Nextpower (NXT) Q3 2025 earnings call transcript

Good afternoon, everyone, and thank you for standing by. My name is Sierra, and I will be your conference operator today. Today's call is being recorded.

I would like to welcome everyone to next tracker's third quarter fiscal year 2025 earnings call. After the speaker's remarks, there will be a Q&A session. At this time for opening remarks, I would like to pass this conference over to Sarah Lee, head of investor relations. Sarah, you may begin.

Thank you, and good afternoon, everyone. Welcome to next tracker's third quarter fiscal year 2025 earnings call. I'm Sarah Lee, head of investor relations. I'm joined by Dan Sugar, our CEO and founder, Howard Wanger, our president, and Chuck Boynton, our CFO. Following our 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 our earnings press release and shareholder letter.

Today's call contains statements regarding our business, financial performance and operations, including our business and our industries 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 10Q, an annual report on Form 10K, which are available on our IR website at investors. next tracker. 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 gap and non-gap measures on today's call. The full non-gap to gap or considerations 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 for joining us today to discuss next tracker's fiscal Q3 financial results and best wishes to everyone celebrating the spring festival. We are pleased to report that our global teams focus on innovative products and operational excellence, combined with robust demand for our products and services, has led to exceptional performance and strategic progress across our business. We achieved strong financial results, with revenue growing 15% year over year, to approximately $2 billion year to date.

Q3 revenue was $679 million. Our adjusted gross profit and adjusted EBITDA also saw meaningful improvements, reflecting our operational efficiency and strong market position. These results underscore our ability to execute effectively in a dynamic market environment, and we remain on track to deliver another strong quarter to close out the year. A backlog hit a new record, increasing quarter over quarter to significantly over $4.5 billion.

This robust backlog provides us with excellent visibility and confidence in our future growth trajectory. In Q3, we remain hyper-focused on scaling our legacy and new products and project execution to deliver differentiated value to our customers across the five continents we are serving today. To further enhance our results, innovating and delivering cutting edge solar technology to the market, we expanded our R&D facilities in three regions, the U. S. , Brazil, and India, and partnered with UC Berkeley to establish the CalNext Center for Solar Energy Research, with a $6.5 million commitment to advance solar power plant technology and develop future engineering leaders.

We believe these strategic investments and global expansion reinforce our commitment to innovation and position as a global leader in solar technology and will drive long-term value creation. Critical as we anticipate the solar industry to experience unprecedented growth longer term, driven by increasing electricity demand and growth in solar power. I will now share our perspectives about the market and industry outlook.

Solar continues to perform as the fastest growing power generation being added to most major grids around the world. According to Wood Mackenzie, in the U. S. , in the third quarter of 2024, solar accounted for 64% of all new electricity generating capacity added to the grid. And last year, the U. S. added approximately 40 gigawatts of solar power. Power demand in the U. S. is expected to increase significantly, about 9% by 2028, according to ICF International, the consulting firm.

And the U. S. Department of Energy forecasts 15 to 20% power demand growth over the next decade. Capacity additions have been dominated by solar, with nearly 7,000 solar and solar plus storage projects in the queue. And we believe solar remains the single most practical source of power generation in the U. S. grid and many electric systems around the world.

Cost reliability, availability of supply chain, and speed of construction are key drivers of the growing adoption of solar. Significant reductions in battery costs, coupled with a five-fold increase in battery-powered recent years, has helped solar powers continue growth by delivering firm power in early morning and evening peak power conditions.

Robust demand for new power has combined with our sequential growth in backlog and enabled us to raise our fiscal 25 profit target by $75 million to a midpoint of $720 million. Our strong quarterly results, record backlog, and strategic investments in R&D position us to capitalize on the tremendous growth opportunities in the solar industry. We remain committed to driving innovation, operational excellence, and sustainable value creation for our shareholders.

And we thank you for your continued support. I'll now pass the call over to Howard Wanger, President of NextTracker, to provide additional color on our business.

Thank you, Dan. Our demand profile continued to be positive in the quarter, with a book-to-bill ratio greater than one. We had record bookings for both the U. S. and rest of world regions, driving backlog to significantly greater than $4.5 billion. We would like to highlight this milestone further by noting that we have more than doubled our backlog since our IPO two years ago, which stood at $2.1 billion at the time.

