Q2 2024 Nextracker Inc Earnings Call

Ladies and gentlemen, please remain holding the call will begin momentarily again, please remain holding the call will begin momentarily.

[music].

Good afternoon, everyone and thank you for standing by my name is Hannah and I'll be your conference operator today today's call is being recorded.

I would like to welcome everyone to next truckers second quarter fiscal year 2024 earnings call.

After the Speakers' remarks, there will be a Q&A session.

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.

Thank you and good afternoon, everyone and welcome to <unk> second quarter fiscal year 2024 earnings call.

I'm, Mary Lai, Vice President Investor Relations.

I'm joined by Dan Sugar, our CEO and founder.

Howard Wenger, our president and David <unk>, our CFO.

Following our prepared remarks, we will transition to our Q&A session.

As a reminder, there will be a replay of this call posted on the IR website, along with our slides.

Today's call contains statements regarding our business.

Performance and operations.

The impact of our business and industry that may be considered forward looking statements and such.

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 frenzy.

For more information on our risk factors and uncertainties. Please visit our IR website at investors docked next tracker dotcom switching.

Which includes our press release our SEC.

SEC filings and our most recent filings with the SEC.

This information is subject to change and we undertake no obligation to update these forward looking statements.

Please note we will provide non-GAAP measures on today's call.

All non-GAAP to GAAP reconciliation can be found in the appendix slide of today's presentation as well.

Financials section of our website.

And now I will turn the call over to our CEO and founder Dan.

Thank you Barry we're excited to have you join our team.

Good afternoon, welcome to our second quarter earnings call.

Before we cover the next chart you also thoughts on the Middle East tragedy.

Sounds good.

Violent events took place in Israel, a few weeks ago.

Subsequent walks of life in.

No worries.

Our Hearts go out to all those impacted.

Pete.

All people are free.

People are using renewable empowered world will contribute.

Unknown Executive: Ladies and gentlemen, please remain holding. The call will begin momentarily. Again, please remain holding. The call will begin momentarily.

No.

I will provide a high level summary of our Q2.

Your performance and an update on the separation.

This quarter as well.

How do you expect from next truck strong execution.

This marks our third consecutive quarter of double digit growth.

Q2, achieving record revenue record profit and record backlog.

Q2 strong performance with total revenue $573 million growing 23% year over year.

Driven by broad based growth in most markets.

Our adjusted EBITDA expanded to $110 million, a 164% increase compared to this quarter last year.

Profitability growth was primarily driven by strong execution strategic supply chain repositioning.

Unknown Executive: Good afternoon everyone and thank you for standing by.

Hannah: My name is Hannah and I will be your conference operator today. Today's call is being recorded. I would like to welcome everyone to next trackers, second quarter fiscal year 2024 earnings call.

Yes. Thank you.

Can you focus on pricing discipline.

David previously.

Financial result, this quarter exclude expected benefits from the higher rate 45 tax credits related to traffic components.

Unknown Executive: After this speaker's remarks, there will be a Q&A session.

Mary Lai: At this time for opening remarks, I would like to pass the call over to Miss Mary Lai, vice president of investor relations. Mary, you may begin. Thank you and good afternoon everyone. Welcome to next trackers, second quarter fiscal year 2024 earnings call. I'm Mary Lai, vice president of investor relations.

We also delivered another strong quarter of new contract bookings with strength in both the U S and international markets, resulting in a new record backlog.

Significantly over $3 billion.

You can find it on contracts with deposits.

Identify projects shifted.

Mary Lai: I'm joined by Dan Shugar, our CEO and founder, our wender of president and Dave Bennett or CFO. Following our prepare remarks, we will transition to a Q&A session. As a reminder, there will be a replay of this call post on the IR website, along with our slides and such.

With the strong performance in the first half of the year record backlog and demand momentum we are raising the midpoint of our annual revenue and profit guidance by 50 and $100 million respectively.

At midpoint, our new revenue target to three $5 billion and our EBITDA target was $415 million.

Mary Lai: Today's call contains statements regarding our business, financial performance and operations, including the impact of our business and industry that may be considered for missing statement and such statements involve risk and uncertainties that may call actual results that differ materially. This is a statement from our expectations. Those statements are based on current beliefs, assumptions and expectations and seek only out of the current age.

Fiscal 'twenty four.

Dave will expand on our quarterly results and annual guidance.

Earlier today.

Next tracker and flex, formerly announced their plans to fully separate next tracker, but yes.

We are grateful for our time with flex, which began in 2015 with net tracker was only two years old as a company.

Mary Lai: For more information on our risk factors and uncertainties, please visit our IR website at investors.nexttracker.com, which includes our press release, slides, SEC filing and our most recent filing with the SEC. This information is subject to change, and we undertake no obligations to update these four little statements. Please note, we will provide non-gap measures on today's call. The full non-gap debt reconciliation can be found in the appendix slides of today's presentation, as well as on the financial section of the IR website.

Our relationship began with prior to that with flex serving as a contract manufacturer.

Alright.

Onyx in service, which they continue to this day.

While we have always operated our own supply chain and operations.

Helped us considerably, especially in these early years maturing our business processes.

Supporting our expansion into emerging markets.

Together, we accomplished our objectives of supporting customers in many global markets, creating extraordinary shareholder value and growing next tracker as the global market leader of trackers for eight consecutive years. According to third party independent data from Wood Mackenzie.

Dan Shugar: And now I will turn the call over to our CEO and founder, Dan. Thank you, Mary. We're excited to have you join our team. Good afternoon. Welcome to our second quarter earnings call.

We anticipate completing the separation in our fiscal fourth quarter, ending March 31, 2024 subject to a number of conditions.

Dan Shugar: Before we cover next tracker, we offer thoughts on the Middle East tragedy. We'll profoundly send and distress by the violent events that took place in Israel a few weeks ago. And the subsequent walks of life and tensions in Middle East are also out to all of the impact.

We are energized to start our next chapter and believe this is the appropriate time to separate.

With next tracker expecting you achieved annual revenue of over $2 3 billion. This fiscal year operating as a fully independent company will allow us to make additional strategic investments.

Dan Shugar: Constanthropy for all people are free and safe. We believe our vision of a renewable powered world will contribute to our peace and stability.

<unk> expanding our talented team and pursue the market opportunities ahead.

I'd like to recap, our innovation history and plan backed by over 400 patents issued or pending.

Dan Shugar: I will provide a high level summary of our future performance and an update on the separation from Black. This quarter is what we've come to expect from Nextracker, strong execution. The smarts are third consecutive quarters of double-digit growth with Q2 achieving record revenue, record profits and record backlog. Q2's strong performance with total revenue of 573 million, growing 23% year-over-year, was given by broad-based growth in most markets. Our adjusted at the dot expanded to 110 million, a 164% increase compared to this quarter-level year.

Since founding this track we have revolutionized the tracker space with a suite of innovations that we're first to market <unk> to scale, including.

The launch of itself balanced self grounded insult Howard tracker system on the Nx horizon flagship product in 2013, and 14 of which more than 2 million trackers have been shipped.

Our proprietary to capture software launch in 2017, providing owners enhanced energy yield and over 200 projects installed.

And navigator <unk> launch in 2020, providing owners operating benefits of higher levels of control and lower risk for power plant owners and operators.

Dan Shugar: Profitability growth is primarily driven by our strong execution, strategic supply chain, repositioning, capacity expansion and continued focus on pricing discipline. Estimated previously, our financial results as quarter exclude expected benefits from the IRA 45X tax credits related to track performance. We also delivered another strong quarter of new contract bookings with strength in both the US and international markets, resulting in new record backlog, which is significantly over $3 billion to find the fund contracts with the profits that identify projects in SHIC days.

First tracker tail protection system.

<unk> deployed over two years ago.

Horizon Xdr, the industry's most deployed altering solar tracker first delivered in 2018 sold more than 70 utility scale projects to date.

Dan Shugar: With the strong performance in the first half of the year, record backlog and demand momentum, we are raising the midpoint of our annual revenue and profit guns by 50 and 100 million, respectively. At midpoint, our new revenue target is $2.35 billion, and our new EBITDA target is $415 million for the full fiscal 24.

Just last month, we launched our next generation technology suite with new innovation.

The Tech suite provides next generation functionality and value health protection undulating terrain.

Fast changing atmospheric conditions Howard will repeat this infection.

Based on our strong profitability growth and liquidity position, we have significantly increased our R&D investments.

Key element of Nick's trackers itself.

Innovation and customer value.

We believe the additional R&D investments will accelerate the time to market for new products and allow us to continue being a leader in the industry.

We already cover that we have raised our revenue midpoint of profitability guidance for the second consecutive quarter.

Unknown Executive: Gave will expand on our quarterly results and annual guidance.

Dan Shugar: Earlier today, both Next Tracker and Flex formally announced their plans to fully separate Next Tracker and Flex. We are grateful for our time with Flex, which began in 2015, when Next Tracker was only two years old as a company. Our relationship began with Flex prior to that, with Flex serving as a contract manufacturer of our proprietary electronics in service, which we continue to do today. While we've all incorporated our own supply chain and operations, Flex helped us consider what, especially in the early years, entering our business processes and supporting our expansion into emerging markets.

