Q3 2025 Nextracker Inc Earnings Call
Well, let's go.
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Sierra: Good afternoon everyone and thank you for standing by. My name is Sierra and I will be your conference operator today. Today's call is being recorded.
Speaker Change: I would like to welcome everyone to Nextracker's third quarter fiscal year 2025 earnings call. After the speaker's remarks, there will be a Q&A session. At this time, for opening remarks, I would like to pass this conference over to Sarah Lee, Head of Investor Relations. Sarah, you may begin.
Speaker Change: Thank you and good afternoon, everyone. Welcome to Nextrapper's third quarter fiscal year 2025 earnings call. I'm Sarah Lee, head of investor relations. I'm joined by Dan Shugar, our CEO and founder, Howard Wenger, our president, and Chuck Boynton, our CFO. Following our prepared remarks, we will transition to a Q&A session.
Speaker Change: As a reminder, there will be a replay of this call posted on the IR website, along with an earnest press release and shareholder letter.
Speaker Change: Today's call contains statements regarding our business, financial performance, and operations, including our business and our industry that may be considered forward-looking statements, and such statements involve risks and uncertainties that may cause actual results to differ materially from our expectations.
Speaker Change: Those statements are based on current beliefs, assumptions, and expectations, and speak only as of the current date.
Speaker Change: For more information on those risks and uncertainties, please review our earnings press release, shareholder letter, and our SEC filings, including our most recently filed quarterly report on Form 10-Q and annual report on Form 10-K, which are available on our IR website at investors.nexttracker.com.
Speaker Change: This information is subject to change, and we undertake no obligation to update any forward-looking statements as a result of new information, future events, or changes in our expectations.
Speaker Change: Please note we will provide GAAP and non-GAAP measures on today's call. The full non-GAAP to GAAP reconciliations can be found in the appendix to the press release and the shareholder letter, as well as the financial section of the IR website. And now I will turn the call over to our CUN founder, Dan.
Speaker Change: Thank you for joining us today to discuss Nextracker's fiscal Q3 financial results.
and best wishes to everyone celebrating the Spring Festival.
Speaker Change: We are pleased to report that our global team's focus on innovative products and operational excellence combined with robust demand for our products and services has led to exceptional performance and strategic progress across our business.
Speaker Change: We achieved strong financial results, with revenue growing 15% year-over-year to approximately $2 billion year-to-date.
Speaker Change: Q3 revenue was $679 million. Our adjusted gross profit and adjusted EBITDA also saw meaningful improvements, reflecting our operational efficiency and strong market position.
Speaker Change: These results underscore our ability to execute effectively in a dynamic market environment, and we remain on track to deliver another strong quarter to close out the year.
Speaker Change: Our backlog hit a new record, increasing quarter over quarter to significantly over $4.5 billion. This robust backlog provides us with excellent visibility and confidence in our future growth trajectory.
Speaker Change: In Q3, we remained hyper-focused on scaling our legacy and new products and project execution to deliver differentiated value to our customers across the five continents we are serving today.
Speaker Change: To further enhance our results, innovating and delivering cutting-edge solar technology to the market, we expanded our R&D facilities in three regions, the U.S., Brazil, and India, and partnered with UC Berkeley to establish the CalNEXT Center for Solar Energy Research.
Speaker Change: with a $6.5 million commitment to advance solar power plant technology and develop future engineering leaders.
Speaker Change: We believe these strategic investments and global expansion reinforce our commitment to innovation and position as a global leader in solar technology and will drive long-term value creation.
Speaker Change: Critical as we anticipate the solar industry to experience unprecedented growth longer-term, driven by increasing electricity demand and growth in solar power.
Speaker Change: I will now share our perspectives about the market and industry outlook.
Speaker Change: Solar continues to perform as the fastest-growing power generation being added to most major grids around the world.
Speaker Change: According to Wood Mackenzie, in the U.S. in the third quarter of 2024, solar accounted for 64% of all new electricity generating capacity added to the grid.
Speaker Change: And, last year, the U.S. added approximately 40 gigawatts of solar power.
Speaker Change: Power demand in the U.S. is expected to increase significantly, about 9%, by 2028, according to ICF International, a consulting firm.
Speaker Change: And the U.S. Department of Energy forecasts 15 to 20 percent power demand growth over the next decade.
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Speaker Change: Capacity additions have been dominated by solar, with nearly 7,000 solar and solar plus storage projects in the queue, and we believe solar remains the single most practical source of power generation in the U.S. grid and many electric systems around the world.
Speaker Change: Cost, reliability, availability of supply chain, and speed of construction are key drivers of the growing adoption of solar.
