Q4 2025 Nextracker Inc Earnings Call
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Joe: Good afternoon, everyone and thank you for standing by my name is Joe and I will be your conference operator today today's call is being recorded.
Speaker Change: I'd like to welcome everyone to next trackers fourth quarter fiscal year 2025 earnings call after.
Speaker Change: 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 Mr. Chuck Boynton CFO Chuck you may begin.
Speaker Change: Thank you and good afternoon, everyone. Welcome to next trackers fourth quarter fiscal year 2025 earnings call on sharp points and next trackers, CFO and I'm joined by Dan Sugar, our CEO and founder and Howard Wenger our president.
Speaker Change: Following brief prepared remarks, we will transition to our Q&A session.
Speaker Change: As a reminder, there will be a replay of this call posted on the IR website, along with the earnings press release and shareholder letter today's call contain statements regarding our business financial performance and operations, including our business in our industry that may be considered forward looking statements and as such statements involve risk.
Speaker Change: <unk> are 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 next tracker dotcom.
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.
Speaker Change: non-GAAP to GAAP reconciliations can be found in the appendix to the press release and shareholder letter as well as the financial section of our IR website.
Speaker Change: And now I will turn the call over to our CEO and founder.
Speaker Change: Dan.
Speaker Change: Thank you for joining us today to discuss our fourth quarter results and to recap our accomplishments for fiscal 2025 next tracker had a fantastic year and again delivered strong financial performance for the quarter a year ago, we forecast two eight to $2 $9 billion of revenue and we achieved.
Speaker Change: $3 billion for the full year, we forecast $600 million to $650 million of adjusted EBITDA and delivered $775 million for this fiscal year. We are set up for another year of solid growth Chuck will provide the details shortly but I want to.
Speaker Change: First lay out three themes that you will hear during today's call.
Speaker Change: First next tracker continues to win in the market driven by a flight to quality and evidenced by our continued strong bookings growth momentum.
Speaker Change: At our IPO in February 2023, our backlog was $2 1 billion.
Speaker Change: They did significantly over $4 5 billion.
Speaker Change: We have been the global and U S market share leader for nine consecutive years and according to third party sources in 2024, we further increased our leading global market share with top share in U S Europe, Latin America, and Australia regions.
Speaker Change: And we hold a strong position in most other major markets.
Speaker Change: Second we believe that we are best positioned to navigate the current policy uncertainties by virtue of our large geographically diversified order backlog with tier one customers defer.
Speaker Change: Differentiated products and increased customer profitability, our healthy balance sheet and an extremely flexible supply chain comprising over 90 manufacturing sites in 19 countries.
Speaker Change: Third we are accelerating our innovation engine acquiring and organically developing adjacent technologies to create a complete solar power platform by scaling new products and services across next trackers high volume global tracker footprint, we can translate modest invest.
Speaker Change: <unk> funded from free cash flow into meaningful financial contribution for the company with significant incremental value for our customers.
Speaker Change: Our market opportunity is expanding rapidly driven by the structurally increasing global demand for electricity to power AI data centers Evs and buildings.
Speaker Change: This unprecedented surge in electricity demand is approaching the limits of existing generation capacity with terawatts of incremental new capacity needed within the next five years.
Speaker Change: Many key customers have been asking us to offer additional products and services. In addition of solar trackers to increase installation speed improve system performance and enhance long term operating reliability.
Speaker Change: Customers value, our solar domain expertise innovation capabilities supply chain acumen financial strength and business culture.
Speaker Change: Our response to these customer requests.
Speaker Change: Again, the transition from a pure play tracker company to a solar power technology platform supplier last summer when we acquired two specialty Foundation company.
Speaker Change: Today's announcement that we've acquired <unk> Corporation, a pioneer and electrical balance of system or E Mail us.
Speaker Change: Extensive strategy and continues our evolution the <unk> acquisition will enable our customers to source, both tracker systems and import components from a single highly bankable supplier.
Speaker Change: And we've completed additional acquisitions.
