Nextracker Q1 2025 Earnings Call Transcript

Quartr
Provided by Quartr
August 1, 2024

There are 17 speakers on the call.

Operator

Good afternoon, everyone, and thank you for standing by. My name is Jayla, and I'll be your conference operator today. Today's call is being recorded. I would like to welcome everyone to the NetTracker's Q1 fiscal year 2025 earnings call. After the speakers' remarks, there will be a question and answer session.

Operator

At this time, for opening remarks, I would like to pass the call over to Ms. Mary Lai, Vice President of Investor Relations. Mary, you may begin.

Speaker 1

Thank you, and good afternoon, everyone. Welcome to NextShopper's Q1 fiscal year 2025 earnings call. I'm Mary Lai, Vice President of Investor Relations. I'm joined by Dan Sugar, our CEO and Founder Carl Wagner, our President and Chuck Boynton, our CFO. We're excited to have launched a new shareholder letter format along with our press release.

Speaker 1

On today's call, we will open a brief with a brief message from Dan and then immediately transition into a Q and A session. As a reminder, there will be a replay of this call posted on the IR website, along with a 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 ks, which are available on our IR website.

Speaker 1

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 reconciliation 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?

Speaker 2

Thank you, Mary. Welcome to NEXTracker's Q1 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 of revenue and record adjusted EBITDA.

Speaker 2

It was our 6th consecutive quarter of year over year growth of year over year double digit revenue growth. In Q1, we saw a healthy demand in both the U. S. And international markets. Our backlog increased quarter over quarter and is over $4,000,000,000 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.

Speaker 2

And today, we announced we are taking orders for solar tracker solutions with 100 percent U. S. Domestic content capability with an expected ship date in early calendar 2025. We are also thrilled to welcome the teams from Ojo and Solar Pile International to NEXTracker. We have extensive experience with foundation design, supply chain, installation and the technologies we acquired broaden the geotechnical use cases for solar.

Speaker 2

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 position.

Speaker 2

This concludes my comments. We now look forward to your questions. Let me pass the call back to the operator.

Operator

Our first question comes from Mark Strouse with the company JPMorgan.

Speaker 3

Your line is now

Speaker 4

open. Yes, good evening. Thank you very much for taking our questions and appreciate the new investment. Investment. So I wanted to start with kind of the domestic content.

Speaker 4

Can you talk about how your customer conversations are shaping up? If you're seeing firm orders yet,

Speaker 5

just kind

Speaker 4

of talk about maybe the pipeline activity. Are things kind of firing on all cylinders yet? Are customers kind of waiting that language to be finalized? Are they waiting for the election? Just any update there?

Speaker 4

And then I've got a quick follow-up. Thank you.

Speaker 6

Mark, this is Howard Wanger. 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 percent now we're taking orders.

Speaker 6

And we actually have an order for a 100% domestic content tracker. Then customers are not equivocating with respect to placing those orders. They're not waiting for additional guidance. The guidance came out from Treasury. It's very clear.

Speaker 6

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 very good position to deliver.

Speaker 2

Dan? Mark, thanks for asking about the stood out to content. Building on Howard's answer, it was very helpful 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 tubes, fasteners, slue drives, dampers, motors, controllers, rails. And if you can build

Speaker 3

those components

Speaker 2

to that guidelines, then there's an additional credit comes in with the production labor. Customers do value that. We stood up and had these public factory openings at 8 factories including our electronic controller. We had an event in Silicon Valley with a partner and it's very tangible, customers get it and we're getting great feedback. Thanks, Mark.

Operator

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

Speaker 3

Hey guys, thanks for taking my questions. To what degree are you guys dealing with the Southeast Asia, AD CBD impacts and the potential for that to be slowing the market down. Our work, as you may know, suggests 2025 slowdown. Have you seen some projects push out? Our checks also suggest that you guys are winning a substantial amount of share as well.

Speaker 3

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 1 in the coming quarters? Thanks.

Speaker 2

Phil, Dan Sugartshire. I'll take the first half of your question dealing with the ABCBD and Howard will then comment on bookings. We read your reports, which are always great and your team is very comprehensive. And actually, we tested some of those questions with our commercial team. We would characterize the ABCVD issues as a secondary headwind.

