

Thank you, and good afternoon, everyone. Welcome to Nix Trapper's first quarter fiscal year 2026 earnings call. I'm Sarah Lee, Nix Trapper's Head of Investor Relations, and I'm joined by Dan Shipper, our CEO and founder, Howard Winger, our president, and Chuck Woynton, our CFO. Following brief, prepared remarks, we will transition to a Q&A session. As a reminder, there will be a replay of this call posted on the IR website, along with the earnings 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 quarterly report on Form 10-Q and annual report on Form 10-K, which are available on our IR website at investors.nextrapper.com. 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-gap-to-gap reconciliations can be found in the appendix to the press release and the shareholder letter, as well as the financial section. I will turn the call over to our CEO and founder, Dan.

Good afternoon, everyone, and thank you for joining us. I'm pleased to report our strong start to fiscal year 26. Building on the momentum we established last year, the market continues to reach 23%. Our backlogs hit a new record of over-healthy global demand and also continue to generate solid cash flow. We're particularly pleased with our strong Q1 performance considering the evolving U.S. policy. Our ability to consistently execute in challenging conditions speaks to the strength of our team, differentiated products, and the quality of our customer. A significant fortification of energy regulatory can move beyond being involved into a broader utility scale. I'm excited to provide a more detailed look into our strategy at our upcoming Capital Markets Day on November 12th. I have President Howard Wenger to go deeper into our Q1 performance and the exciting developments.

Thank you, Dan. Q1 was another great quarter for NextTracker. It continues to be driven by a plight to quality of the strength of our quarter. According to Wood McKenzie, NextTracker is now the number one tracker provider worldwide for the 10th consecutive year. our market share to 26% during 2024. We're in the leading market position in North America, Latin America, and Oceania, which includes Australia. We are pleased to report we are also the top provider in Europe, highlighted by flagship projects like the 550-megawatt Arekio solar power plant in Greece, one of the largest. Moving to pricing costs in Q1, Pricing for NextTracker was generally stable, and the company continued to manage costs well. Project timing was also stable and manageable on a portfolio basis, with some projects accelerating and some pushing out consistent with previous quarters. Our backlog and large project portfolio provided excellent visibility and helped reduce uncertainty. On the product side, we continue to experience strong demand for our core NX Horizon tracker systems and True Capture technology. Our recently introduced Hale Pro System, an expanded XTR tracker series with quarter over and 22% respectively. Hale Pro is winning in the market due to its ability to reduce both hail damage risk and insurance costs. This is yet another example of innovation driven by customer feedback, and in this case, the insurance industry. We are pleased by the positive traction we are seeing as our technology platform expands to a more complete solution, including adding foundations and EVOS to our industry-leading tracker systems. Our foundation products and services continue to gain momentum, with cumulative sales of NX Earth Trust now over 1 gigawatt. We're also excited by customer reaction to our new EVOS solutions, which we began selling during the quarter. We're optimistic to significantly scale. As Dan mentioned, we recently executed a series of strategic technology acquisitions, extending our platform and capabilities in robotics, automation, and AI. This includes acquiring the company's on-site technology and Amir Robotics and the IP from SenseHawk. These acquisitions complement our own internal efforts by incorporating ground-based robots and drones to provide incremental customer value across the full-time. By providing the emerging area, we have appointed Dr. Francesco as our new chief and globally recognized leader in AI and predictive model-based control systems.

He brings decades of experience at a top 20% Q1 adjusted EBITDA year over year, adjusted EBITDA margin of 25%, which was an increase of approximately 100 basis points compared to the previous year. Our adjusted gross margin was 33%. We recognized 150 basis point benefit in Q1 for 45X related to historical shipments. We continue to believe that our gross margins should be in the low 30s, with OPEX in the 9% to 10% range, yielding operating margins in the low 20s. On the cash side, we generated $70 million in adjusted free cash flow during the quarter, down from the same period last year, primarily driven by growth investments in capital expenditures and working capital. We see strong cash generation throughout the year with over $450 million of free cash flow. We exited the quarter with $743 million in total cash with no debt. Our strong balance sheet and cash flow generation remain competitive advantages. Moving on to our outlook. Looking ahead, our outlook assumes the current U.S. policy environment remains in effect, and in addition, that permitting processes and timelines will remain consistent with historical levels. As Dan mentioned, we are closely monitoring potential updates to safe harbor provisions and other regulatory actions which could impact project timing, customer investment behavior, and our financial results. For the full year fiscal 2026, we expect revenue to be in the range of $3.2 to $3.45 billion with relatively balanced quarterly revenue for the remainder of the year. Adjusted EBITDA to be in the range of $750 to $810 million and adjusted diluted EPS to be in the range of $3.96 to $4.27 per share. Our increased outlook is grounded in several key factors, including the strength and diversity of our backlog, a continued flight to quality among solar developers, and the deep capability and commitment of our global team. With that, we're happy to answer any questions you may