Speaker Change: Significant reductions in battery costs, coupled with a five-fold increase in battery power in recent years, has helped solar power's continued growth by delivering firm power in early morning and evening peak power conditions.
Speaker Change: Robust demand for new power has combined with our sequential growth and backlog and enabled us to raise our fiscal 25 profit target by $75 million to a midpoint of $720 million.
Speaker Change: Our strong quarterly results, record backlog, and strategic investments in R&D position us to capitalize on the tremendous growth opportunities in the solar industry.
Speaker Change: We remain committed to driving innovation, operational excellence, and sustainable value creation for our shareholders. And we thank you for your continued support.
Speaker Change: I'll now pass the call over to Howard Wenger, President of Nextracker, to provide additional color on our business.
Thank you, Dan.
Speaker Change: Our demand profile continued to be positive in the quarter, with a book-to-bill ratio greater than 1. We had record bookings for both the U.S. and rest of world regions, driving backlog to significantly greater than $4.5 billion.
Speaker Change: We would like to highlight this milestone further by noting that we have more than doubled our backlog since our IPO two years ago, which stood at $2.1 billion at the time, and we have done so while growing the company's top and bottom lines.
Now, a bit more detail for sales in Q3.
Speaker Change: In the U.S., we had 75% of total bookings in the quarter, covering a diverse mix of new project contracts in over 20 states across the country.
Speaker Change: Our new foundations business is currently focused on the U.S. market, and is helping us get additional wins in a growing pipeline of interest.
Speaker Change: We believe customers are recognizing the synergy of a more complete solution combining our NxHorizon Tracker Platform with innovative foundations that span a wide range of soil conditions.
Speaker Change: And, we continue to see new sales in the quarter of our XTR Extreme Terrain Following Tracker, which can radically reduce the need for expensive site grading, as well as strong sales of our TrueCapture software for U.S. projects, which enables power plant owners to boost total energy yield.
Speaker Change: These innovations are enabling greater siting flexibility and can lower solar power costs to help address rapidly expanding U.S. electricity demand.
Speaker Change: In the international arena, excluding the U.S., we sign contracts in 13 different countries in Latin America, Europe, Australia, and the MEIA region of Middle East, India, and Africa.
Speaker Change: Of note in Q3, we signed 15 new projects, each with a capacity in the range of 100 to 750 megawatts,
in Australia, Brazil, Chile, Europe, India, Peru, and Saudi Arabia.
Speaker Change: The international pipeline continues to grow, and we are seeing more countries installing solar. And we are also gaining traction for XTR and TrueCapture software internationally in the corridor.
Speaker Change: Shifting for a moment to supply. We believe our global supply chain is one of the strategic advantages that enables more sales.
Speaker Change: For example, in the U.S., our partners operate over 20 factories producing our products, which enables us to reduce lead times for our customers with superior on-time delivery performance while increasing flexibility throughout construction.
Speaker Change: As previously announced, we are now shipping 100% U.S. domestic content per Treasury guidance. We are finding that our customers increasingly want domestic content for their projects, and we believe we're the first and only company currently shipping a 100% U.S. domestic content tracker.
Thank you.
Speaker Change: In Q3, we had over 80% of revenue coming from repeat customers. We believe there are many factors that set us apart and enable us to be the preferred tracker partner.
Speaker Change: We have a relentless customer focus in the company with a service mindset that EPCs, developers, and owners can rely upon and trust.
Speaker Change: We believe we have a significantly differentiated and superior product and service offering that delivers the highest performing and most reliable solar power in the industry at the lowest LCOE.
Speaker Change: And we have built a strong company operationally and financially with a proven track record.
Speaker Change: All of these factors set us apart and give our customers and stakeholders peace of mind that we will work with them as partners and deliver.
Moving to Pricing and Costs
Speaker Change: In Q3, pricing for Nextracker was stable, and the company continues to manage costs well. Pricing and costs vary by region, customer, project size and location, soil condition, panel type, and other factors.
Speaker Change: Historically, as the solar industry continues to scale, system costs have decreased over time, resulting in solar power becoming among the most competitive generation technologies.
Speaker Change: We're doing our part to continue this trend with ingenuity and know-how to reduce install costs and to generate more energy.
Speaker Change: Finally, project timing was stable and manageable on a portfolio basis in the corridor, with some projects accelerating and some pushing out, which is the nature of large-scale projects spanning multiple corridors and years.
Speaker Change: In summary, the business performed very well in Q3, and we are on track to deliver another strong quarter to close out our fiscal year. And with that, I'll pass the call over to Chuck Boynton, our Chief Financial Officer. Chuck?
Chuck Boynton: Thank you, Howard. Good afternoon, everyone. Thank you for joining us for our third quarter fiscal year 2025 earnings call. I'm pleased to present our financial results and outlook.
