Release Date: August 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- NEXTracker Inc (NXT, Financial) reported a 50% year-on-year growth in revenue and record adjusted EBITDA for Q1 FY2025.
- The company has achieved its sixth consecutive quarter of year-over-year double-digit revenue growth.
- NEXTracker Inc (NXT) has a robust backlog exceeding $4 billion, providing strong visibility for future revenue.
- The company has launched new product solutions, including the AgriPV solution and NX Low Carbon Tracker.
- NEXTracker Inc (NXT) is taking orders for solar tracker solutions with 100% U.S. domestic content capability, expected to ship in early 2025.
Negative Points
- The company faces higher supply chain costs, including increased logistics and steel prices.
- There are concerns about potential delays in project timelines due to construction permits and interconnection issues.
- The international market mix, which has a lower margin profile compared to the U.S., is expected to increase in the latter half of the year.
- The company has noted a shift in project life cycles, with longer timelines for project completion.
- There is some uncertainty regarding the impact of the Southeast Asia AD/CVD tariffs on project schedules.
Q & A Highlights
Q: Can you talk about how your customer conversations are shaping up regarding domestic content? Are you seeing firm orders yet?
A: Howard Wenger, President: Demand is healthy for trackers with domestic content. We have firm orders ranging from 40% to 100% domestic content, and customers are not waiting for additional guidance. The guidance from Treasury is clear and favorable for trackers and Nextracker. We have over 20 facilities with an annual capacity of over 30 gigawatts. Dan Shugar, CEO: The new safe harbor table from Treasury is helpful, specifying components like torque tubes and fasteners. Customers value this, and we are getting great feedback.
Q: Are you dealing with the Southeast Asia AD/CVD impacts, and do you expect the strength in the book-to-bill to continue?
A: Daniel Shugar, CEO: The AD/CVD issues are a secondary headwind. The primary impact on project schedules relates to construction permits and interconnection delays. Howard Wenger, President: We had a strong quarter with $720 million in revenue and increased our backlog to over $4 billion. 80% of that backlog is expected to be realized over the next 8 quarters. The market continues to be healthy, and we are getting our fair share.
Q: Why does the adjusted EBITDA midpoint remain unchanged despite a strong Q1?
A: Charles Boynton, CFO: We expect stronger revenue contribution from international markets in the back half of the year, which has a different margin profile compared to the U.S. Q1 had a tailwind, but the year will be more balanced with international mix. Daniel Shugar, CEO: Grid-enhancing technologies can help accelerate renewables by using existing transmission lines more efficiently.
Q: Can you discuss the acquisitions of Solar Pile and Ojjo and their expected impact?
A: Daniel Shugar, CEO: These acquisitions increase our capability in difficult soil areas. Both technologies are early in the adoption curve but have been validated in the field. We expect them to be accretive over time. Charles Boynton, CFO: Higher supply chain costs impacted gross margin, but these are variable and can be managed.
Q: How has the backlog timeline shifted, and what does it mean for project cycles?
A: Howard Wenger, President: Project life cycles are getting longer due to permitting and interconnection delays. This gives us more visibility, and the backlog remains solid with very few projects dropping out. Charles Boynton, CFO: Only one project dropped out in the last 12 months, less than 1% of the total.
Q: What is driving the sequential decline in Q2 despite a strong Q1?
A: Daniel Shugar, CEO: The decline is driven by customer schedules. We had many scheduled deliveries in Q1, and we are not pushing to drive outcomes. We look at this on an annual basis, supported by a strong backlog.
Q: How do domestic adder bonuses factor into your pricing strategy?
A: Howard Wenger, President: Domestic content is a factor in the U.S., which is 2/3 of our business. We made the decision to reshore manufacturing during the pandemic, which turned out to be beneficial with the IRA. We are in a good position to offer high levels of domestic content.
Q: What is the market opportunity for AgriPV, and how are you positioned?
A: Daniel Shugar, CEO: AgriPV uptake will be market-specific. We have developed projects in multiple countries and have a robust R&D program. Our architecture facilitates more adoption in the AgriPV area, and we are excited about its prospects.
Q: Are customers concerned about the December deadline for panels under the tariff exclusion?
A: Daniel Shugar, CEO: Customers are more concerned about construction, permitting, and interconnection delays. The AD/CVD situation is a secondary factor. We are also seeing a ramp-up in U.S. solar panel manufacturing, which is encouraging.
Q: Why did you decide to make the acquisitions now, and how do they align with your strategy?
A: Daniel Shugar, CEO: Our liquidity is strong, and we have validated these technologies in the field. The acquisitions address market needs for difficult geotechnical site conditions and offer real value to customers. The timing aligns with our strategic rationale and ability to execute.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