And one of the contributing element is a structural enhancement to our business, including supply chain retooling with a unique and Serge regional manufacturing model, which our team is executing ahead of schedule in major markets, including the U S, Brazil, India and Australia.

We are building out our search to meet local demand with in country factory capacity and Serge to support demand in other markets to arbitrage commodity currencies supply disruptions and demand spike as conditions warrant.

We initiated these changes early in the pandemic completing significant due diligence supplier development talent and IP investments and implemented major process improvements across our systems logistics and import export procedures and enhanced contract terms.

Dan Shugar: Together, we've accomplished our objectives of supporting customers in many global markets, creating extraordinary shareholder values, and growing Next Tracker as the global market leader of trackers for eight consecutive years. According to 35 independent data from Wooden County.

This was a strategic undertaking and our multi year transformation.

The result is that we re architected, our supply chain and improved our cost structure, our on time delivery of material.

Dan Shugar: We anticipate completing the separation in our fiscal fourth quarter and in March 31st, 2024, subject to a number of conditions. We are energized to start our next chapter and believe this is the appropriate time to separate. With Nextracker, expecting to achieve annual revenue of over 2.3 billion this fiscal year, operating as a fully independent company will allow it to make additional strategic investments, continue expanding our talent and team and pursue the market opportunities ahead.

<unk> to our customers' requirements and we drove margin expansion.

I will provide more details on our Q2 expansion progress in North America, India next.

Which includes two public dedication.

We celebrated the opening of our new electronics manufacturing line without so fly ash.

Best of class facility is located just a few miles from our headquarters in Silicon Valley.

This partnership is producing our patent itself power controller and related technology further deepening the content who is building the U S.

Dan Shugar: I'd like to recap our innovation history and plans, backed by over 400 patents issued in pending. From founding Nextracker, we have revolutionized the tracker space for the suite of innovation that were first market, annual first scale, including the launch of the self-balanced, self-grounded and self-powered tracker system on the NX Verizon flagship product in 2013 and 2014, of which more than 2 million trackers have been shipped. Our proprietary True Capture software launch in 2017, providing owners and enhanced energy yield on over 200 projects installed today.

For our customers.

We also celebrated the opening of our Las Vegas, Nevada factory with unit Max.

They will produce our critical steel components.

In total we now have over 15 U S suppliers facilities with dedicated next tracker manufacturing loans.

Steve presence, including Texas, Arizona, Pennsylvania, Illinois, Tennessee, California, and Nevada, and I would like to thank our teams for our tremendous progress the last few years.

On our last earnings call.

Dan Shugar: Next navigator control system is launching 2020, providing owners operating benefits, a higher level of control and lower risk for power plant owners and operators. The first tracker, Hail Protection System, first deployed over two years ago. NX Verizon XDR, the industry's most deployed, all-terrain solar tracker, first delivered in 2018, sold to more than 70 utility scale projects to date.

We announced our contracted capacity in the U S exceeded 25 gigawatts.

In India, we have achieved 10 gigawatts of annual manufacturing capacity with over 80% of our solar tracker content for MBS made in India.

Customer confidence of our supply position and cost structure has enabled five gigawatt contracts under fulfillment for operational in India.

Now I'll turn the call over to Howard Wenger, our president to expand on our commercial progress in product innovation.

Dan Shugar: Just last month, we launched our next generation technology suite with 2 new innovations. The tech suite provides next generation functionality and value in Hail Protection, underlating terrain and fast-changing atmospheric conditions, powerful producers and such. Based on our strong profitability growth and liquidity position, we have significantly increased our R&D investments. A key element of next tracker success is product innovation that has customer value. We believe the additional R&D investments will accelerate the time-to-market for new products and allow it to continue being a leader in the industry.

Thank you Dan we are indeed pleased with our team's solid execution in performance as noted our success has been driven by innovation and our differentiated product offering by an unwavering commitment to our customers and by our competitive drive to win and make solar powered mainstream.

In Q2, we had continued wins in the marketplace and we unveiled a trifecta of three new and key product innovations let.

Let me start with sales and a business update.

I am pleased to report we had another strong quarter for new business in both the U S and international markets, increasing our backlog quarter over quarter to a new record of significantly over $3 billion.

Dan Shugar: We already covered that we have raised our revenue midpoint of profitability guidance for the second consecutive quarter, and that one of the contributing elements is a structural enhancement to our business, including supply chain and tooling, with a need and surge regional manufacturing model, which our team is executing hedge schedule in major markets, including the US, Brazil, India, and Australia. We are building out our meet and surge to meet global demand with in-country factory capacity, and surge to support demand in other markets to arbitrage commodity current needs supply disruption and demand supply as conditions warrant. We initiated these changes growing in the pandemic, completing significant due diligence for fire development, talent and IT investments, and implemented major process improvements across our systems, logistics, and import export procedures and enhanced contracts.

Let's look a bit closer at the U S market, which remains our largest segment with approximately two thirds of our total Q2 revenue.

We continue to have a healthy combination of new EPC contracts with new and repeat customers and additional volume commitment agreements our BCA is.

We signed several new VCA contracts and the corner, one of which we publicly announced for two gigawatts with Clearway Energy group.

Solar developer and power plant owner.

I'm pleased to report we continued to make significant strides in our EPC and DCA programs further developing and solidify long term relationships with developers power plant owners and EPC.

Furthermore, we believe this approach reduces risk in our business and we believe it is a competitive advantage that plays to our strengths in technology execution and customer focus and company assets.

Dan Shugar: This was a strategic undertaking and a multi-year transformation. The result is that we re-architected our supply chain, improved our cost structure, our on-time delivery of materials, sequenced to our customer's requirements, and we drove margin expansion.

I would like to reiterate a couple of points, we have made previously regarding <unk>.

BCA typically carries a two year term and has a specific list of.

Multiple projects that we are committed to supply. These specific projects are included in our backlog as they are contractually binding with elements such as pricing tied to project design.

Dan Shugar: I will provide more details on our key to expansion progress in North America and the next, which includes two public dedication. We celebrated the opening of a new electronics manufacturer in line without a flash. At the flash facility located just a few miles from our headquarters in Silicon Valley, this partnership is producing a patented self-tower controller and related technology further deepening the content we're building in the US for our customers.

Two way retail vs for liquidated damages for noncompliance.

And like our EPC agreements have cash deposits or other financial securities.

<unk> model provides greater visibility and diversification and is working extremely well delivering benefits to all of our customer partners.

Which takes me to the inflation reduction act or by R&D as we stated on our last earnings call. We firmly believe the 30% ITC component of IRI is a key driving force for utility scale solar demand.

Dan Shugar: We also celebrated the opening of Las Vegas Nevada Factory with Unimax, where they will produce a critical steel component. In total, we now have over 15 US supply facilities that dedicated Nextracker Manufacturing on with state presence, including Texas, Arizona, Pennsylvania, Illinois, Tennessee, California, and Nevada, and I would like to thank our teams for our tremendous progress in the last few years. On the last rune's call, we announced our contracted capacity in the US exceeded 25 gigawatts.

Case with.

With 30% ICC is a well understood and well formed consequential policy that has no domestic content requirements.

That said delivery.

Delivering domestic content to enable the capture of the 10% bonus ITC for power plant owners remains a priority for <unk>.

As Dan mentioned in his prepared remarks, we have been successful in building out our U S supply chain and deepening our content by adding local manufacturing electronic controllers and other components.

Dan Shugar: In India, we have achieved 10 gigawatts of annual manufacturing capacity, with over 80% of our solar tracker content for India, made in India. Customer confidence of our supply position and cost structure has been able 5 gigawatts contracts under fulfillment for operational and media.

It is important to note that treasuries guidance amended certain clarifications that impact how to precisely calculate domestic content percentage levels for trackers.

Therefore, we believe the responsible thing to do is work through domestic content levels and diesel uncertainties with our customers rather than publicly announced specific domestic content percentages.

Howard Wenger: Now, I'll turn the call over to Howard Wenger, our president, to expand on our commercial progress and product innovation. Howard, thank you, Dan. We are indeed pleased with our team's excellent execution and performance. As noted, our success has been driven by innovation and our differentiated product offering, by an unwavering commitment to our customers, and by our competitive drive to win and make solar power mainstream.

Additional clarification on open questions impacting the calculation.

Please note that we feel very competitive with our domestic manufacturing position and trajectory as validated by customer feedback and our continued growth.

In summary, the U S market continued to be robust in the quarter for next tracker and the outlook is positive.

Howard Wenger: In Q2, we have continued wins in the marketplace, and we unveiled a tripe theft of three new and key product innovations.

Now, let's move to the international business in.

Howard Wenger: Let me start with sales and a business update. From pleased to report, we have another strong quarter for new business in both the US and international markets, increasing our backlog quarter to a new record of significantly over $3 billion. Let's look a bit closer at the US market, which remains our largest segment with approximately two thirds of our total Q2 revenue. We continue to have a healthy combination of new EPC contracts with new and repeat customers, and additional volume commitment agreements, or BCA's.

In Q2, we saw continued demand strength distributed across multiple continents with new wins in Asia, Oceania Middle East Africa, Canada, and Latin America with.