Speaker Change: That we will be communicating over the coming months.
Speaker Change: I am really excited about the opportunities that these combinations one block.
Speaker Change: We will be inviting analysts and investors to our headquarters in the fall to see our technologies firsthand and hear more about our longer term plans to scale our business.
Speaker Change: Before turning the call over to Howard to review some of the highlights from the quarter and year, Let me say, how proud I am of the contributions of our employees and how grateful we are for the trust and partnership with our customers and suppliers.
Speaker Change: As Dan noted, we had a great year and finished with a very strong quarter.
Speaker Change: Demand strength continued in Q4, helping to drive record bookings and backlog for FY 'twenty five.
Speaker Change: We believe next trackers benefiting from a general flight to quality, leading to expanded market leadership customers continue to recognize our differentiated advantage driven by our technology platform and supply chain faster installation times operational superiority, including superb on time delivery.
Speaker Change: And overall bank ability and strength.
Speaker Change: In the U S. The general market environment remains strong.
Speaker Change: Tier one owner developers continue to advance their projects and bring them to notice to proceed.
Speaker Change: Multiple owner developers have told us that their pipelines are secure including making the necessary safe harbor investments and locking in domestic supply.
Speaker Change: We are seeing substantially increased demand for 100% domestic content tracker, which is currently being shipped so many projects.
Speaker Change: In the international Arena outside the U S. We signed contracts in 17 different countries in Q4 alone with dozens of new utility and DG projects across the globe.
Speaker Change: The international pipeline continues to grow and we're seeing more countries installing solar.
Speaker Change: In Europe, we had the strongest year ever delivering record breaking volume <unk>.
Speaker Change: Spain was particularly strong and we saw good traction across other countries in Europe.
Speaker Change: We believe our market share grew to a leading position benefiting from our xdr terrain. Following tracker, which is critical to this region as well as benefits from our cost reduction programs.
Speaker Change: We had a very solid year in Latin America led by Brazil, and we extended our reach into new countries. We saw increasing sales gains in our true capture yield management platform regional independent engineers now recognize the benefits of true capture through extensive measurement and verification programs, which owners rely on further.
Speaker Change: Purchase decisions. We were also pleased to see Latin America's first installation of our Nx horizon low carbon tracker.
Speaker Change: Finally, we had excellent gains in big wins in other markets, including Australia, New Zealand, India, Saudi Arabia, and South Africa.
Speaker Change: Now turning to R&D in next trackers innovation DNA.
Speaker Change: In Q4, we reached a record 1220 patents, including 646 issued patents.
Speaker Change: 574 patents pending.
Speaker Change: These patent assets reflect our focus on engineering excellence and solving real world challenges at scale.
Speaker Change: From control algorithms and structural design to tracker performance improvements each patent represents a meaningful source of value for next tracker and for our customers.
Speaker Change: Our innovation focus drove strong demand for new products.
Speaker Change: 125.
Speaker Change: This includes excellent uptake for our Hale Pro series trackers with over nine Gigawatts of hail from 60.
Speaker Change: And hail Pro 75 sold during the year.
Speaker Change: Providing solutions that really matter to owners in the insurance industry.
Speaker Change: We sold 17 Gigawatts of <unk> 75, and <unk> one five during the year reinforcing our global leading position and terrain following.
And we exceeded our sales plan for our recently acquired foundations business with one gigawatt book.
Speaker Change: Moving to pricing costs and project timing.
Speaker Change: In Q4 pricing for next tracker was generally stable and the company continues to manage cost well.
Speaker Change: Project timing was also stable and manageable on a portfolio basis in the quarter.
Speaker Change: With some projects accelerating and some pushing out which is if we have noted previously is the nature of large scale projects spanning multiple quarters and years.
Speaker Change: Our backlog in large project portfolio provide excellent visibility.
Speaker Change: Help reduce uncertainty.
Speaker Change: In summary.
Speaker Change: We had a great year, and we enter our new fiscal year with momentum.