Speaker 2

There it could be an issue on some projects being happening later than the customer would otherwise want them to. We think the primary we've seen the primary impact on schedule of projects relates to construction permits or interconnection delays. And 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 ABCVD issues. And so it is a factor, but we've seen that those other issues be larger factors. Howard, do you want to comment on his bookings?

Speaker 2

Sure.

Speaker 6

So we had a really strong quarter in execution and delivered $720,000,000 revenue for Q1. So we're off to a great start as Dan mentioned in his remarks. And with that, we increased our backlog quarter over quarter. And so it continues to be over $4,000,000,000 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, gives a lot more detail.

Speaker 6

One of the things we noted is that 80% of that backlog is expected to be realized over the next 8 quarters. And so it gives us a lot of visibility. We did have a strong quarter in bookings once again. And we do not provide guidance on bookings and backlog. But the color is that the market continues to be healthy and we're getting at least our fair share of the market.

Speaker 6

Thanks, Bill. Next question please.

Operator

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

Speaker 7

Hey, guys. Good afternoon. Thanks for taking the questions and kudos on the solid start to the year. I guess 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, 22% of sales that's remaining unchanged. You just did 24% in Q1.

Speaker 7

So it does imply some moderation moving 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?

Speaker 7

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 focused. Is there an opportunity for you guys to directly participate in that? Is that part of your sort of M and A wheelhouse, if at all? Just would be curious if that's something you can help the industry out with directly.

Speaker 7

Thanks guys.

Speaker 8

Great. I'll take the first part

Speaker 9

and Dan or Howard can

Speaker 8

take the second. Brian, good to hear from you. So as we look at the strong Q1, really, really strong both gross margin and EBITDA margin and we're proud of those results. As you look out to the back half of the year, there's going to be a lot more international mix. Our expectation is and again, it's hard to look at 1 quarter because we look at this on an annual basis or even multiyear basis.

Speaker 8

But we look at the year and we expect to see stronger revenue contribution from our international markets. And as you know, the margin profile in the U. S. Is really, really strong. And so overall, we're off to a great start.

Speaker 8

We do see the timing, things move in, they move out. And Q1 really was a real tailwind for us. And we expected a strong year, but it's going to be a bit more balanced with our international mix. In the shareholder letter, we outlined our expectation of approximately 2 thirds U. S, 1 third North International and in Q1 it was more like $7,129,000 Thank you, Brian.

Speaker 2

Okay, Brian. Thanks for the question about the grids enhancing technologies. So when we look at such a strong percentage of the interconnection queue being solar and solar plus storage, We've covered on previous calls over 7,000 projects have applied to be interconnected to grid. 2,000 gigawatts, much more than the interconnected capacity of the entire U. S.

Speaker 2

Grid today. 80% of the cube being dominated by solar and surplus storage. The biggest single issue governing those projects is connection to the grid. And so if you look historically, it takes a long time to build a transmission line. I started my career on an electrical engineer as a transmission planner working for Pacific Gas and Electric Company in the very distant past in 1980s.

Speaker 2

But it's a big deal to build a new line. You need to get rights away, there's eminent domain, folks don't like to see long transmission lines built. There are 3 grid enhancing technologies that have become commercialized over the years that can you can use the existing lines or the existing corridors of transmission often with the same transmission towers to get vastly more power transmitted in the same corridor. And those relate to using dynamic thermal rating where you put a device on the line to actually measure the temperature of the line in real time. If the wind is blowing perpendicular across the line, the line's cooler, you can transmit vastly more power on that line.

Speaker 2

There's new conductors where you can take the same tower and just put a new wire on the line that's the same diameter and get 50% to 100% more power on the same corridor. The U. S. Has lagged international adoption of these technologies. We've seen India and Europe really taking off on these technologies.

Speaker 2

We think there's a tremendous opportunity. Recently, I spoke in a major conference. I was there with some U. S. Utility executives, we were engaged.

Speaker 2

There's a tremendous push on this from the Federal Energy Regulatory Commission, the U. S. Department of Energy. We're seeing some utility commissions pushing on it, some leading utilities starting to lean in and do this work. And we think it's right for the ratepayer and it definitely can help really accelerate renewables.

Speaker 2

We featured all this in our shareholder letter because it's something that has been sort of not focused on, but in the renewable industry, we think it's very important and it could provide a big part of the solution to getting these projects connected quicker.