have. Operator? If you'd like to ask a question, please press star followed by one on your telephone keypad. If for any reason you'd like to remove that question, please press star followed by two. Again, to ask a question, it is star Our first question is from Dimple Gilsai with Bank of America. Your line is now open.

Thank you. Thanks for taking the question. Can you please discuss, you know, what conversations have looked like with developers, both the OBBB? Are they kind of in wait and see mode? And maybe you can also just expand on bookings momentum. I know you've grown from what you previously described as significantly higher than $4.5 billion to $4.7 billion this quarter. But, you know, is that pace of bookings picking up? Or any commentary there would really be helpful.

Hey, Gimple, this is Howard Winker. So we are in touch with our owner developers closely. And let me just start out by saying we're really – and what we're hearing is that they're feeling good about, as you know, we team up with tier one developers who are quite sophisticated they're able to save question

is from franith satish with wellspark your line is now thanks uh good afternoon maybe i'll touch on the new new business here the venture into ai and robotics i i know you'll probably offer more details um at the analyst day but um just just generally are you planning to to offer these solutions as a service with the recurring revenue stream or will this be primarily an equipment sale model and then how do these robotic acquisitions integrate with your existing true capture software are there any synergies here given that you'll have all these extra data points and can this

all be wrapped up as one service hi pretty uh dan triggered here we're so excited about the suite of robotics technologies that we've just launched in terms of the go-to-market the there's a range of solutions that we brought in today technologies with integrated in our next question is from Brian Lee with Goldman Sachs your line

is no hey guys good afternoon thanks for taking the questions just said to you know one Howard going back to the comment around backlog you said it did grow quarter on quarter i know you changed kind of the language semantics a bit so i wanted to confirm that that was the case it did grow and i guess that implies you know bookings were 900 million maybe close to a billion again and uh curious if anything in the quarter you saw pauses from to you or vice versa and you pull forwards to try to get ahead of um you know the

bill passage and had a follow-up got it hi brian so yeah i'm not seeing appreciate all that color

very helpful. And if you could bear with me, just one more math question, and then I'll get out of here. On the IRA credit impact or vendor rebate, I think it was 11 percentage points on gross margin this quarter. That was up significantly, you know, like 300 to 400 basis points incremental versus what you've seen in prior quarters. What's kind of driving that? Because I did see international revenue growth was better than the U.S. this quarter. So I'm curious how that worked out this quarter to be such a higher impact and how we should think about that number in relation to gross margin maybe going forward. Is it going to stay at that level? Does it flatline? Does it go

down? Thanks, guys. Yep. Thanks, Brian. This is Chuck. So, we did have a really strong quarter. 45X was a little higher than normal. I mentioned in the prepared remarks about 150 basis points. That's a little more than $10 million, and that's really relating back to kind of higher than it's been. That's partially driven by U.S. demand for U.S.-made products. So we're actually to our customers, and with that, thank you to our operations team. They have just done a phenomenal job. Our on-time delivery is incredible, and we're delivering local around the world in the U.S., a role hallmark, working with our manufacturing partners to deliver really compelling U.S.-made content. Thanks, guys. I'll pass it on. Our next question is from Philip Shen with Roth Capital

Partners. Your line is now open. Hey, guys. Thanks for taking the questions. First one is on your backlog. What percentage of the backlog is safe harbored? And then can you talk separately on how much risk there is with the Trump executive order expected to be released August 18th. And then finally, as it relates to the interior memo where the secretary has to review all the permitting for projects that touch federal land, when you look at your backlog, what kind of impact could that have depending on how they enforce that?