Let's focus on one, particularly exciting international market, India, which is the third largest consumer of electricity in the world behind China, and the United States and the world's fifth largest economy earlier.

Earlier this year.

The government of India announced a national target of 500 Gigawatts of renewable energy capacity by 2030.

Howard Wenger: We find several new BCA contracts in the quarter, one of which we publicly announced, for two gigawatts, with Clearway Energy Group, a US solar developer and power plant owner. From pleased to report, we continue to make significant strides in our EPC and BCA programs for their developing and solidifying long-term relationships with developers, power plant owners, and EPC. Furthermore, we believe this approach reduces risk in our business, and we believe it is a competitive advantage that plays to our strengths in technology, execution, customer focus and company assets.

Each would reduce the carbon emissions intensity of its economy by 45%.

There are less than 200 gigawatts of renewables installed to date in India. Therefore, there is a push to install over 300 gigawatts of renewables in the next seven years.

This renewal energy pushed by the government together with continued solar energy cost reduction is causing an acceleration of demand for solar power.

We believe next tracker is very well positioned in India to take advantage of these recent developments.

In the quarter, we announced that we have achieved 10 gigawatts of annual domestic manufacturing capacity, 80% local content that is made in India.

Howard Wenger: I would like to reiterate a couple of points we've made previously regarding BCA's. The BCA typically carries a two-year term and has a specific list of multiple projects that we are committed to supply. These specific projects are included in our project as they are contractually binding with elements such as pricing-type project design, two-way breach LBs for liquidated damages for non-compliance, and like our EPC agreements have cash deposits for other financial securities.

In addition, <unk> has over five gigawatts of systems under fulfillment are already operational in.

This combination of a robust localized supply chain and being the leading tracker platform in India provides next track or the ability to mobilize and surface graphically growing.

Very significant market.

Finally, rounding out our review of demand. We are pleased that true capture our intelligent self adjusting tracker software continues to gain momentum in Q2.

Howard Wenger: The BCA model provides greater visibility and diversification and is working extremely well delivering benefits to all of our customer partners, which takes me to the Inflation Reduction Act for IRA. As we stated on the last range call, we firmly believe that the 30% ITC component of IRA is a key driving force for utility scale solar demand in the United States. With 30% ITC, they will understand and will form consequential policy that has no domestic content requirements.

We're seeing adoption, increasing and Q2 volume was up quarter over quarter and year over year.

True capture provides typically 1% to 3% annual energy production improvement for the entire power plant and we have seen annual gains. Besides 6%. This is a material benefit for power plant owners, enabling and further preference for our trackers. In addition to being a feature we continue to monetize.

We believe our two capture software platform leads the industry with over 200 projects deployed and validated by multiple leading independent engineering firms with real data customers can trust.

Howard Wenger: That said, delivering domestic content to enable the capture of the 10% bonus ITC for power plant owners remains a priority for Nextracker. As Dan mentioned in his prepare remarks, we have been successful building out our U.S, supply chain and deepening our content by adding local manufacturing electronic controllers and other components. We think it is important to know that Treasury's guidance omitted certain clarifications that impact how to precisely calculate domestic content percentage levels for trackers.

Now, let me shift gears to products and innovation.

Howard Wenger: Therefore, we believe the responsible thing to do is work through domestic content levels and these uncertainties with our customers rather than publicly announce specific domestic content percentages, sending additional certification on open questions impacting the calculation. We know that we feel very competitive with our domestic manufacturing position and trajectory as validated by customer feedback and our continued growth.

We saw many of you at the <unk> conference held in Las Vegas in September.

I'll quickly recap, our new innovations announced there all of which leverage inherent differentiated features of next trackers flagship Nx horizon Smart solar tracking system first we announced a new innovation and product set called hail crowd.

On our Haynesville technology first deployed over two years ago.

<unk> enables all solar panels to be simultaneously and quickly so when theres, a hail event that threatens the solar field.

Pro also comes equipped with an automatic stowing future that links to real time and forecast the national weather service data, enabling an auto command for the entire solar fields go into protective selling mode and advance of approaching storms.

Our Hale pro system can still panels up to four times faster than standard trackers and do so even very power outages.

Howard Wenger: In summary, the U.S, market continued to be robust in the order for Nextracker and the outlook is positive.

We also announced our new <unk> Pro 75 solution, which enables a much steeper stone angle of 75 degrees.

Howard Wenger: Now, let's move to the international business. In Q2, we saw continued demand strength distributed across multiple continents with new wins in Asia, Oceania, Middle East, Africa, Canada, and Latin America, which focus on one particularly exciting international market in India, which is the third largest consumer of electricity in the world behind China and the United States and the world's fifth largest economy. Earlier this year, the government of India announced a national target of 500 gigawatts of renewable energy capacity by 2030, which would reduce the carbon emissions intensity of its economy by 45%.

Our standard spill angle of 60 degrees.

<unk> 75 is designed for locations subject to extreme scale, which we believe is becoming more prevalent as whether it becomes more severe over time.

The second product innovation, we announced is a doubling of the capability of our Nx horizon Xdr extreme train following tracker, we first shipped X TR in 2018 and to date, we have sold to over 70 utility scale projects at our clients that are using this technology.

With the introduction of our new ex tier one five we significantly reduce or even eliminate the need for earthworks, even steeper and more unrelated sites ex tier one five can lower cost and accelerate deployment. It also reduces the environmental impact, which can use the permitting process for new projects.

Howard Wenger: There are less than 200 gigawatts of renewables installed today in India. Therefore, there is a push to install over 300 gigawatts of renewables in the next seven years. This renewable energy pushed by the government together with continued solar energy cost reduction is costing acceleration of demand for solar power. We believe Nextracker is very well positioned in India to take advantage of these recent developments. In the quarter, we announced that we have achieved 10 gigawatts of annual domestic manufacturing capacity with 80% local content that is made in India.

Third we introduced the expansion of our true capture software capabilities with the new innovation, we call zone, all the fields with.

Howard Wenger: In addition, Nextracker has over five gigawatts of systems under fulfillment or already operational in India. This combination is a robust localized supply chain and being the leading tractor platform in India provides Nextracker the ability to mobilize and serve this rapidly growing and very significant market.

This new traffic control mode enhances energy production during rapidly changing southern conditions, primarily driven by rolling cloud cover.

Utilizing new control algorithms and real time hardware measurement capability tracker blocks are adjusted according to variations in sunlight intersecting clouds to increase annual energy King and lower the <unk> project.

We are excited by the early customer interest in these innovations and we believe they further enhance our technology lead and value proposition. They also expand the use cases for next tracker and effectively increase our Tam.

Howard Wenger: Finally, grounding out our review of demand, we are pleased that true capture, our intelligent self-adjusting tractor software, continued to gain momentum in Q2. We are seeing adoption increasing and Q2 volume was up quarter over quarter and year over year. True capture provides typically one to three percent annual energy production improvements to the entire power plant and we have seen annual gains the highest six percent. This is a material benefit for power plant owners enabling a further preference for our tractors in addition to being a feature we continue to monetize. We believe our true capture software platform leads the industry with over 200 projects deployed and validated by multiple leading independent engineering firms with real data that customers can trust.

In summary, we are very proud of the team's execution.

We carry significant momentum into the second half of our fiscal year.

No.

Let me turn the call over to Dave <unk>, Our Chief Financial Officer to review financials and to further discuss guidance Dave.

Dave.

Thank you Howard before I start I'd like to remind everyone that all references to financial metrics, except for revenue or non-GAAP adjusted and all growth rates are year over year, unless otherwise stated.

We completed our first half of fiscal year 2024 with strong execution.

<unk> revenue for Q2 posted above our expectations at $573 million up 23% year over year.

Howard Wenger: Now, let me shift gears to products and innovation. We saw many of you at the RE plus conference held in Las Vegas in September. I will quickly recap our new innovations announced there all of which leverage inherent differentiated features of Nextracker's flagship NX Horizon smart solar tracking system.

Both the U S and the rest of the world equally drove that increase fourth quarter mix was 67% and 33% respectively.

As expected we saw a sequential uptick to U S revenue, primarily due to projects generally progressing on schedule and as planned and we saw improvement in channel availability.

Howard Wenger: First, we announced a new innovation and products set called HALEPRO building on our HALEPRO technology first deployed over two years ago. HALEPRO enables all solar panels to be simultaneously and quickly snow when there is a hail event that threatens the solar field. HALEPRO also comes equipped with an automatic snowing feature that links to real time and forecast the national weather service data enabling an auto command for the entire solar field to go into protective snowing mode in advance of approaching storms.

There is no change to our projected full year revenue mix, we still expect the <unk> to be between 60% to 70% of total revenue.

Adjusted EBITDA for Q2 was $110 million this.

This was an increase of $68 million were 164% growth.

Howard Wenger: Our HALEPRO system can fill panels up to four times faster than standard tractors and do so even during power outages. We also announced our new HALEPRO 75 solution which enables a much steeper snow angle of 75 degrees versus our standard snow angle of 60 degrees. HALEPRO 75 is designed for location subject to extreme hail which we believe is becoming more prevalent as weather becomes more severe over time.

Set a new record for the company.

Project gross margins expanded in Q2 and are now tracking in the mid <unk>.