Speaker Change: We're thrilled to report another quarter of exceptional financial performance, demonstrating our team's continued execution in driving customer satisfaction and product innovation globally.
Speaker Change: For Q3, we achieved revenue of $679 million, which represents a 7% sequential improvement over Q2. Our year-to-date revenue reached $2 billion, reflecting a strong 15% growth year-over-year.
Speaker Change: Our Q3 geographic mix with 66% U.S. and 34% rest of world aligning with our projections.
Speaker Change: Our Q3 adjusted EBITDA expanded to $186 million, marking an 11% increase year-over-year. This translates to an adjusted EBITDA margin of 27%, up 4 percentage points from the prior year.
Speaker Change: Year-to-date, our adjusted EBITDA has shown remarkable growth, up 48% compared to the previous year. It's important to note, in FY24, our adjusted results exclude the impact from 45x credits.
Speaker Change: We generated $135 million in adjusted free cash flow during Q3, more than doubling the $62 million from the same period last year.
Speaker Change: Year-to-date, we've generated $395 million in adjusted free cash flow, a 26% increase from the $314 million in the prior year.
Speaker Change: Our strong balance sheet and cash flow generation remain competitive advantages. We closed Q3 with $694 million in total cash and $145 million in total debt with no significant debt maturities until fiscal 2028.
Speaker Change: Total liquidity at the end of Q3 increased to 1.6 billion, providing us with significant financial flexibility.
Speaker Change: Our adjusted gross margins of 36% were roughly in line quarter over quarter.
Speaker Change: Similar to last quarter, we're seeing significant year-over-year growth from sales of our TrueCapture software, driven by a higher rate of commissioned projects.
Speaker Change: Looking forward, we expect our software revenue to be approximately 2% of revenue.
Speaker Change: We continue to experience strong demand for our products across all major global markets.
Speaker Change: Q3 saw exceptional bookings, with our backlog growing to significantly greater than $4.5 billion.
Speaker Change: This performance not only bolsters our competence in raising our profitability outlook for the current fiscal year, but also lays a solid foundation for 2026 and beyond.
Speaker Change: For the full year fiscal 25, we expect revenue to be in the range of $2.8 to $2.9 billion.
Speaker Change: adjusted EBITDA to be in the range of 700 to 740 million.
Speaker Change: adjusted diluted EPS to be in the range of $3.75 to $3.95 per share.
U.S. revenue mix to be approximately two-thirds of the total.
Speaker Change: We expect our structural gross margins to be in the low 30s, reflecting our continued execution, pricing discipline, and cost management.
Speaker Change: We manage our business on an annual and multi-year basis, consistent with the nature of the utility-scale solar power industry.
Speaker Change: Our competence is driven by customer demand for our differentiated, industry-leading products.
Speaker Change: ability to execute and support customer success, continued bookings momentum, and a strong financial position that's enabling continued innovation and strategic investments.
Speaker Change: We believe our culture, strategy, team, and market position will enable us to continue delivering strong value for customers, shareholders, and other stakeholders.
Speaker Change: We will now begin the Q&A session. If you would like to ask a question, please press star followed by one and your telephone keypad. We will now begin the Q&A session. If you would like to ask a question, please press star followed by one and your telephone
Speaker Change: If you would like to remove those questions, press star followed by 2.
Speaker Change: And if you are using a speakerphone, please pick up your handset before asking your question.
Speaker Change: Our first question today comes from Kashi Harrison with Piper Sandler. Your line is now open.
Thank you very much. Thank you.
Speaker Change: Good afternoon. Thanks for taking my question and congrats again on another strong.
quarter
Thank you.
Speaker Change: I'm only going to ask one, because there's a lot to get to, I'm sure. I want to ask you about the backlog. You said it's significantly above $4.5 billion.
Speaker Change: And if we just kind of do rough math in the past, it feels like you've done at least a billion-dollar quarter.
Speaker Change: Are we right around $5 billion in reality at this point on the backlog? Thank you.
and John. Thank you. Thank you.
Speaker Change: Hi, this is Howard Wenger. We're really happy with the corridor and getting to this new milestone. It's actually, we've had increasing backlog every quarter since going public and actually before then.
Speaker Change: So, our book-to-bill continues to be greater than one. We're not going to give a precise answer, but the math roughly supports what you're saying that we exceeded a billion in the quarter in bookings.
Thank you.
Speaker Change: Our next question today comes from Jordan Levy with Truist. Your line is now open.
Thank you.