Speaker Change: We are well positioned to achieve our FY 'twenty six outlook bolstered by strong backlog and the quality of our customer partnerships.
Speaker Change: Furthermore, we are excited to expand our product offering by adding ethos foundations and enhanced services to our global leading tracker offering.
Speaker Change: Our customers want us to do more and we are responding we look forward to the upcoming analyst day in the fall, where we will discuss in more depth, our solar power platform strategy.
Speaker Change: Now I'll turn the call over to Chuck to discuss the outlook among other topics.
Chuck Boynton: Thank you Howard and good afternoon, everyone I'm pleased to share our financial results for the fourth quarter and fiscal year 2025, we closed the year with yet another exceptional quarter, reflecting strong execution by the global next tracker team and continued momentum in that utility scale solar deployment.
Chuck Boynton: Worldwide, let's start with revenue performance Q4 reached a record $924 million up 26% year over year, bringing our full year revenue to approximately $3 billion and 18.
Chuck Boynton: 18% increase over fiscal 'twenty for <unk>.
Chuck Boynton: Similar to fiscal 'twenty for our full year geographic revenue mix was 69% in the U S and 31% from the rest of world.
Chuck Boynton: Now moving to profitability Q4, adjusted EBITDA expanded to a record 242, million% to 52% increase year over year with an adjusted EBITDA margin of 26%.
Chuck Boynton: For the year adjusted EBITDA was 776 million also a record and up 49% compared to fiscal 'twenty four as a reminder, fiscal 'twenty four adjusted results did not include 45 X credits.
Chuck Boynton: Adjusted gross profit for the year was just over $1 billion Q4, adjusted gross margin was 33, 4%.
Chuck Boynton: 260 basis points from Q3, primarily driven by one time benefits recognized in the prior quarter.
Chuck Boynton: Adjusted diluted EPS for fiscal 'twenty five was $4 22.
Chuck Boynton: Up 38% year over year in Q4, we delivered adjusted EPS of $1, 29% to 34% increase compared to the prior year.
Chuck Boynton: We also delivered robust cash flow.
Chuck Boynton: Adjusted free cash flow was $227 million in Q4.
Chuck Boynton: And $622 million for the full year.
Chuck Boynton: Operating cash flow in Q4 was 237 million offset by Capex of $10 million.
Chuck Boynton: We closed the year with $766 million in cash with no debt and approximately $1 7 billion of total liquidity.
Chuck Boynton: This positions us well to continue investing in our strategic growth initiatives.
Chuck Boynton: During fiscal 'twenty, five we used $150 million of cash to retire our debt and approximately $152 million of cash to fund key acquisitions, including two foundations businesses.
Chuck Boynton: Today, We also announced the acquisition of <unk> Corporation, a leader in <unk> solutions, expanding our platform and enabling integrated offerings that reduce system costs and simplify utility scale solar deployment.
Chuck Boynton: Looking ahead to fiscal 2026.
Chuck Boynton: We expect revenue in the range of $3 two to $3 4 billion with adjusted EBITDA between 700, and $775 million and adjusted diluted EPS in the range of $3 65 to $4 <unk>.
Dan Sugar: As Dan discussed we are accelerating investments to capitalize on the opportunity ahead of us.
Dan Sugar: This will include some additional opex to build out adjacent solutions, particularly around <unk> technology and go to market efforts more specifically in FY 'twenty six we plan to increase our opex as a percentage of revenue by approximately 100 basis points.
Dan Sugar: We also plan to increase our capex to approximately $100 million in FY 'twenty six.
Dan Sugar: All while generating more than $450 million in free cash flow on.
Dan Sugar: On the M&A front in FY 'twenty five we spent approximately $152 million in cash to acquire several businesses.
Dan Sugar: As Dan mentioned, we recently closed several new transactions the payments associated with these deals in our prior transactions will require approximately $110 million in cash this fiscal year exclude.
Dan Sugar: Excluding any additional M&A or capital allocation activity, we expect to end fiscal 2006 with over $1 billion in cash.