Our Q2 EBITDA margin of 19, 2% with October 1000 basis.

The prior year and marks the sixth consecutive quarter of sequential margin improvement.

As Dan and hard provided in their remarks.

It means structural enhancements to our business that include expanding our global supply chain and allows for localized content and flexibility servicing our customers.

This multiyear transformation, along with our continued pricing discipline and improve our margin structure.

Howard Wenger: The second product innovation we announced is a doubling of the capability of our NX Horizon XTR extreme rainfall and tracker. We first shipped XTR in 2018 and today we have sold to over 70 utility scale projects at power plants that are using this technology. With the introduction of our new XTR 1.5, we significantly reduce or even eliminate the need for earthwork on even steeper and more unsolating sites. XTR 1.5 can lower cost and accelerate times deployment. It also reduces the environmental impact which can ease the permitting process for new projects.

The primary drivers supporting a record profit generation in Q2.

Adjusted free cash flow was $26 million for the corner and $251 million for the first half of fiscal 'twenty four driven by strong net working capital management.

Customer deposits from strong bookings and higher EBITDA.

Networking capital at the end of Q2 was less than 10% of annualized revenue, which.

Which is favorable to our expected 10% to 15% level.

To support our planned growth in the next two quarters, we continue to expect to fund our networking capital, which may temporarily challenged free cash flow.

Howard Wenger: Sir, we introduced the expansion of our true capture software capability with the new innovation we call SONAL DEFUSE. This new Trapper control mode enhances energy production during rapidly changing sudden conditions primarily driven by rolling cloud cover. Utilizing new control algorithms, real-time hardware measurement capability, Trapper blocks are adjusted according to variations in sunlight, intercepting clouds to increase annual energy gain, and lower the LCOE over project. We are excited by the early customer interest in these innovations and we believe they further enhance our technology leads and value proposition. They also expand the use cases for next tracker and effectively increase our tan.

Our high quality balance sheet cash flow generation and ample liquidity remain competitive advantages.

We closed the quarter with more than $370 million in total cash.

Which is greater than two times, our total debt of approximately $150 million.

Total liquidity at the end of Q2 with nearly $900 million, which includes cash and a 500 million undrawn revolver.

We continue to operate with a debt to EBITDA ratio of less than one.

With no significant debt maturity until fiscal 2028.

Let me now transition to the <unk> 45 benefit considerations for next time.

Howard Wenger: In summary, we are very proud of the team's execution and we carry significant momentum into the second half of our fiscal year.

We have analyzed the legislative language extensively we're comfortable with it.

And believe there is a high correlation for our torque tools and fasteners to qualify under 45.

Dave Bennett: Now, let me turn the call over to Dave Bennett, our Chief Financial Officer, to review financials and to further discuss guidance. Dave? Thank you Howard.

We're also in a strong position to contribute meaningfully to domestic content.

We have great relationships and arrangements with top vendors in the industry from our standpoint, we are well positioned and confident that the expected 45 X IRI contribution will be meaningful to our financial.

Dave Bennett: Before I start, I'd like to remind everyone that all references to financial metrics, except for revenues, are non-gap, adjusted, and all growth rates are year over year, unless otherwise stated. We completed our first half of fiscal year, 2024, with strong executions. Record revenue for Q2 closed above our expectations at 573 million, stopped 23% year over year. Both the US and the rest of the world equally drove that increase, for a quarter of a minute with 67% and 33% respectively.

Subject to adequate clarifying guidance from the Treasury Department and full alignment with our advisors as to the accounting treatment.

Consistent with last quarter.

If not factored in any expected hiring 45 ex profit projects into.

Into our guidance at this time.

Let's walk through a few considerations that too, but we are taking this position.

First we need further clarification on the transferability criteria.

Dave Bennett: As expected, we saw a sequential object to US revenues primarily due to projects generally progressing on schedule and at plans. And we saw improvements in channel availability. There is no change to our project's full year revenue mix. We still expect the US to be between 60% to 70% of total revenue. Adjusted EBITDA for Q2 was 110 million. This was an increase of 68 million for 164% growth and set a new record for the company.

Second the timing of when our vendors can realize their 45 ex credit is expected to vary.

Third the <unk>.

<unk> economic benefit derived from the 45 ex credit through the sharing percentage with our vendors will be reviewed on a contract by contract basis.

<unk> mechanics, and timing of receipt may also vary.

Lastly, our objective is to bring incremental demand for our high performing vendors.

Optimize margin and reduce the cost of materials, Vienna 45 ex credit.

As a result, we expect our fiscal year 'twenty four to be a transitional year as it relates to the impact of this 45 X correct.

Dave Bennett: Project growth margin expanded in Q2 and are now tracking in the mid-point. Our Q2 EBITDA margin of 19.2% was up to over a thousand basis points from the prior year and marks the sixth consecutive quarter of sequential margin improvements. As Dan and Lauren provided in Merrimers, we have made structural enhancements to our business that include expanding our global supply chain that allows for localized content and flexibility, servicing our customers. This multi-year transformation, along with our continued pricing, as improved our margin structure, and was the primary driver supporting our record profit generation in Q2.

Before I move on to guidance, let me speak briefly about the expected separation from flat.

As Dan noted earlier today, both next tracker and flex formerly announced the plan to spin off all flex its remaining interest in <unk>.

To the <unk> shareholders.

As stated in the press release.

The separation transaction is expected to close in our fiscal fourth quarter ended March 31 2024.

But remains subject to a number of conditions and no assurance can be given that the separation will in fact occur.

Earlier today, we filed a registration statement on form S. Four with the SEC, which includes additional information on the spin off.

Dave Bennett: Adjusted to three cashflow with 26 million for the corner, and 251 million for the first half of fiscal 24, given by strong networking capital management, increased customer deposits from strong bookings and higher EBITDA. Networking capital at the end of Q2 was less than 10% of annualized revenue, which was favorable to our expected 10 to 15% level. To support our planned growth in the next two quarters, we continue to expect to fund our networking capital, which made temporarily challenged free cashflow.

The separation is expected to have an impact on our go forward tax rate that I'll speak to more in my guidance for months.

The transaction will significantly increase our public float we do not anticipate a material impact to our diluted EPS.

Now turning to comments for Q3 and full year fiscal 2000 <unk> guidance.

As always we encourage you to evaluate next tracker on an annual basis to reflect the nature of our large scale projects.

Therefore, we will not provide quarterly guidance, but will provide Q3 comments as guideposts.

Dave Bennett: Our high-quality balance sheet, cashflow generation, and ample liquidity remained to competitive advantages. We closed the quarter with more than 370 million in total cash, which is greater than two times our total debt of approximately 150 million. Total liquidity at the end of Q2 was nearly 900 million, which includes cash and a 500 million dollar unbrawn revolver. We continue to operate with a debt to EBITDA ratio less than one, with no significant debt maturity until fiscal 2028.

Our Q3 revenue growth is expected to be approximately 20% year over year and.

And based on the current timing of projects due for revenue is expected to have a larger contribution in Q3.

Our revised full year fiscal 2024 guidance is as follows.

With a record first half and our anticipation of a strong second half.

We have raised the midpoint of our full year revenue guidance by $50 million.

New range is now two three to $2 4 billion at the midpoint, we're expecting 24% growth year over year.

Dave Bennett: Let me now transition to the 45X benefit considerations for Nextracker. We have analyzed the legislative language extensively, we're comfortable with it, and believe there's a high correlation for our twerk tunes and fasteners to qualify under 45X. We are also in a strong position to contribute meaningfully to domestic content. We have great relationships and arrangements with top vendors in the industry. From our standpoint, we are well positioned and confident that the expected 45X IRA contribution will be meaningful to our financials. So just to adequately clarify and guide us from Treasury Department and full alignment with our advisors as to the accounting treatment.

We have raised our EBITDA guidance range meaningfully by $100 million.

The updated range is now $390 million to $440 million.

At the midpoint, we're expecting nearly 100% growth year over year.

GAAP EPS is expected to be between $1 60 to $1 80 per share and includes approximately 35.

Related to stock based compensation and intangible amortization.

Adjusted EPS is expected to be between $1 95 to $2 15 per share based on 148 million weighted average shares outstanding.

Dave Bennett: Consistent with last quarter, we have not factored in any expected IRA 45X profit projection into our guidance at this time.

Interest and other expense is expected to be between $15 million to $20 million.

Still expect the adjusted income tax rate to range between 15% and 20% for the full year and includes a slightly higher expected rate post separation from flat.

Dave Bennett: Let's walk through a few considerations that to why we are taking this decision. First, we need further clarification on the transferability criteria. Second, the timing of when our vendors can realize their 45X credit is expected to vary. Third, the expected economic benefit derived from the 45X credit through the sharing percentage with our vendors will be reviewed on a contract by contract basis. Terms, mechanics, and timing of receipt may also vary. Lastly, our objective is to bring incremental demand to our high-performing vendors, optimize margins, and reduce the cost of material via the 45X credit. As a result, we expect our fiscal year 24 to be a transition year as it relates to the impact of this 45X credit.

I will now turn the call back to Dan for concluding remarks.

Dan.

We achieved record financial results through innovation.