Jordan Levy: Afternoon all, and congratulations on a really strong quarter. Just wanted to see if you could talk around your supply chain around steel. I know you all have a pretty solid U.S. manufacturing footprint, but just with all the discussions on tariffs and whatnot, I just wanted to see how you all view potential risks there. Should anything come to fruition on that front?
and Daniel Shugar. Thank you. Thank you.
Jordan Levy: Hi Jordan, Dan Shugar speaking. We feel very good about our supply chain both in the U.S. and overseas. In the U.S. we enjoy very strong relationships with
Jordan Levy: the major U.S. mills still producing. In some cases we've actually, with partners, stood up manufacturing facilities on the very campus of some of the newest mills in the United States or nearby.
Jordan Levy: We're making virtually all of the tubes that we're, as an example, delivering in the U.S. or manufacturing in the U.S.
The U.S. Steel position has
They're a much cleaner
Jordan Levy: manufacturing mix in terms of the the content of the steel. We launched our low carbon tracker product that we sold and then overseas we built out supply chain in India and other places for those markets. We're in this great position we can make
Thanks so much.
Speaker Change: Our next question comes from Brian Lee with Goldman Sachs. Your line is now open.
Brian Lee: Hey guys, good afternoon. Kudos on the solid quarter here. I just had two, I guess first, would you, you know, Dan or Howard,
Speaker Change: say that maybe the U.S. is growing faster than expected just based on the bookings momentum here? And is that market share drivers you're seeing or just generally the environment picking up? Or maybe it's a bit of both, but we'd love to hear your perspective. And then do you see this 75-25 mix?
may be holding even into next year as well.
Thank you. Thank you.
Speaker Change: Well, I'll take the mixed question first and then talk about the velocity second.
Speaker Change: We're as you've seen and as we've discussed previously our mix is typically 60 to 70 percent in the U.S. and that
Speaker Change: that is holding in roughly. And so what that means is as we grow, we're growing both domestically and internationally. And that speaks to the volume in both, or the velocity in both.
Speaker Change: regions for the company. And as far as the U.S. market goes, the demand is strong. We have record bookings in the U.S. this quarter, and our pipeline is indicative of continued strength.
Speaker Change: So we're happy where things are at the moment. As far as market share, that's not something that we actually can accurately...
monitor, there really is no
Speaker Change: data that isn't lagging. Most of the data on market share comes six to nine months after the year is over and it's done on an annual basis, but we feel like we're doing well in the marketplace.
Thank you for your question
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Speaker Change: Our next question today comes from Philip Shin with Roth Capital Partners. Your line is now open.
Thank you very much.
Speaker Change: You guys, congrats on the strong quarter indeed. You guys have consistently surprised to the upside, so great job.
Speaker Change: First question is on the 8 quarter backlog conversion. You guys highlighted 87%. Is the majority of that in year one? What kind of color can you share there? And then in terms of
Speaker Change: pricing. Can you talk about if there's been any change or adjustment to pricing in the bookings? Do you see that coming down a touch as we go through?
Speaker Change: 26 and maybe fiscal 27. So just curious what you can share in terms of the pricing outlook. Thanks guys.
Speaker Change: Thanks, Phil. Yeah, on the 87% of our backlog, realize our next eight quarters...
Yes, the majority of that is
Speaker Change: slated for being recognized over the next four quarters. So that gives us more visibility into the year ahead and we'll be commenting more on that in the next earnings call.
Speaker Change: As for the second part of your question on pricing, what we saw and what we're seeing right now is pricing is quite stable.
Speaker Change: globally for the company and in the United States where a lot of our shareholders have interest. And as far as the solar industry goes, what we've seen over time is the entire value chain
Speaker Change: reduces price as the costs are reduced with scale. And we continue to invest in innovation.
Speaker Change: to extend our current tracker platform so that we can lower the installed costs, we can lower the upfront cost, and we can get more energy yield.
Wow!
Speaker Change: lowering price in a measured way over a period of time.
Speaker Change: to be more and more competitive versus other generating technologies, and that's what's faulted the whole industry to be
in a position where solar
As we remarked, as Dan remarked.
Speaker Change: 64% of all new generation globally was from solar. That's an astonishing figure.
Speaker Change: So, and that's all done through cost reduction and then price reduction. But currently, what we're seeing, just to reiterate, the price environment is quite stable. Thanks, Phil.
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Speaker Change: Our next question comes from Bernice Tvesh with Wells Fargo. Your line is now open.
Thank you.
Speaker Change: Thanks. Maybe just following up on Phil's question on that backlog conversion metric, so 87% this quarter, 90% last quarter, I think it was 80% the quarter before that. So is this 80% to 90% band kind of a good way to think about the natural variability of this metric? And then kind of given your view of the macro environment today and everything going on, do you think there's potential to improve this metric over 90% as we get more clarity on what Trump
does with IRA and tariffs and the like.