Phil, Dan Sugar here, Howard and I are your own tag team on this. You know, we were thinking about this in the preparation for this call. We were thinking as a run-up over the last, let's say, year or even longer, you know, what percentage was, say, Harvard? You know, when we asked our Tier 1 customers, how do they feel about the integrity of their pipeline, their projects they feel what they feel good about it because they take harvard under you know the rules that exist so i'd say so when you ask the question i think a lot of projects in the united states benefit from that um but that's taking the longer view on the state

harvard howard do you want to pick it up from there i mean you we heard a next era's call that they feel uh good about their course and that's they're indicative they're one of the leading developing. We work with them and others. I think the industry

is from Julian Dumoulin-Smith, which your line

is now open. Hey, good afternoon, team. Thanks for the time. Let me just continue on that same line of thinking here. Just first, a higher level question. I mean, how do you think about the cadence of the overall industry? If you think about both safe harbor dynamics that you're seeing on pull-in as well as potentially some of that safe harbor material

So, you know, pull it off 29, 20, 30.

How do you think about how that squares with the timing of orders and a potential eventual pickup with backlog activity?

Clearly not as meaningful here at the very near term, but how does it square with what

you're expecting here at 25 through, you know, call it the next four years, timing-wise?

So the connection was a little bit janky there, but I think we got the gist of it, Julian. so so we think look one thing that we did is under Dan's leadership honestly and with the ops team working hand in glove for the last few spin up the U.S. domestic supply chain we were the first company to come out with 100% domestic tracker we've only increased capacity since then we have over 25 facilities and so we're really good and the reason why we point that out is Should the rules dictate that, let's just say the safe harbor requirement goes up from 5%, hypothetically? We don't know. But let's just say it was doubled to 10%. We're in position. And so, yeah, there could be some, you can call it a pull-in, you can call it whatever you want, but there are shipments by next track.

Yeah, I'll just pile on that. The Federal Energy Regulatory Commission has a map that shows last year over 80% of the power capacity you saw in the United States was solar. And Lawrence Berkeley Lab, which is funded by the U.S. Department of Energy, calculated almost 7,000 projects are solar and solar plus storage. There's this incredible need for power. in the United States, period. You see it dominating the news, the headlines. People are talking about, you know, other ways to make power, and there's limited availability of gas turbines, nuclear is way out there in terms of time frame. And solar is available, affordable, and has no fuel risk. We also see now storage and California at incredible scale. Keeping the lights on, you can look at the demand, you know, today and from last week online and see that with batteries, the solar power is available until 10, 11 p.m. when folks are going to sleep and the power drops. So we think that this is going to be an endurance story. We have a very compelling manufacturing and jobs made in the USA, energy dominance, facts on the ground situation. We see policymakers respond into that. So we see the U.S. market, despite a lot of fluidity, as it's been up into the right, our backlog reflects that, our bookings reflect that, and our revenues reflect that. Meanwhile, we're continuing to expand overseas. As Howard mentioned, we achieve leadership in Europe as the number one provider in Europe. and we saw our total market share globally increase from 23% in 2023 to 26% in 2024. That's a double-digit increase globally. So we're really focused on serving the global market, and global manufacturer provides tremendous strength.

Actually, can I just open a micro here? This was respect to the diversification comment from last quarter, about a third over five years. Obviously, you guys have a natal estate target ad in November here.

Can you speak a little bit more greatly to the different pieces

that you're expecting on diversification? I know you've kind of feathered a couple of them out there in the market at this point with Ventec, et cetera, but any broader set or more specific sense you can sort of feather into that one right here? Yeah.

Your connection is quite spotty, but we'll speak to the growth in non-tracker. So let's do a quick review. We acquired a machine learning company about 10 years ago called Brightbox. We built a fantastic software business that created tremendous value for customers, helped with stickiness with our tracker, our overall value proposition, and improved the yield of trackers. It also demonstrated that NextTracker knows how to work with companies that we acquire and get the technology integrated in a way that's accretive. Then last summer, we acquired two foundation companies, and we've introduced those products in a major launch. That suite of products is going very well with incredible customer uptake. We're ahead of plan from a sales standpoint, and we're integrating the ops. Very pleased with how that's going. So far, those technologies have been focused in the United States. We do plan on launching the foundation technologies in selected international markets next year. The True Capture software suite I mentioned a moment ago has been offered globally for many years and, in fact, is on the uptake internationally. Now, last quarter, we announced acquiring an electrical balance system provider, Bentech, and launching in the electrical balance system. The on-site technology, which serves both management, we're going to be rolling that out, both geographically and from a product diversity over time, and we'll definitely be unpacking that further at the cap.