Our global supply chain, a multiyear strategic supply chain transformation and our relentless focus on customer service.

Our performance is supported by our deep industry domain expertise and our trusted customer relationships, we understand the needs of developers independent power producers and contractors.

<unk> of what we've accomplished as a company in fact DSS Chronicle recently recognized next tracker with the top workplaces in 2023 award.

Dave Bennett: Before I move on to guidance, let me speak briefly about the expected separation from flex. As Dan noted earlier today, both next tracker and flex formally announced the plan to spin off all flexes remaining interest in next track, to the Flex Shareholder.

To be leading and working with a group of technology innovators. We now look forward to your questions. Let me pass the call back to the operator.

Thank you.

If he would like to ask a question. Please press star followed by one on your telephone keypad.

Dave Bennett: As stated in the press release, the separation transaction is expected to close in our fiscal quarter in the March 31, 2024, but remains subject to a number of conditions and no assurance can be given that the separation will impact a curve. Earlier today, we filed a registration statement on form S-4 with the FCC, which includes additional information on the separation is expected to have an impact on our goal forward tax rate that I'll speak to more in my guidance remarks. The transaction will significantly increase our public flow, but we do not anticipate a material impact to our diluted BTS.

If for any reason you would like to remove that question. Please press star followed by two.

Again to ask a question press star one.

Kindly ask participants to limit themselves to one question today.

As a reminder, if you are using a speaker phone. Please remember to pick up your handset before asking a question.

We will pause here briefly ask questions are registered.

Our first question is from the line of Mark Strouse with Jpmorgan. Please proceed.

Great. Good afternoon, and thank you all very much for taking our questions and congrats on the strong print here.

Dave I wanted to start with the margins.

Dave Bennett: Now, turning the comments for Q3 in full year fiscal 24 guidance.

So since the IPO, we've been we've been kind of conditioned to think about this business as kind of a mid teen EBITDA margin business. Your guidance guidance is kind of indicating closer to high teens now just kind of the the.

Dave Bennett: As always, we encourage you to evaluate Nextracker on an annual basis to reflect that the nature of our large scale projects. Therefore, we will not provide quarterly guidance, but we will provide Q3 comments as guidelines. For Q3, revenue growth expected to be approximately 20% year over year, and based on the current timing of projects, Q4 revenue is expected to have a larger contribution than Q3.

The reasons that you stated for the Guy it sound more structural in nature, but just wanted to confirm if thats kind of a new base level of margins, we should be expecting with obviously with the caveat that there's quarterly fluctuations.

Mark Thanks for the question, yes confirmed that.

Dave Bennett: A revised full year fiscal 2024 guidance is as follows. With a record first half and our anticipation of a strong second half, we have raised the midpoint of our full year revenue guidance by 50 million. The new range is now 2.3 to 2.4 billion. At the midpoint, we are expecting 24% growth year over year. We have raised our events that guidance range meaningfully by 100 million. The updated range is now 390 to 440 million.

If you recall we've been messaging.

Last couple of quarters, when we've had execution upside and the drivers behind those after printing a couple of quarters Q1 dollars seven over 17% in this current quarter over 90%.

We're confident and committed in the higher margin structure. It was driven by that global supply chain.

In our investments throughout the business to ensure that higher margin profile.

Dave Bennett: At the midpoint, we are expecting nearly 100% growth year over year. Gap BTS expected to be between $1.60 to $1.80 per share, and includes approximately 35 cents related to stock-based compensation and intangible amortization. Adjusted EPS is expected to be between $1.95 to $2.15 per share based on 148 million weighted average share of savings. Interest and other expense is expected to be between 15 to 20 million. We still expect the adjusted income tax rate to range between 15% and 20% for the full year, and includes a slightly higher expected rate, both separation from wealth.

Thank you.

Our next question is from the line of Jon Windham with UBS you May proceed.

Okay perfect. Thanks for having me on.

I was wondering if could just any comments you could share about conversations you're having with customers over the last couple of months I would say the volatility in interest rates is a concern for people. So just any color you have on how those conversations have evolved over the last couple of months. Thanks really appreciate it.

This is Howard Wenger.

For the question.

Well.

The outlook is very positive.

And we continue to have very strong demand in the United States, which is two thirds of our business as well as international.

Dan Shugar: I will now turn the call back to Dan, who are concluding remarks. Dan, we achieved record financial results through innovation, a global supply chain, a multi-year strategic supply chain transformation, and our relentless focus on customer service. Our performance is supported by our deep industry domain expertise and our trusted customer relationships. We understand the needs of developers, independent power producers, and contractors.

Regarding.

Interest rates.

It is a topic, but what we're hearing is that there are a number of levers that can accommodate higher interest rates, including the benefit of a 30% tax credit.

Where a lot of these projects that were developed were under the assumption of a.

Much lower tax credits on the on the order of 10% even in many cases and then you've got the bonus ITC.

Dan Shugar: I'm proud of what we've accomplished as a company. In fact, the ESF Chronicle recently recognized NexTracer with the top four places in 2023, to honor to be leading and working in the group of technology innovators.

Yes, there is.

Really very strong demand for clean energy in the U S and electric demand is increasing.

And where the electric demand is increasing such as data centers for example, clean.

Unknown Executive: We now look forward your questions. Let me pass the call back to the operator. Thank you. If you would like to ask a question, please press star followed by one on your telephone keypad. If for any reason you would like to remove that question, please press star followed by two. Again, to ask a question, press star one. We kindly ask participants to limit themselves to one question today. As a reminder, if you're using a speaker phone, please remember to pick up your handset before asking our question. We will pause here briefly as questions are registered.

Clean energy is something Thats very much sought after which means a higher potentially higher power purchase agreement price. So those are just a few of the levers that can accommodate a higher interest rate, but certainly it's something that.

<unk> is being watched closely thanks for the question.

Thank you okay, great yourself.

Our next question is from the line of Julien Smith with Bank of America. Please proceed.

Hey, good afternoon, guys just to clarify the last couple of real quickly first just in terms of project delays.

Mark Strouse: Our first question is from the line of Mark Strouse with JP Morgan, please proceed. Great. Good afternoon.

Do you see what youre, saying here fairly constructive through the course of the year can you clarify are you seeing churn in your backlog here in terms of projects moving in and out or are you seeing fairly consistent schedule is executed here further reason that.

Unknown Executive: Thank you all very much for taking our questions and perhaps on a strong print here.

Dave Bennett: Dave, I wanted to start with the margins. You know, so since the IPO, we've been, we've been kind of conditioned to think about this business as kind of a mid teens, you have a large in business, your guidance guidance is kind of indicating closer to to high teens now, just kind of the reasons that you stated for the guide sound more structural in nature. But just want to confirm if that's kind of the new base level of margins we should be expecting with obviously with the caveat that there's quarterly fluctuations.

It looks like supply chain is getting a little bit back in the norm and then relating to that structural execution here, 19% here is as you allude here second quarter are you guiding up but is there potential to sustain that this 19 plus percent such that there could be a little bit more latitude in full year numbers just to kind of clarify on what you are saying about the back half of the year.

Yeah.

Julien Dan Sugar here. Thanks for your question what.

One of the benefits of operating globally.

We can serve.

Dave Bennett: Mark, thanks for the question. Yeah, confirm that if you recall, we've been messaging the last couple quarters when we've had execution upside and the drivers behind those. After printing a couple quarters to one seven over 17% and this current quarter over 90%. We're confident and committed in the higher margin structure. It was driven by that global supply chain and our investments throughout the business to ensure that higher margin profile.

We are serving.

Unknown Executive: Thank you.

Many dozens of countries.

In parallel.

Simultaneously that helps as a global manufacturer.

In terms of the projects.

We've just seen the breadth and the depth of the projects in our tier one.

Customers expand very significantly over the last few years, we've gone from a megawatts to gigawatts from projects programs and so even within a given customer. They have one project. That's delayed often they'll have another project, which can fill it's it's gap so for sure there's been individual projects that.

John Wyndham: Our next question is from the line of John Wyndham with UBS. You may proceed. Hey, perfect. Thanks for having me on. I was wondering if just any comments you could share about conversations you're having with customers over the last couple of months. Absolutely, the volatility and interest rates is a concern for people. So just any color you have on how those conversations have maybe evolved over the last couple of months. Thanks really appreciate it.

Experienced delays that that happens.

That's not a new thing.

We've just seen a just a huge amount of demand in it.

The markets in the U S and abroad.

And our record results in terms of revenue recognition.

Bear that out from what we've accomplished so far and our confidence that that's going to continue has enabled us to increase our guidance on revenue for this year.

Howard Wenger: This is Howard Wenger. Thanks for the question. Well, the outlook is very positive and we continue to have very strong demand in the United States, which is two thirds of our business. As well as international regarding interest rates. It is a topic, but we what we're hearing is that there are a number of levers that can accommodate higher interest rates, including you have the IRA benefit of a 30% tax credit where a lot of these projects that were developed were under the assumption of a. Lee, much lower tax credit on the order of 10% event in many cases.

Howard Wenger: And then you've got the bonus ITC plus there's really very strong demand for clean energy in the US. And electric demand is increasing. And where the electric demand is increasing such as data centers, for example, clean energy is something that's very much sought after, which means a higher, potentially higher power purchase agreement price. So those are just a few of the levers that can accommodate higher interest rate, but certainly it's something that is being watched closely. Thanks for the question. Thank you.