This is Howard.
Speaker Change: 80 to 90% is probably a good way to think about it. And going from 80 to 90 and back to 87, it's really not a huge driver because
Speaker Change: where the important thing is that the vast majority of it's realized over the next eight quarters. And as we've stated previously, the majority of that amount over the next eight quarters is over the next four quarters. So
What we're seeing is we continue to book more projects.
Speaker Change: We achieved a record internationally for bookings this quarter, as we noted, and in the U.S. And so we're going to continue to fill up our backlog along the entire span of eight quarters.
Speaker Change: We do have these BCA agreements that are multi-year in nature, and they're the ones that contribute more to the back end of that amount, but as those projects get perfected,
Speaker Change: and orders come through the EPCs, they drop into the typically into the four-quarter bucket. So it's sort of this extension of our pipeline but with a lot more certainty and visibility because those are contracted projects.
with
Speaker Change: project schedules, project names, project sites, deposits, etc. So, but the getting back, just to circle back, 80 to 90 percent as a bookend is probably the right way to think about that as we move forward.
And that's been consistent for us over time.
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Thank you.
Speaker Change: Our next question comes from Mark Strauss with J.P. Morgan. Your line is now open.
Thank you for tuning in. We'll see you next time.
Mark Strauss: Great, thanks for taking our questions. I wanted to ask about the domestic content rules that came out a couple of weeks ago. Have you seen any kind of acceleration in quoting activity since that came out or are customers just kind of
Mark Strauss: waiting to see potentially how sticky the overall IRA could be under the new administration.
Mark Strauss: And kind of a quick follow-up, I mean, just kind of to the extent that you think that there's any pricing power or change in pricing power with the new rules, obviously, with the percentage assigned to the tracker going higher and with your 100% domestic content capability.
Thank you
Thank you.
Speaker Change: Hi, Mark. We'll do a two-part answer. I'll answer the first part, Howard will answer the second part. So, we were very pleased with the updated rules from Treasury related to domestic content.
Howard Wenger: It generally improves the picture for customers, it simplifies things, and it's easier for them to achieve the bonus 10% ITC. And it also really amplified the
Howard Wenger: The value we're providing by being in such a strong supply chain position in the U.S. with over 20 factories shipping finished goods to customers across the United States that are geographically optimized.
Howard Wenger: Shorten would lead time to site, minimize logistics costs, and ensure they have capacity to meet their needs.
Howard Wenger: Howard, do you want to take the second part, please? I'll just add that from a customer perspective in our pipeline, in our actual bookings, we're seeing more and more...
Howard Wenger: domestic content be part of what we're contracted to do, and not only to have domestic content but to have higher and higher levels of domestic content. We're seeing more
Howard Wenger: Customers wanting 100% domestic content, as you know the rules, ratcheted up by 400 basis points on Tracker.
Howard Wenger: the number of points that you can get on domestic content. And plus, some customers are expressing that it gives them more comfort to have the tracker be 100 percent. So,
Howard Wenger: We think it's something that what we know we're seeing that it's a value to customers in terms of pricing we're
Howard Wenger: We're partners with our customers, particularly our repeat customers. We have 80% of our business is repeat business, so we have very close relationships. If a customer wants domestic content,
Howard Wenger: there will be a modest premium for that in terms of price, but that's reflective of the increasing cost to the company.
Thank you for the question.
Speaker Change: Our next question comes from Dimple Gosu with Bank of America. Your line is now open.
Thank you very much.
Thanks for taking the question.
Speaker Change: Can you talk a little bit about just, you know, your liquidity position, which seems to be pretty healthy?
Speaker Change: In terms of capital allocation priorities, how do you think about, you know, returning cash to shareholders via...
Speaker Change: M&A activity versus expansion opportunities in Europe or otherwise, you know, looking to grow market share in the U.S.
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Chuck Boynton: Thank you, Dimple, this is Chuck. Our TEP location policy has not changed.
We're focused on growth, prioritizing investment.
and projects and activities organically.
We then are looking at M&A activities.
and seeing how we can build shareholder value via M&A.
Chuck Boynton: And then later this year, we'll look at, you know, possible buyback program. As we talked before, there are certain restrictions due to the spin. And so we'll talk about that more as we get closer to that date, end of this year, calendar year.
Chuck Boynton: but we're very pleased with our Fortress balance sheet and I think it is a real competitive advantage. Thank you.
Speaker Change: Our next question comes from Dylan Asano with Wolf Research. Your line is now open.
Speaker Change: Hey, good afternoon. Thanks for taking my question. Can you talk about what your safe harbor strategy might look like should you need to meet an accelerated demand pull forward event that could be the result of changes to IRA?