Operator

Our next question comes from Vikram Bakri with the company Citi. Vikram, your line is now open.

Speaker 5

Good afternoon, everyone. I wanted to talk about Audio in the space. I was wondering what's the attach rate of these 2 companies combined with your systems?

Operator

What do

Speaker 5

you see that attach rate going forward? And if you can share the philosophy around acquisitions also, the letter says the acquisitions will be accretive over time. I was wondering like in 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.

Speaker 5

I imagine it was supply chain costs, if you can quantify that too. Thank you.

Speaker 2

Thank you, Vikram. We're very excited about the acquisitions of Ojo and Solarpile International because they increase the geotechnical and difficult soil areas where solar can be practical to be installed. And we're seeing an increase in the prevalence of difficult sites. For these, Ojo has very unique means and methods and intellectual property and machines to address hard rock type applications. Solar Pine International is more on the softer soils and the froth keys, so freezing and thawing type places, etcetera.

Speaker 2

As solar has proliferated from California in the Southwest to other areas in the U. S. And overseas other places, we've seen a higher percentage of these types of difficult soil conditions and we've heard from our customers the same thing. Now we're not speaking to attach rate, but what I can share is both of these technologies are fairly early in the adoption curve for these in the market. The NEXTracker, when we first saw the OJO technology years ago, we did lean in.

Speaker 2

We supported them. We became the 1st UL certified tracker of the Ojo Foundation technology. We participated in some of their early projects. And what I will say is Howard and I sat down with a number of customers. There was a lot of excitement about the combination.

Speaker 2

Ojo has fantastic technology. The company was not well capitalized. They saw NEXTracker being able to significantly

Operator

support the

Speaker 2

company and the comfort factor of customers was a lot stronger. But with both Ojo and Solar Panel International, we had really vetted, validated these technologies both in our test facilities that we have joining our headquarters and other locations as well as with full scale projects with customers out in the real world. And so we are very confident about the ability of these technologies to perform and to be able to expand the range of where solar makes sense. Chuck, can you handle the next question

Speaker 6

please on margins?

Speaker 8

Yes. Vikram, on the cost side for supply chain, the backdrop is that the revenue that we recognized in Q1 was booked many, many quarters ago in some cases. These are long projects generally. And the costs that you've seen in transport, freight, logistics, containers has gone up in the last three quarters. Suez Canal created an issue where shipping rates went up, fast boat costs have gone up.

Speaker 8

We contemplate generally the cost of steel and generally that is kind of hedged with our customers. But a lot of the supply chain costs can be variable. And so this quarter as opposed to last quarter, there was a slight increase in costs. Thank you. Next question, please.

Operator

Our next question comes from Puneet Satish with the company Wells Fargo. Puneet, your line is now

Speaker 10

open. Thanks. Let me just say I'm a big fan of this new format in the expanded Q and 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 8 quarters.

Speaker 10

Is that a shift at all from the prior commentary where I think you've said the backlog will be realized within 8 quarters as some of the deals got elongated at all. And then how long will it take to realize that remaining 20%?

Speaker 6

Thanks for the question, Puneet. 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 in the tent or getting projects perfected.

Speaker 6

That has it's taking more time than it did 2 years ago, 3 years ago. And so in addition to things like module availability, which is a secondary or maybe even a tertiary issue, project cycles are moving somewhat to the right. The flip side is that we're getting even more visibility and longer term visibility, which is good for the company. Those that backlog is still solid. Projects are not dropping out.

Speaker 6

In fact, we did a review of our projects internally. We had literally one project drop out in the last 12 months. So it's very, very solid backlog. And of course, we've talked about the we have a high bar for what goes into our backlog. So yes, project cycles are lengthening to a degree.

Speaker 6

We factor that into our outlook and feel really good about it. Chuck, did

Speaker 8

you have something you want to add? No. Well said, Howard. I think the one project is less than 3%. So

Speaker 11

it's 1

Speaker 8

out of 100 and 100 of projects. Yes. Yes, just for context.

Speaker 6

Yes, less than 1%. It's much less than 1%. Okay. Thank you for the question, Puneet. Next question please.