Dan Sugar: Investing for growth, while driving strong cash generation remains core to our strategy.
Dan Sugar: We expect structural gross margins for fiscal 2006 in the low Thirty's. This takes into consideration geographic mix impact of tariffs and the investments to scale, the recently announced acquisitions.
Dan Sugar: While we have taken a prudent approach to guidance due to ongoing macroeconomic uncertainty our confidence in the business is grounded in several key drivers.
Dan Sugar: The strength of our record backlog.
Dan Sugar: Continued flight to quality amongst solar developers and the deep capability and commitment of our global team.
Dan Sugar: In summary, next tracker delivered another year of record results with strong revenue growth expanding profitability and excellent cash generation.
Dan Sugar: We are strategically reinvesting into this momentum to grow market share expand our portfolio and create long term shareholder value.
With that we're happy to take your questions.
Dan Sugar: Operator.
Dan Sugar: Okay.
Dan Sugar: Now open the line for questions if you'd like to ask a question. Please dial star one on your telephone keypad.
Dan Sugar: Any reason you need to remove your question you can dial star to again to ask a question. It is star one.
Speaker Change: The first question is from the line of Mark Strouse with Jpmorgan. Your line is now open.
Mark Strouse: Great. Thank you very much thanks for taking my questions. Congrats on the continued execution.
Speaker Change: Maybe Dan or Howard.
Speaker Change: There's a lot to get through here, but I wanted to start with the house tax Bill just given your long experience in this space.
Speaker Change: Knowing that things can still change, but just kind of based on your experience based on kind of your initial conversations with partners.
Workable do you think this package is with regards to some of the new provisions like the timing being based on placed in service.
Speaker Change: The fee arc requirements et cetera, not just for tractors, that's where the overall space just kind of given my view that you're a good spokesperson for the overall industry. Thank you.
Dan Sugar: Thanks, Mark both this is Dan sugar, both Howard and I have been to Washington, We've met with.
Speaker Change: Congressional representatives.
Speaker Change: We've been working with our trade associations and obviously very focused on these issues.
Speaker Change: There are things in the.
Speaker Change: A reconciliation bill that are favorable and there are things that need attention and an ongoing work in the favorable category.
Speaker Change: The 45 ex <unk>.
Speaker Change: Treatment.
Speaker Change: As it relates to <unk>.
Speaker Change: Incentives to manufacture certain components in the United States.
Speaker Change: Additionally, the <unk> 48, as it relates to the timing of the 30% investment tax credits and the timing of those those two are generally generally favorable.
Speaker Change: Need for improvement would be the transferability.
Speaker Change: Provisions.
Speaker Change: Placed in service versus start of construction timing as it relates to when tax credits are.
Speaker Change: Okay.
Speaker Change: Locked in and the Fiat <unk>.
Speaker Change: Areas that deal with.
Speaker Change: Certain components that are in solar systems that may.
Speaker Change: Half of foreign origin, how those can impact so there are opportunities for improvement in those I would say it's fair that.
Speaker Change: Collectively just with the NASDAQ or people we've met with.
Speaker Change: Over 15 Representatives.
Speaker Change: In the last few weeks or so.
Speaker Change: Peers and industry associations have met with many more.
Speaker Change: Generally very supportive of our make in America initiatives next tracker alone has had nine public factory openings of new or massively expanded factories, making our equipment we have over 25.
Speaker Change: Manufacturer partners across U S. Others in the industry are.
Speaker Change: The amplify that and Thats really recognize I think it's also recognize that solar is a really key part of the.
Speaker Change: Energy dominance in that I mean.
Speaker Change: Solar was over 80% of the capacity installed in the grid last year, so that all of that subsidy recognized.
Speaker Change: So we're cautiously optimistic the areas.
Speaker Change: Outlined for need for improvement, we're going to have constructive dialogue with our representatives and be able to.
Speaker Change: Move the needle forward that said the <unk>.
Speaker Change: Final Bill.