And we have done so while growing the company's top and bottom lines. Now, a bit more detail for sales in Q3. In the U. S. , we had 75% of total bookings in the quarter covering a diverse mix of new project contracts in over 20 states across the country. Our new foundations business is currently focused on the U. S. market, is helping us get additional wins in a growing pipeline of interest.

We believe customers are recognizing the synergy of a more complete solution combining our NX horizon tracker platform with innovative foundations that span a wide range of soil conditions.

We are also pleased with increased bookings in the quarter for our Hale Pro 75 tracker and Hale Pro software with auto-sto features which are designed to help protect systems during severe weather storms.

And we continue to see new sales in the quarter of our XTR extreme train following tracker, which can radically reduce the need for expensive site grading, as well as strong sales of our true capture software for U. S. projects, which enables power plant owners to boost total energy yield. These innovations are enabling greater siding flexibility and can lower solar power costs to help address rapidly expanding U. S. electricity demand.

In the international arena, excluding the U. S. , we signed contracts in 13 different countries in Latin America, Europe, Australia, and the MEIA region of Middle East, India, and Africa. The range of 100 to 750 megawatts in Australia, Brazil, Chile, Europe, India, Peru, and Saudi Arabia. The international pipeline continues to grow, and we are seeing more countries installing solar.

And we are also gaining traction for XTR and true capture software internationally in the quarter, shifting for a moment to supply. We believe our global supply chain is one of the strategic advantages that enables more sales. For example, in the U. S. , our partners operate over 20 factories producing our products, which enables us to reduce lead times for our customers with superior on-time delivery performance while increasing flexibility throughout construction.

As previously announced, we are now shipping 100% U. S. domestic content per treasury guidance. We are finding that our customers increasingly want domestic content for their projects, and we believe we're the first and only company currently shipping a 100% U. S. domestic content tracker.

In Q3, we had over 80% of revenue coming from repeat customers. We believe there are many factors that set us apart and enable us to be the preferred tracker partner. We have a relentless customer focus in the company with a service mindset that EPCs, developers, and owners can rely upon and trust. We believe we have a significantly differentiated and superior product and service offering that delivers the highest performing and most reliable solar power in the industry at the lowest LCOE. And we have built a strong company operationally and financially with a proven track record. All of these factors set us apart and give our customers and stakeholders peace of mind that we will work with them as partners and deliver.

Moving to pricing and costs. In Q3, pricing for next tracker was stable, and the company continues to manage costs well. Pricing and costs vary by region, customer, project size, and location, soil condition, panel type, and other factors. Historically, as the solar industry continues to scale, system costs have decreased over time, resulting in solar power becoming among the most competitive generation technologies.

We are doing our part to continue this trend with ingenuity and know-how to reduce install costs and to generate more energy. Finally, project timing was stable and manageable on a portfolio basis in the quarter. With some projects accelerating and some pushing out, which is the nature of large scale projects spanning multiple quarters and years.

In summary, the business performed very well in Q3, and we are on track to deliver another strong quarter to close out our fiscal year. And with that, I'll pass the call over to Chuck Boynton, our chief financial officer. Chuck?

Thank you, Howard. Good afternoon, everyone. Thank you for joining us for our third quarter fiscal year 2025 earnings call. I'm pleased to present our financial results and outlook. We're thrilled to report another quarter of exceptional financial performance demonstrating our team's continued execution in driving customer satisfaction and product innovation globally. For Q3, we achieved revenue of 679 million, which represents a 7% sequential improvement over Q2. Our year to date revenue reached 2 billion, reflecting a strong 15% growth year over year.

Our Q3 geographic mix with 66% U. S. and 34% rest of world aligning with our projections. Our Q3 adjusted EBITDA expanded to 186 million, marking an 11% increase year over year. This translates to an adjusted EBITDA margin of 27% up 4% points from the prior year. Year to date, our adjusted EBITDA has shown remarkable growth up 48% compared to the previous year.