Operator

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

Speaker 9

Good afternoon and thanks for taking my question. Just a quick one on the guidance. Q1 was quite strong relative to your

Speaker 3

expectations, but I think the mid single

Speaker 12

digit growth in Q2 implies,

Speaker 9

wondering if you could speak to the driver of the sequential decline into 2Q, whether it's conservatism or if there's something else going on there? Thank you.

Speaker 8

Yes, Kathy. I'd say first and foremost is we're a customer driven company. We want to deliver per our customers' schedules. They had a lot of scheduled deliveries they wanted in Q1 and deals got pulled into Q1. And that's the real driver.

Speaker 8

We're not pushing to drive an outcome with our customers. We're listening to them and driving to what our customers want. And that's why you can't just look at 1 quarter. Q1 was a fantastic quarter. Q2, we're guiding mid single digit growth year over year.

Speaker 8

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.

Operator

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

Speaker 13

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

Operator

bit more on that?

Speaker 6

This is Howard Wenger. It's a factor in the U. S. And of course that's 2 thirds of our business. It's the most attractive market in the world for NetTracker from a pricing and a margin perspective and the strength of our relationships in the size of the market.

Speaker 6

It's a factor having domestic content and we made the decision actually during the pandemic when there are all those delays in logistics steel costs going up overseas. We made the decision to reshore onshore manufacturing, turned out to be a good decision because Ira came along and we accelerated this transition to now having over 20 factories. And so we believe we are in very good position. We think we're differentially able to offer high levels of domestic 2025 100 percent domestic content products. Appreciate the question.

Speaker 6

Thank you.

Operator

Our next question comes from Jordan Levi with the company Truist. Jordan, your line is now open.

Speaker 12

Afternoon, all. I appreciate all the commentary. I know you've done work in the agri PV space before and I appreciate everything you put in the shareholder letter about that. Nice to see a 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?

Speaker 2

Hey, Jordan, thanks for that. We've been passionate about AgriPV since founding 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, we've been growing crops amidst the solar panels there. And I think the amount of uptake of AgriPV is going to be very market specific.

Speaker 2

Some markets, it could be a negligible percent and some markets it could be a dominant percent. The one of our customer projects, the Mammoth Solar Project, which was developed by Doral, it's in Indiana. Won the at the there was a conference last month. They won the AgriPV Project of the Year. On that particular project, it's a combination of ranching and agriculture.

Speaker 2

They have, for example, 1500 sheep at that project doing vegetation management and they are commencing a program to grow produce there with local farmers. What we've seen is there can be depending on where you are, much greater community acceptance and it can provide a dual income stream to existing community that might be involved in agricultural ranching. And we've developed a number of projects on multiple in multiple countries on multiple continents with that. We NEXTracker has a very robust R and D program in solar. We have in addition to our headquarters R and D center, we have a very extensive center of Solar Excellence in Brazil.

Speaker 2

And we have an extensive AgriPV R and D program that's been conducted there for several years. We're measuring things like yield per square area for different crop types, the amount of radiance, how to optimize the operation of the solar power system in conformance with needs for cross and so forth. So it's early days for AgriPV. We think it's a great use case and we think our architecture with unimpeded rows to be able to navigate through the systems without mechanical impediment, facilitates more adoption in the AgriPV area. So we're excited about the prospects here and we'll be reporting on it over time as we learn from our customers and introduce new technologies in this area.

Speaker 2

Next question please.

Operator

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

Speaker 8

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.

Speaker 8

I'm curious as to whether any of your customers are talking to you about potential complexities related to modules that aren't put in by that December deadline? Thank you.

Speaker 2

Thanks for your shout out for Chuck, Joe. We're thrilled to have Chuck join our amazing finance and accounting team, Again, on the panel, ABCD 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 just seen that as a secondary factor where that's impacted that our customers are concerned about or talking to us about. The more the larger factors have been construction permitting and inter electrical interconnection. So those we just haven't seen that be a primary factor.

Speaker 2

It's also I will say very gratifying to see the ramping of quite a few solar panel manufacturing operations in the United States with both legacy producers in the U. S. And new producers. So and we encourage more of that. And we're doing everything we can to help them as a validated product on trackers and things like that.

Speaker 2

Thank you. Thank you, Joe. Next question please.

Operator

Our next question comes from John Wyndham with the company UBS. John, your line is now open.

Speaker 14

Perfect. I'll reiterate, I like the format and the extra time for questions. My question would be this on the 2 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.