Speaker Change: Not done until it's done so well need to see where that lands.
Mark Strouse: Thanks, Mark next question please.
Speaker Change: Thank you. The next question is from Ben <unk> with Baird. Your line is now open.
Ben: Hey, guys congrats on the results.
Speaker Change: Maybe if you could just talk about international.
Ben: The business there.
Ben: And how do we think about margin going forward.
Ben: As to your backlog.
Ben: No.
Ben: Yeah.
Ben: Sure. This is Howard.
Speaker Change: Yes, we're really pleased with how we ended the quarter both on the revenue side and booking side and we continue to perform within the 30% to 40% of our business being international or rest of world and the balance 60% to 70 being in the U S.
Ben: And that's where we're at.
Ben: We've been very consistent in our shareholder letter on that front and our backlog reflects that the international business continues to harm there are more countries. As we noted in our remarks that we did business in Q4 alone in 17 countries outside the United States and.
Ben: Many of them are.
Ben: Kind of countries that we don't talk that much about like Saudi Arabia in Greece in Peru, and Chile in Bulgaria.
Ben: These were released for countries, where we actually booked and signed contracts in the quarter amongst others. So.
Ben: And from a margin perspective, we've been quite consistent in saying that the margins are lower internationally generally speaking.
Ben: And we've been able to as a combined overall company maintained really healthy margins.
Dan Sugar: In the past and Thats what were outlook going forward. Thanks for the question Dan.
Speaker Change: Thank you. The next question is from Philip Shen with Roth Capital Partners. Your line is now open.
Philip Shen: Hi, everyone. Thanks for taking my questions Congrats on the strong results.
Philip Shen: First one is a follow up on the House draft Bill.
Speaker Change: Sure you mentioned the fee.
Speaker Change: Restrictions and then the change in language from.
Speaker Change: Construction starts to place in service I was wondering if you might be able to quantify what kind of impacts that might.
Speaker Change: There might be if this these provisions were to become law.
Speaker Change: What kind of impact could we see.
Speaker Change: Each one of these.
Speaker Change: New items on volumes for let's say for.
Speaker Change: For the industry calendar 'twenty six and seven.
Speaker Change: And then.
Speaker Change: On bookings.
Speaker Change: Can you share the directionality of what F Q4 bookings looked like it was it well above 1 billion one point.
Speaker Change: If you can give a desk and what that would be great and then what are you.
Speaker Change: What's your expectation in terms of bookings activity.
Speaker Change: In the coming quarters, given the uncertainty in the marketplace, although we have some.
Speaker Change: Better understanding of.
Speaker Change: Where the change.
Speaker Change: Changes to the IRA might be not thanks.
Speaker Change: Yeah. Thanks, So I'll take the first part as it relates to the policy and then Howard will jump in on the rest.
Speaker Change: It's really early days on this bill this Phil it's got a long way to go. It was just published it's going to have a quite a journey.
Speaker Change: And we don't have precise.
Speaker Change: Answers to your question I would say, though directionally.
Speaker Change: The there'll be little impact for the next few years in terms of the.
Speaker Change: <unk>.
Speaker Change: What are realized.
Speaker Change: Financial results will be.
Speaker Change: What we're looking at is more intermediate term.
Speaker Change: Three four years out how it relates to new projects that as.
Speaker Change: The projects that are grandfathered in now which can go two to three years become fulfilled.
Speaker Change: So it's really the future book of business that we will have the most impact due to the policy areas that need work that we outlined earlier on the call.
Speaker Change: Howard can you take the second part of his question. Please sure Hey, Phil So.
Speaker Change: We've had sequential growth in our backlog.
Philip Shen: Since going public every quarter and this last quarter was no exception, we had record revenue and we still at $924 million and we still increased backlog sequentially.
Speaker Change: So.
Speaker Change: That gives you.
Speaker Change: Gives you some some color on the bookings strength this quarter.
Speaker Change: And as far as in the coming quarters, our pipeline is healthy.
Speaker Change: The U S market, what we're finding is we talk a lot with 100 developers.