Thank you.
Speaker Change: Yeah, we'll do two part on this. This is Dan. I'll speak to the power setup from a supply chain standpoint, and then Howard will speak to maybe the commercial aspects of that. So, first...
Howard Wenger: We are in a position to be able to respond very quickly to customer needs.
Howard Wenger: both on normal day job activity if customers need to, for whatever reason, accelerate a delivery schedule, or if it's to address a safe harbor need, we can
Howard Wenger: move very very quickly to respond to those needs given our supply chain strength and geographic position. And so it's all about
Howard Wenger: meeting customer need, helping them be successful on every project, and then engendering confidence, which has then resulted in repeat orders.
Howard Wenger: I'll just add that we're open for business. If a customer wants a safe harbor, we'll work with them.
Howard Wenger: Thank you. Our next question comes from Ben Callow with Bayard. Your line is now open.
Ben, your line is now open.
Ben Callow: Hi guys. You guys kind of talked about the different international projects that you won. In the past you've talked about Australia margins being similar to the US. I'm just wondering how those are trending because you mentioned there's 700 megawatt type projects and so some of these things are getting big and how we think about that kind of cadence impacting margin as we go forward.
Ben Callow: This is Howard. So yeah, we're really pleased with the velocity in the international market. As we noted, we had significant sales in the quarter.
across.
Australia, Brazil, Chile, Europe, India, Peru.
of Saudi Arabia, so kind of all regions.
There's some big projects in there.
Ben Callow: and the margins do vary by region. Really there's no big change from what we've talked about in the past.
It is a more competitive environment.
internationally, kind of more CAPEX sensitive, upfront cost sensitive, but
Ben Callow: Given our differentiation, our technology differentiation, what we offer to our customers, the reliability of the company, our track record, our delivery, our supply chain, the strength of the company, our balance sheet, we're doing well there and we had a record quarter.
Ben Callow: so we're happy with that and so the margin profile guidance really there's really no material change at this time.
Thanks, Ben.
Speaker Change: Our next question comes from Joseph Osha with Guggenheim Partners. Your line is now open.
Joseph Osha: Yeah, following on the previous question, I'm wondering if you can talk a bit about demand and pricing trends in Middle East and North Africa, especially in light of what's happened with Soltech going bankrupt. Thank you.
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So the Middle East and Africa.
Joseph Osha: have vast solar potential and very ambitious goals, particularly in the Middle East and in the Kingdom of Saudi Arabia.
Joseph Osha: where they have a target of on the order of 20 gigawatts per year in Saudi allow so the market is really substantial.
is
Joseph Osha: It's been disclosed the pricing for power, solar power, in that region.
to be as low as...
Joseph Osha: super low lowest pricing in the world and that means everybody along the value chain needs to sharpen their pencils and
and really do whatever we can to make that happen.
Joseph Osha: The benefit of operating over there, in part, is that it's a level playing field. There's no real subsidies there for solar and there's no tariffs. And so you can see in a market that's unsubsidized what solar can really do.
or there's no tariffs and just...
Joseph Osha: delivering at $10 to $20 per megawatt hour. It's really quite impressive. So we don't see that changing in terms of trajectory to answer that part of that question. And I'm going to go to Dan because I think he has some more commentary.
Speaker Change: Yeah, I just was in Abu Dhabi at the World Future Energy Summit. Next Tracker participated in that.
Speaker Change: as we have for many years. I had the opportunity with
Speaker Change: some of the largest customers in that region. What I will say is, as markets mature as they are in the Middle East,
Speaker Change: You're seeing a real flight quality and appreciation for durability of technology. And so, as markets get more, as Howard mentioned, the intrinsic cost of power there,
Speaker Change: Our next question comes from Stephen Fox with Fox Advisors. Your line is now open. Hi, good evening. Two quick ones for me. On the international sales growth, I was wondering if you could maybe force rank, you know, where the best growth came from in the quarter. And then in terms of the visibility that you're seeing in the backlog, is there anything that you would attribute to why it's, you know, been happening, especially the last couple quarters and why it continues? Thanks.
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Howard Wenger: Okay, this is Howard. So the areas, the regions where we really saw in the corridor
Speaker Change: Excellent performance was in Latin America, Europe, and Australia. Those were really the three standout regions.
Speaker Change: and we're really pleased there. It's not to say that the Middle East and Indian Africa aren't important, but that's just in the corridor and it can vary, but that's specific to answer your question on that.
As far as
Have a fantastic day. We'll see you next time.
Speaker Change: Here's the big picture as we see it. Dan used the phrase, flight to quality. We believe that that's what's happening, that over time, with scale, these projects are getting bigger and bigger.