It's important to note, in fiscal year 24, our adjusted results exclude the impact from 45X credits. We generated 135 million in adjusted free cash flow during Q3, more than doubling the 62 million from the same period last year. Year to date, we've generated 395 million in adjusted free cash flow, a 26% increase from the 314 million in the prior year.

Our strong balance sheet and cash flow generation remain competitive advantages. We closed Q3 with 694 million in total cash and 145 million in total debt with no significant debt maturities until fiscal 2028. Total liquidity at the end of Q3 increased to 1.6 billion, providing us with significant financial flexibility.

Our adjusted gross margins of 36% were roughly in line quarter over quarter. Similar to last quarter, we're seeing significant year over year growth from sales of our true capture software driven by a higher rate of commission projects.

Looking forward, we expect our software revenue to be approximately 2% of revenue. We continue to experience strong demand for our products across all major global markets. Q3 saw exceptional bookings with our backlog growing to significantly greater than 4.5 billion. This performance not only bolsters our competence in raising our profitability outlook for the current fiscal year, but also lays a solid foundation for 2026 and beyond.

For the full year, fiscal 25, we expect revenue to be in the range of 2.8 to 2.9 billion. Adjusted EBITOT to be in the range of 700 to 740 million. Adjusted diluted EPS to be in the range of $375 to $3.95 per share. US revenue mixed to be approximately 2 thirds of the total.

We expect our structural gross margins to be in the low 30s, reflecting our continued execution, pricing, discipline and cost management. We manage our business on an annual and multi year basis consistent with the nature of the utility scale solar power industry. Our competence is driven by customer demand for our differentiated industry leading products, ability to execute and support customer success, continued bookings momentum and a strong financial position that's enabling continued innovation and strategic investments.

We believe our culture strategy team and market position will enable us to continue delivering strong value for customers, shareholders and other stakeholders. Thank you. And we look forward to your questions.

Operator. We will not begin the Q&A session. If you would like to ask a question, please press star and follow by one and your telephone keypad. If you would like to remove those questions, press star and follow by two. And if you are using a speaker phone, please pick up your handset before asking your question.

Hi, this is Howard Wenger. We're really happy with the quarter and getting to this new milestone. It's actually we've had increasing backlog every quarter since going public and actually before then. So our book to build continues to be greater than one. We're not going to give a precise answer, but the math roughly supports what you're saying that we exceeded a billion in the quarter and bookings.

Thank you.

I just wanted to see how you all do potential risks there should anything come to fruition. Hi, Jordan, Dan, sugar speaking. We feel very good about our supply chain, both in the US and overseas, but in the US, we enjoy very strong relationships with.

The major US mills still producing in some cases. We've actually with partners stood up manufacturing employees on the very campus of some of the US mills in the United States or nearby.

We're making for. We're making virtually all of the tubes that were as an example delivering in the US. We're manufacturing in the US. Every tube we make in the US uses 100% US steel raw material.

And the US steel position has a much cleaner manufacturing mix in terms of the content of the steel, we launch our low carbon tracker product that we sold. And then overseas, we built out supply chain in India and other places for those markets. We're in this great position. We can make locally for local markets, or we can export to arbitrage.

Depending on what's happening with the global supply chain. So we, as Howard mentioned in the opening remarks, we really feel like our global supply chain footprint is expanding for next tracker and our customers are reflecting that back.

Thanks.

And then do you see the 7525 mix maybe holding even into next year as well? Well, I'll take the next question first and then talk about the velocity second. We're, as you've seen, and as we've discussed previously, our mix is typically 60 to 70% in the US. And that, that is holding in rough roughly. And so what that means is, as we grow, we're growing both domestically and internationally.

And that speaks to volume in both or the velocity in both regions for the company. And as far as the US market goes, the demand is strong. We had record bookings in the US this quarter and our pipeline is indicative of continued strength. So we're happy where things are at the moment. As far as market share, that's not something that we actually can accurately monitor.

There really is no data that isn't lagging. Most of the data on market share comes six to nine months after the year is over and it's done on an annual basis. But we feel like we're doing well in the marketplace.

Thank you for your question.

Thanks, Phil. Yeah, on the 87% of our backlog realizing the next eight quarters. Yes, the majority of that is slated for being recognized over the next four quarters. So that gives us more visibility into the year ahead and we'll be commenting, commenting more on that in the next earnings call.