Dave can you address Julians question with respect to margin. Please sure.

Please.

Keep in mind.

Yes.

Longer contract lifecycle. So I think in terms of sustainability, absolutely, we would confirm sustaining our midpoint of our guidance, which is up almost 18% EBITDA and that is really derived if you just looked at the first two quarters profitability. It's around in the middle of that and the our guide would would be committing.

Unknown Executive: Okay, great result.

Us to sustaining that.

Thank you.

Our next question is from Chinese cities with Wells Fargo. You May proceed.

Thanks.

I guess when you look at some of your competitors they are.

<unk> more aggressively with some of the developers that are more price sensitive.

Just curious for your thoughts on that part of the market.

Whether you would consider releasing either a new product or using margin as a weapon to kind of gain some market share there.

<unk> positive way.

This is Howard Wenger so thank you for the question.

We're extremely disciplined when it comes to pricing and we're not a company that chases business, we partner with tier one customers, both owner developers and EPC.

Julien Son: Our next question is from the line of Julien Son, with Bank of America, please proceed. Hey, good afternoon, guys. Just to clarify the last couple real quickly.

And.

We.

Julien Son: First, just in terms of project delays, you know, obviously what you're saying here, fairly constructed through the course of the year, can you clarify, are you seeing churn in your backlog here in terms of projects moving it out? Or are you seeing fairly consistent schedules executed here? For every reason that, you know, it looks like supply chain is getting a little bit back in the norm.

We partner with companies, who understand our value proposition.

And.

We are relentless in terms of our product offering and innovation.

When it comes to L. Coa globalized cost of energy, which is the governing inflation for the power plant owner, who is the ultimate customer.

Dan Shugar: And then relating to that structural execution here, 19% here, as you lose here a second quarter, are you guiding up? Is there potential to sustain at this 19 plus percent such that there could be a little bit more latitude and full year numbers, just to kind of clarify on what you're saying about the back after the year? Julien, Dan Schringer here. Thanks for your question. One of the benefits of operating globally is we can serve, we are serving many dozens of countries in parallel simultaneously.

And there's three components to the LCR, we inflation there is the capex that you referred to or capital upfront capital cost there is the operating cost.

And then in the denominator and the energy output.

So we unveil just in the last this past quarter three upgrades.

Next generations of key technology. The company has that addresses all three of those buckets that contribute to lower Coa.

Dan Shugar: That helps as a global manufacturer. I think in terms of the projects, we've just seen the breadth and the depth of the projects in our tier one customers expand very significantly over the last few years. You know, we've gone from megawatts to gigawatts from project programs. And so even within a given customer, they have one project that's delayed. Often they'll have another project which can fill its gap. Now for sure there's been individual projects that experience delays that happens. That's not a new thing. We've just seen a huge amount of demand in the markets in the US and abroad and our record results in terms of revenue recognition.

So.

Our STR train following one five we can now install on more undulating sites.

Saving costs and speeding permitting.

Our true capture software continues to expand so that we capture more energy on an annual basis.

And then we have our Hale CRO, which we announced to enable us to install cost effectively in areas that are prone to hail loses some of the examples of things that we do to address.

Cost.

And our margins are improving as Dave and Dan mentioned.

Sure that's an additional lever if we need to.

The address price, but as a company we are.

Extremely disciplined when it comes to price.

And it's not.

Dave Bennett: Bear that out from what we've accomplished so far in our confidence that that's going to continue has enabled us to increase our guidance on revenue for this year. Dave, can you address Julien's question with respect to margin please? Julien, to keep in mind we have our longer contract life cycle. So I think in terms of sustainability, absolutely we would confirm sustaining our midpoint of our guidance, which is almost 18% even done. And that is really derived if you just look at the first two quarters profitability is around in the middle of that. And yeah, our side would be committing up to sustaining that.

Our central.

Weapon is to just be the low price provider.

Unknown Executive: Thank you.

Thank you.

Our next question is from Christine Cho with Barclays. Please proceed.

Thank you for taking my question.

If I could just come back to gross margin and ask it a little differently last quarter. You did see I think you know quite a big decline I think Eric you said it was like a 1000 beds declining freight and logistics as a percentage of Cogs.

Last quarter was that a similar tailwind this quarter and.

As raw material costs go down is that a tailwind for you I thought there was some back to back contract on them too.

Praneeth Satish: Our next question is from Praneeth Satish with Wells Fargo. You may proceed. Thanks. I guess when you look at some of your competitors, they are competing more aggressively with some of the developers that are more price sensitive. Just curious for your thoughts on that part of the market. And whether you would consider releasing either a new product or using margin as a weapon to kind of gain some market share there in an NPV positive way.

And you guys fixing your costs and your fixed or AFP as some margin with respect to raw materials. So that's relatively fixed but just wondering if that has changed.

Christine Thanks for the question so.

We did messaged last quarter that logistics.

Once a tailwind in our execution upside well we were cleared.

In messaging on top of that was that our structure allows for us to generate.

Howard Wenger: This is Howard Wenger. So thank you for the question. We're extremely disciplined when it comes to pricing. And we're not a company that chases business. We partner with tier one customers, both owner developers and EPCs. And we partner with companies who understand our value proposition. And we are relentless in terms of our product offering innovation. When it comes to LCOE, well, less cost of energy, which is the governing equation for the power plant owner, who is the ultimate customer.

Both the actual execution and locked in the margins and what we're doing now is locking that in for a little ahead of schedule on that in terms of our margin structure, but now we've locked that in and committed to locking that in.

To meet our quote to actual so certainly.

Our pricing looks at the landscape and Thats raw materials that logistics and we lock in our quote contractual enhancements I think Dan spoke to as well.

That gives us more confidence in locking in that margin what they all come together and Thats really the driver behind our increased guide to the midpoint at that 18% EBITDA and mid twenties for the gross margins that you are asking about and building on your comments, Dave as Howard mentioned in his prepared remarks were.

Howard Wenger: And there's three components to the LCOE invasion. There's the cat X that you refer to or capital upfront capital costs. There's the operating cost. And then in the in the denominator is the energy output. So we unveiled just in the last this past quarter, three upgrades in next generations of key technology company has that addresses all three of those buckets that contribute to lower LCOE. So our PR train following 1.5, we can now install on more angelating sites, saving costs and speeding permitting our true capture software continues to expand so that we capture more energy on an annual basis.

Being increased uptake.

Uptake of our value add products like true capture.

And.

That has been a factor in our margin growth in the last quarter as well so we're seeing.

As panel availability.

Issues has improved significantly in the U S. In the last year project commissioning.

Is progressing nicely and that also supports commissioning.

Our true capture software and control system and other features.

Thank you.

Howard Wenger: And then we have our Hale Pro, which we announced to enable us to install cost effectively in areas that are prone to hail. So this is some of the examples of things that we do to address costs. And our margins are improving as Dave and Dan mentioned. Sure, that's an additional lever if we need to address price, but as a company, we're extremely disciplined when it comes to price. And it's not our central weapon is to just be the low price provider. Thank you.

Our next question is from Philip Shen with Roth You May proceed.

Hey, guys congrats on a very strong quarter.

Give us a backlog significantly greater than 3 billion can.

Can you speak to the bookings at all the prior quarter you guys gave.

Backlog is greater than $3 billion and now you are significantly greater.

Let's say you're at $3 5 billion now would it be reasonable to think that your Q2 bookings.

Close to 1 billion or maybe over $1 billion.

Or at least can you comment on whether or not the book to Bill was at least over one and then shifting to software you talked about the increased adoption of software.

With potential for.

Strong margin contribution from software can you talk about how software adoption could ramp in F Q3, and four and even in Africa.

Christine Cho: Our next question is from Christine show with Barclays. Please proceed. Hello, thank you for taking my question.

F 2025.

Yeah.

Christine Cho: Maybe if I could just come back to gross margins and ask it a little differently. Last quarter, you did see, I think, you know, quite a big decline. I think your cue said it was like 1,000 bits, declining freight and logistics as a percentage of hogs, last quarter. Was that a similar tailwind this quarter and as raw material costs go that down. Is that a tailwind for you? I thought there was some back-to-back contracting to you and you guys fixing your cost when you fixed your ASP, so margin with respect to raw materials was relatively fixed, but just wondering if that has changed.

Hey, Phil.

This is howard so.

We had another really strong quarter on bookings and customer wins and new contracts.

As I mentioned also.

Several <unk>.

<unk>.

And R R.

Wins in bookings are very consistent with the last two quarters on that front. So that should give you an indication certainly our book to bill was greater than one for sure.

And so.

That should give you enough color on the strength of.

Demand in.

Dave Bennett: Christine, thanks for the question. So we did message last quarter that logistics. What is the tailwind in our execution upside? What we were cleared in messaging on top of that was that our structure allowed for us to generate both to actual execution that locked in the margins and what we're doing now is locking that in. We're a little ahead of schedule on that in terms of our margin structure, but now we've locked that in and committed to locking that in to meet our quote to actual.

Bookings and as far as our software and adoption.

Yes, we're really happy with.