There's there's more of them
Speaker Change: We believe we're emerging as really the trusted brand, but we're also differentiated across many of the key buying vectors.
Proof in Technology.
Proof of Energy Yield
which all contribute to lower LCOE.
Speaker Change: biggest balance sheet in our in our sector or in our in in our segment for for what we offer.
Thank you very much.
Just an unbelievable team that's so committed to customer service.
Speaker Change: and to innovation and stretching the boundaries of what we can do as a company with just extreme amount of focus and know-how and and we deliver we deliver success for our customers and I think that's
Speaker Change: That's what's happening. I think there's separation there for us that we want to continue to drive, and that's what we're doing, and the results speak to that. Thank you very much for your question.
Speaker Change: Thank you. Our next question comes from Mahit Manloy with Mezo. Your line is now open.
Thank you. Thank you.
Speaker Change: Thanks for taking the questions. I'm sorry if I'm just in the prepared remarks, but can you still understand?
be I gross Martin bead and used free
Speaker Change: and what drove that and why would it not be a repeat of that in the next quarter or next year. And then secondly, just want to understand the cadence of bookings, how's it been after elections or after the Trump administration started? Thanks.
Speaker Change: Certainly, I'll take the first part and Howard can take the second part.
Speaker Change: Q3 was a very strong margin quarter overall, gross margins at 36%.
Speaker Change: We did have some tailwinds. Some of these were one-time. Some were operationalized opportunities that we would hope can repeat. I won't go through them all in detail, but FX was a bit of a tailwind that tends to not repeat. We did have lower freight costs where we really operationalized our team. Our operations team is world-class.
and they were able to drive savings and freight.
We also had some savings in material and overhead.
Speaker Change: And so these are real opportunities that we don't necessarily plan on, but we were able to capture in Q3.
Speaker Change: I'm looking forward into Q4 and beyond. I'll talk about Q4. Next earnings call, we'll talk about the next fiscal year. Q4 margins go down a little bit, mostly because of international mix.
And we did talk about last quarter.
Speaker Change: some large, very large international projects that get delivered this year that bring the overall margin mix down a bit.
Speaker Change: So you're seeing, you know, a really strong Q3, a very strong Q4, with a little margin compression based on international power.
We've checked in with our customers and they're
Speaker Change: feeling very good about their pipelines and the projects that they've contracted with us on. So we feel really good about the coming year and closing out this fiscal year.
Speaker Change: And, you know, we kind of toggle to the big picture, which is
Speaker Change: Solar has proven to be a super nimble technology that you can deploy just about anywhere where there's demand constraints and how to deal with rapidly escalating electricity consumption and demand in this country.
and de-bottleneck transmission, de-bottleneck distribution.
and really be a force for solving
Speaker Change: The industry has proven that and we're a big part of that.
Speaker Change: So, we think the macro story will prevail and we've been successful in every administration.
Speaker Change: going back. Many of us have been in the industry for 30 years that are in the company or more and so we've kind of seen it all and it's just the macro
The story prevails.
Thank you.
for the questions.
Thank you. We appreciate it.
Speaker Change: Our next question comes from Julianne Dumond-Smith with Jefferies. Your line is now open.
Speaker Change: Hey, good afternoon team. Thank you guys very much for taking the time. Look, just following up on the international conversation, a lot of discussion by geography. I wanted to ask a little bit more on the MSA coverage. How are you thinking about expanding that business strategy and origination strategy?
Speaker Change: to these novel international geographies. How are you thinking about sort of comparable terms from a duration perspective, kind of thinking beyond
Speaker Change: the incremental backlog you've added here into thinking maybe longer term and also the sustainability of the margins that you're seeing considering potential adoption of an MSA strategy or implementation of an MSA strategy more broadly in international markets.
Thank you.
Speaker Change: Hey Julian, this is Howard. Our framework agreements have been very much focused on the United States. We've had conversations internationally, of course.
Speaker Change: Many of our customers are multinational, big energy companies, and so there is interest in a global framework approach, which we welcome, and we think it's really good for the business. It reduces friction and is great for us and our partners.
and it's proven and we continue to sign these agreements.
So... Thank you.
Speaker Change: We'll have more commentary next quarter, but I would say that right now the core
Speaker Change: business in the international region continues to be on a on a more project by project basis or several projects at a time and
Speaker Change: However, our repeat customers is very similar. It's also at approximately the same clip of 80% repeat.
Speaker Change: internationally. So these are companies that we work with day in and day out.
Speaker Change: And many of them, when we talk to them about a framework agreement, they're getting more acclimated with it, but they say, hey, we're already in this kind of partnering approach, which is, which is really kind of true. So we'll, we'll bring it back for more commentary on the next call.
Thank you.