As for the second part of your question on pricing. What we saw and what we're seeing right now is pricing is quite stable.

Globally for the company and in the United States where a lot of our shareholders have interest. And as far as the solar industry goes, what we've seen over time is the entire value chain reduces price as the costs are reduced with scale. And we continue to invest in innovation to extend our current tracker platform so that we can lower the installed costs.

We can lower the upfront cost and we can get more energy yield while lowering price in a measured way over a period of time to be more and more competitive versus other generating technologies. And that's what's vaulted the whole industry to be in a position where solar as we remark, as Dan remarked, 64% of all new generation globally was solar. That's an astonishing figure.

So, and that's all done through cost reduction and then price reduction. But currently what we're saying just to reiterate, the price environment is quite stable.

Thanks, Phil.

Do you think there's potential to improve this metric over 90% as we get more clarity on what Trump does with IRA and tariffs and the like.

This is Howard. So 80 to 90% is probably a good way to think about it. And as we stated previously, the majority of that amount or next eight quarters is over the next four quarters. So what we're saying is we continue to book more projects. We achieved a record internationally for bookings this quarter as we noted and in the U. S. And so we're going to continue to fill up our backlog along the entire, you know, span of eight quarters.

We do have these BCA agreements that are multi year nature and they're the ones that contribute more to the back end of that amount. But as those projects get perfected. In in orders come through the EDC's they drop into the typically into the fourth quarter bucket. So it's sort of this extension of our pipeline, but with a lot more certainty of visibility because those are contracted projects with.

Project schedules, project names, project sites, deposits, etc. So, but the getting back just a circle back, 80 to 9% as a book and it's probably the right way to think about that as we move forward. And that's been consistent for us over time.

Thank you.

Thank you. I'm Mark will do a two part answer. I'll answer the first part power to answer the second part. So we were very pleased with the updated rules for treasury related to domestic content. It generally improves the picture for customers. It simplifies things and it's easier for them to achieve the bonus 10% ITC. And it also really amplified the value we're providing by customers by being in such a strong supply chain position in the US with over 20 factories shipping finished goods customers across the United States.

That are geographically optimized. The shortened would we come to site in my logistics costs and ensure they have capacity to meet their needs. Our do you want to take the second part please. I'll just add that from a customer perspective and our pipeline and our actual bookings we're seeing more and more domestic content be part of what we're contracted to do. And not only to have domestic content but to have higher and higher levels of domestic content we're seeing more customers wanting 100% domestic content as you know the rules ratcheted up by 400 basis points of tracker. The number of points that you can get on domestic content and plus some customers are expressing that that it gives them more comfort to have the tracker be 100%.

So we think it's something that what we know we're seeing that it's a value to customers in terms of pricing.

We're partners with our customers. If particularly our repeat customers have 80% of our businesses with repeat is repeat business. So we have very close relationships. If a customer wants domestic content. There will be a modest premium for that in terms of price, but that only that's reflective of the increasing cost to the company.

Thank you for the question.

Our application policy has not changed. We're focused on growth, prioritizing investment in projects and activities organically. We've been looking at M&A activities and seeing how we can build share over value via M&A. And then later this year, we'll look at, you know, possible buyback program as we talked before. There are certain restrictions to the spend. And so we'll talk about that more as we get closer to that date, end of this year calendar year.

But we're very pleased with our fortress balance sheet. And I think it is a real competitive advantage.

Thank you.

Yeah, we'll do two part on this. This is Dan. I'll speak to the. The commercial aspects of that. So first, we are in a position to be able to respond very quickly to customer needs. Both on normal day job activity if customers need to. For whatever reason, accelerated delivery schedule. Or if it's to address the safe harbor need, we can.

Move very, very quickly to respond to those needs. Given our supply chain, strange and geographic position. And so it's all about being customer need, helping them be successful on every project. And then engendering confidence, which has been resulted in repeat orders.

I'll just add that. We're open for business. If the customer wants the safe harbor, we'll work with them.

Thank you.