The adoption rate.

Attach rate for true capture we're adding more features.

<unk>.

Yeah.

Havent, we havent guided but the color is that we see it having a growing impact on our margin going forward. Thanks for the for the question Slash.

Two questions into one so a combination.

Combination there Phil Thank you.

Dave Bennett: So certainly our pricing looks at the landscape and that raw material, that logistics. And we lock in our quote, contractual enhancements. I think Dan spoke to as well, that give us more confidence in locking in that margin. What they all come together. And that's really the driver behind our increased guide to the midpoint at that 18% EBITDA and mid 20s for the gross margins that you're asking about. And building on your comment day, as Howard mentioned in his prepared remarks, we're seeing increased uptake of our value at products like true capture and that has been a factor in our margin growth in the last quarter as well.

Thanks Howard.

Yeah.

Thank you.

Our next question is from the line of Vikram <unk> with Citi. You May proceed.

Good evening, everyone I wanted to follow up until the previous questions on pricing.

I really appreciate their discipline disciplined pricing strategy, but I was wondering if the pricing negotiations with customers are somewhat getting tougher.

Panel pricing is down so trackers are now somewhat larger percentage of total hardware costs in an industry, which is dealing with higher financing cost. So I was wondering if you're seeing some tougher sort of like negotiations with customers and on the same node.

You mentioned the launch of the new tax suit, which gives you an edge over the competition I was wondering what's next the one five and xdr one five indicates that our new products on the way. So there will be a two point, though if you could indicate the timing and what should we expect that the new product front.

Dave Bennett: So we're seeing as panel availability issues has improved significantly in the US in the last year project commissioning is progressing nicely. And that also supports commissioning of our true capture software and control system and other features.

Yeah.

Unknown Executive: Thank you.

All the handle at least the first question and I think that's going to add to it.

So on the pricing front I just wanted to say that.

I'm glad you brought that up because there is something that I didn't mention there are a couple of things I didn't mention on the last question regarding pricing.

Philip Shen: Our next question is from Philip Shen with Ross. You may proceed. Hey guys, congrats on a very strong quarter. You gave us a backlog of significantly greater than 3 billion. Can you speak to the bookings at all? The prior quarter, you guys gave a backlog as greater than 3 billion. And now you're significantly greater. Let's say you're at 3.5 billion now. Would it be reasonable to think that your FQ 2 bookings were close to a billion or maybe over a billion? Or at least can you comment on whether or not the book to bill was at least over one.

We're still very competitive its not like we have a enormous.

Premium that we're charging customers were still very competitive and we're offering a lot more.

We believe we are the highest quality most reliable tracker in the world.

That we deliver a lower cost of energy to the power plant owner that we're a stronger company.

Than our competitors in terms of our balance sheet and capability.

And and domain expertise.

Howard Wenger: And then shifting the software, you talked about the increased adoption of software with potential for. Strong margin contribution from software. Can you talk about how software adoption could ramp in FQ3 and 4 and even F2025, thanks. Hey Phil, so this is Howard. So we had another really strong quarter on bookings and customer wins and new contracts. As I mentioned, also several BCA's and our our wins and bookings are very consistent with the last two quarters on that front.

And we keep adding features that address both the installed cost so for our EPC that we partner with we're making it easier and easier for them to install our systems doing it faster lowering their cost.

Which gives us more of a preference there, including better tools and better parts.

Howard Wenger: So that should give you an indication, certainly our book to Bill is greater than one for sure. And so that should give you enough color on the strength of demand and bookings. And as far as our software and adoption, yes, we're really happy with the adoption rate, the attach rate for true capture, we're adding more features. We haven't we haven't guided, but the color is that we see it having a growing impact on our margin going forward. Thanks for the questions. Last two questions in one combination there Phil, thank you. Thanks Howard. Thank you.

And better support.

We're adding features that benefit be.

Operators of our power plant.

The power plants that use our trackers and were offering features that increase energy for the power plant owner and in totality, its a higher quality product.

But it's a competitive world and we recognize that and we are competing day in day out.

Ferociously.

Because that's who we are and we want to win.

And we feel we feel like we are winning Dan did you have any additional comments, yes building on your comments Howard.

In some markets we've seen the.

The price in dollars per watt of solar panels Rob.

And.

A natural tendency is to think about how that might impact felt system.

In particular tracker viability, but yes.

You have to keep in mind that as the price of the solar panels has dropped $1 per watt the efficiency of the solar panels has skyrocketed. So we're seeing panels now at 6% to 700 watts per panel.

That's double what they were five years ago.

And so youre getting a lot more bank for the Buck with tracker and the tracker also enables bifacial energy to be harvested from the back whereas with fixed system. It doesn't I.

Vikram Bagri: Our next question is from the line of Vikram Bagri, the city you may proceed.

I would just say also.

The size of these plants have increased enormously.

Howard Wenger: Good evening everyone. I wanted to follow up on some of the previous questions on pricing. Really appreciate your discipline pricing strategy. But I was wondering if the pricing negotiations with customers are somewhat getting tougher. Panel pricing is down, so trackers are now somewhat a larger percentage of total hardware costs in an industry which is dealing with higher financing costs. I was wondering if you're seeing some more tougher sort of like negotiations with customers.

And the stakes with the.

Hi.

The tracker system, which is the skeletal system of the tracker are much higher.

We've seen a flight to quality.

In terms of.

Product.

And in terms of.

The ability to wherewithal of next tracker as a.

Howard Wenger: And on the same note, you mentioned the launch of the new tax suit, which gives you a natural competition. I was wondering what's next, the 1.5 in XTR 1.5 indicates that are new products on the way, so there will be a 2.0. If you can indicate the timing and what should we expect on the new product prices. I'll handle at least the first question and I think Dan's going to add to it.

A very strong company to be able to fulfill both our financial capacity, Dave mentioned, we have over $800 million of liquidity.

Very low debt position.

We've consistently operated the company.

Currently.

We've been profitable for the last five years.

And also on the product, where we don't cut any corners on any aspect of the system.

Howard Wenger: So on the pricing front, I just want to say that I'm glad you brought that up because there's something that I didn't mention. There are a couple things I didn't mention on the last question regarding pricing. We're still very competitive. It's not like we have an enormous premium that we're charging customers. We're still very competitive and we're offering a lot more. We believe we're the highest quality, most reliable tracker in the world that we deliver a lower cost of energy to the power plant owner that were a stronger company than our competitors in terms of our balance sheet and capability and domain expertise, and we keep adding features that address both the install costs.

Also there is a real focus on how the systems are actually operated and maintained.

Howard mentioned, our Nx navigator system, which provides operational benefits.

And also a risk reduction in the actual operation of the systems to extreme weather.

You for your comment.

Thank you.

Our next question is from Jordan Levy with <unk>. Please proceed.

Thanks, So maybe I appreciate the color you gave on the new tax rate, maybe if you could just talk to sort of initial customer reaction.

So those products are <unk>.

Sure. This is Howard so we.

Hi, Jordan.

Howard Wenger: So for our ETCs that we partner with, we're making it easier and easier for them to install our systems, doing it faster, lowering their costs, which gives us more of a preference there, including better tools and better parts and better support. And we're adding features that benefit the operators of our power plant, the power plants that use our trackers, and we're offering features that increase energy for the power plant owner and in totality is a higher quality product.

But really happy with the release of SCR.

Where we actually feel that are starting in 2018.

We've got over 70 projects now with xdr in the field and so what <unk> done so theres already.

Significant interest and adoption of X TR, but with one five which doubles the range effectively doubles.

Howard Wenger: But it's a competitive world and we recognize that and we are competing day and day out, ferociously, because that's who we are. We want to win and we feel like we are winning. Dan, did you have any additional comments? Yeah, building on your comments, Howard, in some markets, we've seen the price and dollars per watt of solar panels drop and a natural tendency is to think about how that might impact our system in particular track or viability.

The ability to.

Conform to undulating terrain and opens up the Tam.

Which makes it easier for the developer to find sites not only flat sites, which are ideal, but rolling trained sites.

Howard Wenger: You have to keep in mind that as the price of the solar panels has dropped and dollars per watt, the efficiency of the solar panels has skyrocketed. So we're seeing panels now at six to 700 watts per panel. That's double what they were five years ago. And so you're getting a lot more bang for the buck with tracker and the tracker also enables bifacial energy to be harvested from the back, whereas with a fixed system it doesn't.

So it brings a lot more into play in terms of the market.

So so far the interest is extremely high.

And it is helping with our bookings velocity these new.

The current innovation suite that we have and the Nextgen.

Suite that we just announced thanks for your question.

Thank you al.

Thank you Mr. Bobby.

Our next question is from Tristan Richardson with Scotiabank. Please proceed.

Great.

Hey, good afternoon, guys I appreciate the time up can you talk a little bit maybe Howard you mentioned 45 acts and how they should be looked at on a case by case basis.

Howard Wenger: I would just say also the size of these plants have increased enormously. And the stakes with the tracker system, which is the skeletal system of the tracker are much higher. We've seen a flight to quality in terms of product and in terms of the ability to wear with all of the tracker as a very strong company to be able to fulfill both our financial capacity. Dave mentioned we have over 800 million of liquidity, a very low debt position.