The
Speaker Change: Our next question comes from Sean McLaughlin with HSBC. Your line is now open.
and Bill Gates. Thank you. Thank you.
Sean Mclaughlin: Good afternoon and thanks for taking my question. I just wanted to come back to
Speaker Change: new products, if you could maybe quantify just how much of sales and order intake the quarter was for new products. And with your push on R&D, I mean, this suggests that the new product pipeline is gonna continue. Maybe if you can just talk about the kind of pricing or competitive advantage you see over time. Thank you.
The End
Speaker Change: Hi, Sean. I'll answer the first part and Howard the second. First of all, we're really excited about the
progress with our new products in the market.
As we've noted, we've
Speaker Change: more than doubled our investment in R&D and product development, and as we introduce these new products, those products come with
Speaker Change: you know, validated information that helps those products become accepted in the market. For example, when we introduced our TrueCapture technology, we had data on
Speaker Change: Utility scale projects that were operating for a period of time with measurement verification protocol so customers know when we bring
Speaker Change: products to the market. It's real hardware, real software, real firmware, and these products can actually operate. Howard, do you want to speak to how we think about that relative to our plan?
Yeah, I mean, we're
Thank you for tuning in.
Speaker Change: We talked about this quarter about how we're getting traction with our Hail Pro 75 product as an example of something that
we believe we're leading the industry on, which is
Speaker Change: a solution for areas that experience extreme weather, including large hail balls. And we had a really strong order of new bookings for that product, and we didn't launch it that long ago.
Speaker Change: So we can, our approach is basically to really develop new technologies or acquire them in the case of the foundation.
but really
invest in R&D.
Speaker Change: and then pilot them with our customers and then we launch them to market.
Speaker Change: In aggregate, for sure, these new products will be material to our next year. So to answer your question about that, these are very important technologies, XTR, TrueCapture,
Speaker Change: the HalePro, the foundations in aggregate for sure. Those are going to be important part of the story next year, and we'll have more color next time. And yeah, I'll just say that R&D investments are really paying dividends for the company.
Thanks for your question.
The
Speaker Change: The next question comes from Vikram Bagri with City. Your line is now open.
Thank you. Bye-bye.
Thank you. Thank you.
Speaker Change: Good evening everyone. I wanted to focus on international too, although it's a third of the business, there's a lot of moving parts.
Speaker Change: I was wondering if you could talk about the Brazil business with the rebound in hydro, the real depreciation and the PPA renegotiation going in the country, how is the environment now, what are you seeing there?
Speaker Change: And on the rest of the world, I was wondering, it seems like margins within the countries are somewhat similar when you look at India, Middle East, and, you know, Brazil.
Speaker Change: Australia. I was wondering if you can just quantify in some way what the margin gap is between the lowest and sort of like margin country in the US and if
Speaker Change: Conversion in those countries going forward can move the margin profile meaningfully at the corporate level.
Speaker Change: And then finally a housekeeping question. I think you mentioned the software will be 2% of the revenues going forward. I was wondering what the attach rate of software is currently to understand if there is an upside or how much of an upside is there to that 2% number that you quoted. Thank you.
Okay Chuck will answer the software question. This is Howard.
Look the
The company has an ethos about
not chasing bad business, okay, so
Speaker Change: We want to be in the best regions in the world in terms of large TAMs, significant TAMs, and where our product plays well.
Speaker Change: and right now, for example, we are not present in China. That's not a market for the company, but there's plenty of other markets that are growing internationally and new countries that are being added all the time.
Speaker Change: and what we're seeing that's driving that are really countries that are setting zero carbon targets.
Speaker Change: and driving to those targets and that's creating sort of a tops-down drive for more renewables.
Speaker Change: In concert with that, our technology is, in many parts of the world, the lowest cost source of generation, okay? And so the fundamentals for growth in these international markets is really...
favorable and we feel good about our position there.
We're not talking about margin differentiation at this time.
Speaker Change: around the world, we feel like that is something that's proprietary.
Speaker Change: And so, but we appreciate the question and I'll check. Why don't you address software?
Speaker Change: Thank you. On the software side, we have built a really great tech stack.
Speaker Change: that our customers really appreciate. We've been selling that at an increasing attach rate to new customers and up selling existing customers, which is why last quarter we saw a fairly significant increase in the software contribution.
Speaker Change: We don't comment specifically on the exact attach rate, but it's been improving, and there's still room to improve a bit more, but we're really proud of the team's results. With that, we'll end the call here. Thank you very much for taking the time today, and we look forward to talking with many of you throughout the quarter and next quarter end.
Speaker Change: That will conclude today's conference call. Thank you all for your participation. You may now disconnect your line.
and the other.