And how we think about that kind of cadence impacting margin as we go forward. This is Howard. So yeah, we're really pleased with the velocity in the international market. As we noted, we had significant sales in the quarter. Across. Australia, Brazil, Chile, Europe, India, Florida, Saudi Arabia, so kind of all regions. It's big projects in there. And the margins do vary by region.

Really, there's no big change from what we've talked about in the past. It's a it is a more competitive environment. The internationally had a more capex sensitive upfront cost sensitive. But given our differentiation, our technology differentiation, what we offer to our customers, the reliability of the company, our crack record, our delivery, our supply chain, the strength of the company, our balance sheet. We're doing well there and we had a record quarter.

So we're happy with that. And so the margin profile guidance really, there's really no material change at this time.

Thanks, Ben.

The Middle East and Africa have vast solar potential and very ambitious goals, particularly in the Middle East and in the Kingdom of Saudi Arabia, where they have a target of the order of 20 gigawatts per year, Saudi alone. So the market is really substantial.

It's been disclosed, the pricing for power, solar power in that region to be as low as, you know, 1.2 cents a kilowatt hour. I mean, it's like really 12 dollars per megawatt hour, super low, lowest pricing in the world. And that means everybody along the value chain needs to sharpen their pencils and, you know, and really do whatever we can to make that happen. Now, the benefit of operating over there in part is that there is, it's a level playing field. There's, there's no real subsidies there for solar and there's no tariffs. And so you can see in a market that's unsubsidized what solar can really do.

And when there's no tariffs and just delivering it 10 to $20 per megawatt hour, it's really quite impressive. So we don't see that changing in terms of trajectory to answer that part of that question.

And I'm going to go to Dan because I think he has some more commentary. Yeah, I just within Abu Dhabi at the World Future Energy Summit, an extractor participated in that event as we have for many years. I had the opportunity to meet with some of the largest customers in that region. What I will say is there's as markets mature as they are in the Middle East, you're seeing a real flight quality and appreciation for durability of technology.

And so as markets get more, as Howard mentioned, the intrinsic cost of power there is such that it's a very competitive market. No question about that. But there is appreciation for differentiated technology that has hard performance. And as durability that's proven in the market, and extract cells in both of those areas.

Our next question comes from Stephen Fox with Fox Advisors.

This is Howard. So the areas, the regions where we really saw in the quarter, excellent performance was in Latin America, Europe and Australia. Those were really the three standout regions.

And we're really pleased there. It's not to say that the Middle East and Indian Africa aren't important, but that's just in the quarter and it can vary quarter. But that's a specific answer to your question on that. As far as, here's the big pictures as we see it, then use the phrase flight to quality. We believe that that's what's happening that over time with scale, these projects are getting bigger and bigger.

There's more of them. We believe we're emerging as really the trusted brand, but we're also differentiated across many of the key buying vectors, proof in technology, proof in low cost, proof in energy yield, which all contribute to lower LCOE.

Biggest balance sheet in our sector or in our segment for what we offer. Just an unbelievable team that's so committed to customer service and to innovation and stretching the boundaries of what we can do as a company with just extreme amount of focus and know how. And we deliver success for our customers and I think that's what's happening. I think there's some, there's separation there for us that we want to continue to drive. And that's what we're doing. And the results speak to that. Thank you very much for your question.

Thank you.

How's it been after elections or after the Trump administration started. Certainly, I'll take the first part and how it can take the second part. Q three was a very strong margin quarter overall. Gross margins at 36%. We did have some tailwinds. Some of these were one time. Some were operationalized opportunities that we would hope to repeat.

I will go through them all in detail, but, you know, FX was a bit of a tailwind that tends to not repeat. We did have lower freight costs where we really operationalize our team. Our operations team is world class and they were able to drive savings and freight. We also had some savings and material and overhead. And so these are real opportunities that we don't necessarily plan on, but we're able to capture in Q three.

I'm looking forward into Q four and beyond. I'll talk about Q four. Next earnings call. We'll talk about the next fiscal year. Q four margins go down a little bit, mostly because of international mix. And we did talk about last quarter, some large, very large international projects that get delivered this year. That bring the overall margin mix down a bit.