Next question is from Ben Callow with Baird. Your line is now open.

Thanks for taking my question, and good afternoon. Just maybe we talked a lot about safe armory, but if you could have any color.

This is Howard. So on part one, $15. Okay, that's an unsubsidized free position. We've got our own internal.

Dylan Asano with Wolf Research. Your line is now open.

Hey, good afternoon. Just on backlog, can you give us an update on how much of the current backlog you expect to shift over, call it, the coming six to eight quarters? I think that's a metric you've shared before. And then quick follow-up on Bentech. When you're talking about building out the eBoss capacity, are you looking to actually expand the current product offering beyond the products you currently make to potentially compete more directly with some of the leading eBoss players? Thank you.

Yeah, Dylan, this is Chuck. Like, it really hasn't changed much. You know, it was a metric we used to publish. We stopped because it kind of was the same each quarter. Call it, you know, high 80s, low 90s would be shipped over the next eight-ish quarters. Not much movement there. And the second question on Bentec products.

And a question is from Amit Dakar with BMO.

Your line is now open. Well, Amit, your line is open.

Hi, thanks for taking my question. I just wanted to ask you, maybe pivoting away from the executive order, but on Section 232, Tariff Investification, I was just wondering what sort of kind of feedback you've got from your customers on that and kind of given your ability to kind of make you work with a greater array of different solar modules that might be in a better position to kind of respond to that. Have you seen kind of any kind of...

Yeah, thanks, Amit. We're flexible to work with a wide range of solar panels. Next Tracker has spent a lot of, contributed a lot to making these panels. If you actually pull the specifications of solar panels, you'll see that almost every panel has a 400 millimeter hole in the frame. That came from Next Tracker about 12 years ago, 13 years ago. And so we have a very strong product management function that closely coordinates with these module companies. It's great to see the growth in the solar panel manufacturing industry here in the United States. There's over 30 companies that have actually made and shipped solar panels in the U.S., which is kind of staggering from where it was five years ago. So it's great to see that and to see the expansion of both legacy players and new players.

Next question is from Joseph Osha with Google Line. Your line is now open.

Thank you very much. Two questions for you. First, looking at Ventec, I'm wondering if we might see you start to use that platform to do completely custom harnesses without insulation piercing connectors, what the thought might be there. And then secondly, looking at some of these acquisitions you've just completed, we do see some companies out there like Carabase really seeking to sort of automate the whole assembly process and all of that. Do I kind of sense that you're maybe moving that direction with these acquisitions that you're making?

I'll do part A and Dan will do part B. This is Howard. So, for Bentech, we're not all the leaders that we're engaged with.

We've seen progress and for future projects. In our robotic programs that we've announced, these things attach basically separate buckets. We're going after things that validate, that support the EPC, to validate installation quality, identify deviations to support the EPCM more efficient. We're doing it to then create a digital 3D map of the job site that supports adaptive tracking. We think what we're doing is unique in this area, and our true capture really delivers the results and expectations we're creating. We have unique robotic technology we've acquired with Amir Robotics on cleaning. Next Tracker was a very early mover on robotic cleaning. For the last seven years, we've been supporting our customers in the Middle East to empirically evaluate how robotic cleaning technologies have worked. We've worked with a bunch of companies. We understand the tech. We've really leaned in. And so that really improves more yield gain. And then with the on-site technologies acquisition, it's really supporting a higher durability and reliability of the solar power assets by inspecting things like the connectors and electrical valve system, and then providing feedback and also reducing risk on where these are going. If I can pull back for a second and just talk about why we did these robotic cleaning, or excuse me, robotic deacquisition, it was really, we actually didn't really believe in robotic cleaning, but we saw a team there really in the maintenance of solar thinking about it. It wasn't a robot in search of what it came up with. It was a need technology, improved reliability, and reduced risk on the job site. So these are our values at Next Tracker. Customer demand, we've come up with solutions to lower the levelized cost of energy improved. With that question, that concludes our call today. Thank you all very much. As Howard mentioned, big picture. Very excited about our progress. We're off to an amazing start in Q1. and look forward to welcoming you all at our Capital Markets Day in November.

That concludes the conference call. Thank you for your participation. Enjoy the rest of your day.