Speaker 14

Should we view it that way that the 45x tax credits have given you a little bit of dry powder? Thanks for taking the questions.

Speaker 2

Yes. So the rationale, look, we went public a year and a half ago and we completed our spin out just a few quarters, a quarter and a half ago. We have our liquidity is in a growing and strong place. We mentioned in the shareholder letter. We upsized our revolver now.

Speaker 2

And so we have also the ability to execute those strategic acquisitions. I will say we're very disciplined. We're very diligent. We approach things from a customer value, from an engineering standpoint, we want to see things tested in the field. We have a long history with both Ojo and with SolarPile International.

Speaker 2

And in the case of those two technologies, we've just seen an increased prevalence of these very difficult geotechnical site conditions. These two technologies offer real value to customers to lower costs, to have less uncertainty on the project. In the case of also the Ojo technology, it's light on land, meaning that in some of the areas where solar is getting deployed, there's concern around vehicular traffic on the sites, both disturbance to sites that have there's concern about the environmental aspects

Speaker 15

of the site. So if

Speaker 2

you have with the Ojo technology, one path of a machine can do the job that 2 to 3 legacy type machines would do. And so for all these reasons, there is a market need, we validated it, we're in a position where we can actually transact, add value to customers. So that was those were the factors that built on our strategic rationale. John, thank you. Next question please.

Operator

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

Speaker 2

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

Speaker 6

This is Howard Wenger. There's a of course, you're going to get some differences in views, but I would say the majority is a shared view that solar is bipartisan that from a manufacturing and jobs perspective where the projects are going, where the manufacturing is taking place is predominantly or majority in the red so called red states, Republican controlled states. And so it actually benefits both parties. We've as a company have done well in all administrations. We did well in the Obama administration, the Trump administration previously.

Speaker 6

So there's a fundamental belief because it's reality that solar is the lowest cost form of energy on the planet. And that's going to be the driver in addition to it being clean power, which if you look at the demand that's increasing, the electric demand that's increasing in the U. S, it's being driven very much by server farms that are supporting AI, data centers, electric vehicles. And so it's part of the electric and clean power revolution that's taking place in the United States, which is needed and being is a fundamental premise and underpinning for the Inflation Reduction Act. And so Dan mentioned that tax credits and particularly the 30% ITC is the fundamental pillar of the Inflation Reduction Act.

Speaker 6

I mean, and tax credits historically have not been repealed. In fact, that would be unprecedented.

Speaker 2

So

Speaker 6

the vast majority from the customer perspective, they're continuing to develop their pipelines. They're continuing to invest 1,000,000, tens of 1,000,000, 100 of 1,000,000 of dollars. You're seeing more money actually going into development and power plant ownership. And so as we mentioned before, the demand for our products is still very healthy in the U. S.

Speaker 6

Even with the election upcoming. Appreciate the question.

Speaker 2

Next question please.

Operator

Our next question comes from Maheep Mandol with the company Mizuho. Maheep, your line is now open.

Speaker 15

Hey, thanks for the questions and apologize for some background noise here, Kenny. And just on the Ojo and the Tracker Foundation acquisitions, could you talk about like the market share over there? Trying to think if there's any antitrust concerns with about acquisitions. And separately, in the prepared remarks or in the kind of talked about other technologies, other grid technologies. Is that kind of directing new acquisitions or like the direction which you would move or any guidance on that previously?

Speaker 15

Thanks.

Speaker 2

Hi. Thanks for your question, Maheep. With respect to the market share of Ojo and the SolarPile International acquisitions in the foundation market, it's a very, very small percentage, a de minimis percentage in those markets. As we noted in the Ojo press release, we do plan to continue to make that technology available to other trackers that have been qualified to use that technology on a go forward. We think it can help really broaden the range for that solar can be used out in the market.

Speaker 2

And so we're very excited about that. And I'm sorry, the second half of your question.

Speaker 8

Yes, I trust. Both of these deals are closed. So they're we looked at them and there's no issue there. Thank you.

Speaker 2

Yes. So thanks for that question. Appreciate it. Sean, I'm sorry, next question, operator?

Operator

Our next question is from Sean McLaughlin with the company HSBC. Sean, your line is now open.

Speaker 16

Thank you. Good afternoon. Appreciate the time to ask questions. And a compliment on another barnstorming set of numbers. I had a 2 part question, if I may.