So you're seeing, you know, a really strong Q three, a very strong Q four. With a little margin compression on international Howard. We checked in with our customers and they're really calm and feeling very good about their pipelines and the projects that they've contracted with us on. So we feel really good about the coming year and closing out this fiscal year.

And, you know, we kind of toggle to the big picture, which is solar has proven to be a super nimble technology that you can deploy just about anywhere where there's demand constraints and how to deal with rapidly escalating electricity consumption and demand in this country. And the bottleneck transmission, the bottle, the bottleneck distribution, and really be a force for solving rapid electricity demand growth.

And the industry has proven that and we're a big part of that. So we think the macro story will prevail. And we've been successful in every administration going back. Many of us have been in the industry for 30 years that are in the company or more. And so we've kind of seen it all and it's just the macro story prevails.

Thank you for the question.

Hey, Julian. This is Howard. Our framework agreements have been very much focused in the United States. We've had conversations internationally, of course, maybe our customers are multinational, big energy companies. And so there is interest in a global framework approach, which we welcome. And we think it's really good for the business. It reduces friction and is great for us and our partners.

And it's proven and we continue to sign these agreements. So can we see we'll have more commentary next quarter? But I would say that right now the core business in the international region continues to be on a more project by project basis or several projects at a time.

And however, our repeat customers is very similar. It's also at approximately the same clip of 80% repeat internationally. So these are companies that we work with day in and day out. And many of them, when we talk to them about a framework agreement, they're getting more acclimated with it, but they say, Hey, we're already in this kind of partnering approach, which is, which is really kind of true. So we'll, we'll bring it back for more commentary on the next call.

Thank you.

Our next question comes from Sean McLachlan with HSBC.

Hi, Sean. I'll answer the first part and Howard the second. First of all, we're really excited about the progress with our new products in the market. As we've noted, we've more than doubled our investment in R&D and product development. And as we introduce these new products, those products come with, you know, validated information that helps those products become accepted in the market. For example, when we introduced our True Capture technology, we had data on utility-scale projects that were operating for a period of time with measurement verification protocol.

So customers know when we bring products to the market, it's real hardware, real software, real firmware, and these products can actually operate.

Howard, do you want to speak to how we think about that relative to our plan? Yeah, I mean, we talked about this quarter about how we're getting traction with our Hail Pro 75 product as an example of something that we believe we're leading the industry on, which is a solution for areas that experience extreme weather, including large hail balls.

And we had a really strong border of new bookings for that product, and we didn't launch it that long ago. So we can, our approach is basically to really develop new technologies or acquire them in the case of the foundation, but really invest in R&D and then pilot them with our customers, and then we launch them to market.

In aggregate, for sure, these new products will be material to our next year. So to answer your question about that, these are very important technologies, XTR, True Capture, the Hail Pro, the foundations in aggregate, for sure. Those are going to be an important part of the story next year, and we'll have more color next time. And yeah, let's say that R&D investments are really paying dividends for the company.

Thanks for your question.

Thank you. Okay, Chuck will answer the software question. This is Howard. Look, the company has an ethos about not chasing bad business. Okay, so we want to be in the best regions in the world in terms of large, significant, and where our product plays well. And right now, for example, we're not present in China. That's not a market for the company, but there's plenty of other markets that are growing internationally and new countries that are being added all the time.

And what we're seeing that's driving that are really countries that are setting zero carbon targets and driving to those targets. And that's creating sort of a tops down drive for more renewables. In concert with that, our technology is in many parts of the world, the lowest cost source of generation.

And so the fundamentals for growth in these international markets is really favorable. And we feel good about our position there. We're not talking about margin differentiation at this time. Around the world, we feel like that is something that's proprietary.

And so, but we appreciate the question.

Now, Chuck, what did you address software? Thank you. On the software side, we have built a really great tech stack that our customers really appreciate. We've been selling that at an increasing attach rate to new customers and upselling existing customers, which is why last quarter we saw a fairly significant increase in the software contribution. We don't comment specifically on the exact attach rate, but it's been improving. And there's still room to improve a bit more, but we're really proud of the change results.

With that, we'll end the call here. Thank you very much for taking the time today. And we look forward to talking with many of you throughout the quarter and next quarter end.

That will conclude today's conference call. Thank you all for your participation. You may now disconnect your line.