By customer.

Can you talk about the backlog and maybe frame for us perhaps the proportion of domestic backlog, where domestic content is absolutely critically important to the customer.

Said another way is there a proportion of your U S funnel of business, where the customers really looking for the most cost effective solution and domestic content might not be a priority.

Right.

Nailed it with your question.

Every customer is different every project's different.

To generalize.

Every developer of consequence that we know.

They are highly interested in the domestic content and capturing the bonus ITC and so they're doing everything they can to do that or are they doing that on every one of their projects keep in mind. These developers have tens of projects that they're developing.

Howard Wenger: We've consistently operated the company recently, where we've been profitable for the last five years. And also on the product where we don't cut any corners on any aspect of the system. Also, there's a real focus on how these systems are actually operated and maintained. Howard mentioned our next navigator system, which provides operational benefits and also risk reduction in the actual operation of the systems to extreme weather. Thank you for your comment.

Dan Shugar: Thank you.

With.

Various equipment sets.

Especially on the panel side that they're lining up for it and the panels really matter of course, where theyre. So source as do the trackers.

And so it just depends on the project.

But I would say that every just about most customers most customers.

Or are looking to take advantage of the bonus ITC and we are very engaged with them on our ability to fulfill that four of them.

Appreciate it. Thank you guys for the U S.

Jordan Levy: Our next question is from Jordan Levy with Truist. Please proceed. Thanks all. Maybe appreciate the color you gave on the new text.

Yes. Thank you.

Thank you.

Howard Wenger: Maybe if you could just talk to this sort of initial customer reaction to those products, how pro XTR 1.5 and Zonal diffuse. Sure, this is Howard. So we, Jordan, we are really, really happy with the release of XTR, where we actually feel that it, sorry, in 2018, we've got over 70 projects now with XTR in the field. And so what XTR 1.5, so there's already significant interest and adoption of XTR. But with 1.5, which doubles the range, effectively.

Our next question is from Derek <unk>.

Berg with Cantor Fitzgerald you May proceed.

Yeah, Hey, guys. Thanks for taking my question so.

So I wanted to actually ask about the Indian market clearly big opportunity there.

I'm wondering if you can first kind of clarify what's your production capacity there today in Gigawatts and how do you think about that going forward, but just broadly on the Indian market.

It just gives you the confidence that you can really win in that market.

Is that a price sensitive market.

What are they sort of like about next tracker or is it the <unk>.

Manufacturing model.

Used domestic content is it the actual tracker technology and software can you talk a bit about what what's going to take to win in that market. Thanks.

Sure I appreciate that Eric.

Howard Wenger: Double the ability to, you know, conform to undulating terrain and opens up the PAM. So which makes it easier for the developer to find sites, not only flat sites, which are ideal, but rolling terrain sites. So it brings a lot more into play in terms of the market. So so far, the interest is extremely high. And it is helping with our bookings velocity, these new, the current innovation suite that we have in the next gen suite that we just announced. Thanks for your question. Thank you. Thank you, Mr. Lavy.

The X factor has been engaged in the India market since our founding 10 years ago.

We have our second largest office is in Hyderabad.

Which is right in the middle of the country, we have a tremendously talented team.

<unk>.

Most of the functionality of the company and very strong engineering base and a super strong support.

Analysis and project engineering team there.

And we did our first project in India in 2014, a one megawatt system we.

We did our first we did the very first 100 megawatt tracker in India and that was in 2015.

Project continues to operate well.

We delivered 27 projects.

Howard Wenger: How do next question and from Tristan Richardson, let's go to bank. Hey, good afternoon, guys. Appreciate the time. Can you talk a little bit maybe Howard, you mentioned 45 X. And these would be looked at on a case by case basis and customer by customer. We talk about the backlog and maybe frame for us perhaps the proportion of domestic backlog where domestic content is absolutely critically important to the customer. Set another way there are proportion of your US funnel of business that where the customer is really looking for the most cost effective solution and domestic content might not be a priority.

Prior to 2020.

And those projects have performed very well and we have a very very good reputation.

Being able to deliver.

A cost effective product and I'll speak to that without cutting corners.

Our product quality.

That has and there's been a flight to quality I mentioned that with.

With customers globally, and that's true also in India.

What's happened is it's really interesting.

The panel technology moved towards bifacial.

B.

Focus on customers on higher efficiency and higher performing systems in India has significantly increased.

Howard Wenger: Right, you nailed it with your question. Every customer is different, every project is different, but to generalize every developer of consequence that we know they are highly interested in the domestic content and capturing bonus ITC. And so they're doing everything they can to do that. Are they doing that on every one of their projects? Keep in mind these developers have pens of projects that they're developing with various equipment sets, you know, especially on the panel side that they're lining up for it and the panels really matter, of course, where they're so sourced as do the trackers.

So we're seeing the market moving toward trackers.

We have.

<unk> five gigawatts.

Yeah.

Demand <unk>.

Tween the systems that are operational and those are.

Being fulfilled on a go forward.

With respect to capacity our teams worked very hard to build manufacturing in India for India that has helped us become more cost become very cost effective within India.

For the customers there and so we have 10 gigawatts of capacity in India for India.

Howard Wenger: And so it just depends on the project, but I would say that every, you know, just about most customers, most customers are are looking to take advantage of the bonus ITC and we are very engaged with them on our ability to fulfill that for them. Be sure to thank you guys for such a U.S. Yeah, thank you. Thank you.

Or it could be used for export.

We mentioned, our meat and search philosophy in India.

And bodies that so.

That's happened through a lot of hard work and.

And currently for India, we can manufacture over 80% of the content.

In India for those those customers.

So we've been really committed to the market there in part because.

The India is from.

Dan Shugar: Our next question is from Derek Soderbergh with cancer fixed sterled, you may proceed. Yeah, hey guys, thanks for taking my question. So I wanted to actually ask about the Indian market clearly big opportunity there. I wonder if you can first kind of clarify what's your production capacity there today in gigawatts and how do you think about that going forward, but just probably on the Indian market. What sort of gives you the confidence that you can really win in that market or is that a price sensitive market, you know, what are they sort of like about Nextracker is it, you know, the manufacturing model so you can, you know, use domestic content as the actual tracker technology and software. He talked a bit about what what's going to take to win in that market. Thanks. Sure, I appreciate that, Derek.

Power generation of Basel intensity standpoint, where the United States was 15 years ago were between 50 and 60% of the power comes from coal so theres an opportunity to really radically.

Reduce the carbon intensity of the power generation sector, and we're focused in India, we're delivering high quality systems. The sophistication of the customers is high and there's been a flight to quality. So we feel great about our position there and supporting India on a go forward.

Yes.

Okay.

Thank you.

That is all the time, we have for questions today I will now pass the call over to the next tracker team for any closing remarks.

Dan Shugar: Nextracker has been engaged in the Indian market since our founding 10 years ago. We've had our second largest office is in a higher bot, which is right in the middle of the country. We have a tremendously talented team covering most of the functionality of the company and very strong engineering base and a super strong support analysis and project engineering team there. And we did our first project in the Indian 2014, a one megawatt system.

Thank you for joining we look forward to speaking to you next quarter and speak to many of you. Soon this concludes our earnings call. Thank you.

That concludes today's next tracker Q2.

FY 2024 earnings call. Thank you for your participation you may now disconnect your lines.

Dan Shugar: We did our first, we did the very first 100 megawatt tracker in India and that was in 2015. The project continues to operate well. We delivered 27 projects prior to 2020 and those projects have performed very well and we have a very, very good reputation of being able to deliver a cost effective product and I'll speak to that without putting corners on product quality. That has and there's been a flight to quality I mentioned that with customers globally and that's true also in India.

Dan Shugar: What's happened is really interesting as the panel technology moved toward by facial. The focus on customers on higher efficiency and higher performing systems in India has significantly increased. So we're seeing the market moving toward trackers. We have five gigawatts of demand between the systems that are operational and those that are being fulfilled on and go forward. With respect to capacity, our teams work very hard to build manufacturing in India for India.

Dan Shugar: That's helped us become more cost become very cost effective within India, for the consumers there. And so we have 10 gigawatts of capacity in India for India or could be used for export. We mentioned our meat and surge philosophy in India and embodies that. So that's happened through a lot of hard work. And currently for India we can manufacture over 80% of the content in India for those customers. So we've been really committed to the market there in part because the India is from a power generation of fossil intensity standpoint where the United States was 15 years ago where between 50 and 60% of the power comes from coal.

Dan Shugar: So there's an opportunity to really radically reduce the carbon intensity of the power generation sector. And we're focused in India, we're delivering high quality systems, the sophistication of the customers is high. And there's been a flight to quality. So we feel great about our position there and supporting India on and go forward.

Unknown Executive: Next. Thank you.

Unknown Executive: That is all the time we have for questions today.

Unknown Executive: I will now pass the call over to the Nextracker team for any closing remarks. Thank you for joining. We look forward to speaking to you next quarter and speak to many of you too.

Unknown Executive: This includes our earnings call. Thank you.

Unknown Executive: That concludes today's Nextracker Q2 FY 2024 earnings call. Thank you for your participation.

Unknown Executive: You may now disconnect your line.