Speaker 16

Firstly, you talk about higher supply chain costs. I mean, where is cost inflation concentrated? And how do you think about your ability to pass through the costs? And secondly, how do I square that with price reductions? Is this a temporary adjustment?

Speaker 16

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? Thank you.

Speaker 2

Yes, appreciate the question. We'll have a 2 part. I'll first speak to the supply chain situation and then Howard will speak to the commercial aspects of it. I'd like to again go back a little flashback 4 to 5 years ago. What happened was we saw in an unprecedented speed probably since World War II, the biggest disruption of the supply chain.

Speaker 2

We saw logistics triple in less than 2 quarters in cost and we saw steel roughly double at that time period. Net tracker was largely protected then due to our mature sourcing experience with how we think about placing orders in a back to back way with customer orders. But really the logistics piece caught us and most companies really off guard. And so we developed this hybrid strategy for building out significant supply chain within key markets. We speak a lot on these calls about the U.

Speaker 2

S, but we've done a similar thing in India where we've built out 10 gigawatts of traffic capacity in India for that market. And in other markets around the world, we can either supply the local market with locally produced materials or we can export or do a hybrid of that. And so this is hard stuff, okay? It was very difficult for us to achieve 100% domestic content in the United States for deliveries that are happening early in the calendar year. But that's what that did was that provided us a natural hedge on logistics because we also optimize the location of our manufacturing partners with the market as we saw it and we set up multiple vendors.

Speaker 2

So we feel we're in a very strong position on that and to be able to give customers confidence and certainty and not have to go back with changes after contracts are being executed. Howard, can you speak to the market the commercial aspects of that question please?

Speaker 6

Yes. I just want to add also that when we reference higher supply chain costs, it's the 45x manufacturing credit for the U. S. Production is intended to put U. S.

Speaker 6

Production more competitive and on par with international imports. That's the purpose of it. So we do have higher costs in the U. S. And the 45x serves to offset that.

Speaker 6

So that's important in the context of that language in the shareholder letter. Chuck did mention that logistics costs, they peaked up some in the quarter. There's quarter by quarter variability in some of the supply chain costs. But we work very hard to lock in our supply chain costs with our customers because we're sharing visibility of their pipeline with our team and we're able to then forecast and lock in costs. So and on a commercial basis, we've proven that over time we can through cost reduction efforts, through design efforts, through R and D, we can reduce steel while still providing a high reliability, high quality product that we can stand behind, lowering costs, lowering price, increasing TAM and enabling the company to scale and drive costs down and open up the market more for solar to the point now where the last 2 or 3 years solar has been the number one source of new power generation in the world.

Speaker 6

So the formula is working. We're part of that as the market leader. We're pleased to celebrate our 9th year of market leadership. And we have time for one more question and appreciate your question, Sean. One more question, please.

Operator

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

Speaker 11

Hey, thanks everyone for taking the question today. I was looking at the backlog commentary that over $4,000,000,000 and 80 percent over 8 quarters and kind of thinking that maybe there was a little bit less coverage than I thought previously kind of in the near term. I was just curious if you could comment historically or kind of expected sort of intra year book to ship, what that maybe looks like? Because it seems like on any given year, you're also like booking and shipping a lot of revenue and just was trying to get a sense

Speaker 3

for what that could

Speaker 2

be. Yes. As we talked about in previous calls,

Speaker 6

most of the backlog is in the 2 to 5 quarter window and then the remaining above 5 quarters, we're giving slightly different color where 80% is over the next 8 quarters. You can still think of it as a long tail to the backlog. So as you get further out in 6, 7, 8, 9, 10 quarters out, it's a much lower percentage. So that should address your question.

Speaker 2

Great. Hey, I'd like to Okay, great. And thank you for that. Really appreciate all the shareholder or all the positive feedback on our shareholder letter. Our team worked really hard on this, going to this new format.

Speaker 2

If you give us more time for questions and provide better resolution, we think for folks to understand our business. We're excited about what's come this year and we look forward to advancing the clean energy transition with customers and partners. Thank you for joining our call today. Mary?

Speaker 1

Thank you. This concludes our earnings call.

Speaker 2

Thank you.

Operator

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

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Earnings Conference Call
Nextracker Q1 2025
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