Speaker Change: <unk> safe harbored and they've secured there the tier ones for sure.
Speaker Change: As with multi gigawatt pipelines with a lot of investment behind it safe harbored.
Speaker Change: They are telling us their pipelines of secure which means for us is.
Speaker Change: Really good news. So in addition to the backlog.
Speaker Change: Being significantly over $4 5 billion. Our pipeline is continues to be very healthy.
Speaker Change: And the flagship of our where we do business in the United States and that continues moving forward.
Speaker Change: Thanks, Phil.
Speaker Change: Thank you. The next question is from Brian Lee with Goldman Sachs. Your line is now open.
Speaker Change: Okay.
Speaker Change: Thanks for taking the question.
Speaker Change: Some great execution here.
Speaker Change: I had two sort of modeling guidance related ones.
Speaker Change: First one would just be.
Speaker Change: Yes around the revenue outlook.
Speaker Change: Mentioned that in your business is evolving.
Speaker Change: Kind of a platform solution smaller going forward. So can you give us a sense of.
Speaker Change: As we look at the 26 revenue guidance.
Speaker Change: Much of the revenue is coming from some of your new business foundations and unpack how much is coming from maybe some price capture with steel going up and then what's the delta between what Youre seeing in international versus domestic and then secondly, just on the margins if I look at your guidance.
Speaker Change: Implying EBITDA margin sort of in that 22% range. You just came off a year, where you did 26 I know you were talking about 100 basis point headwind from higher Opex and investment, but is there a bridge too.
Speaker Change: EBITDA margins are being Brexit would be guided.
Speaker Change: Down year on year or is that just you are.
Speaker Change: Your level of conservatism baked in there thanks guys.
Speaker Change: Yes, Thanks, Bryan Chuck will.
Speaker Change: Get into some detail I will just say at a high level.
Speaker Change: We're.
Speaker Change: Guiding up for another year of.
Speaker Change: Solid growth.
Speaker Change: We will be in terms of getting into how much the new product offerings will be contributing to our total picture will be in a position to do that at the upcoming analyst day, we're going to have in the fall.
Speaker Change: And we will be.
Inviting our analysts.
Speaker Change: And investors to participate in that at our headquarters here in Silicon Valley, and we'll be breaking that down.
Chuck Boynton: At greater detail at that time, Chuck great. Thank you, Brian So first of all fiscal 'twenty five was just a stellar year.
The company had a record Q4 and had incredibly strong margins.
Chuck Boynton: All year.
Chuck Boynton: What you saw and we talked about in Q2 and Q3 was we had a number of <unk> that really helped increase both gross margin and operating margins.
Chuck Boynton: As we look forward into fiscal 'twenty, six it's really a year, where we're leaning in on growth and looking for multi years of growth.
Chuck Boynton: Mentioned in our letter that we see in five years, a third of our business coming from non tracker revenue.
Chuck Boynton: So the strategy is really about leaning in for growth. So we're investing in Opex as you mentioned, we're investing in capex investing in the acquisitions as well as organic activities to drive growth that we'll talk about in the fall at our analyst day.
Our margin profile. If you look at Q4, we were in that.
Chuck Boynton: 33, 4% for Q4, and Thats kind of a good number and thats structural margins. We talked about are kind of in the low 30 structural gross margins in our outlook contemplates that same kind of range for fiscal 2006, and so we feel that.
Chuck Boynton: Low thirties gross margins low twenty's EBITDA margins as a really good place to plan and run our business. Thank you.
Chuck Boynton: Thank you the.
Kashi Harrison: The next question is from Kashi Harrison with Piper Sandler Your line is now open.
Kashi Harrison: Good afternoon, congrats on the fiscal year and thanks for taking the question.
Minor theory is just focused on manpack.
Kashi Harrison: Could you just walk us through strategic rationale go to market how much of the supply chain is U S versus international contract manufacturing versus direct manufacturing and then cost structure I just wanted to get a full picture of how to think about that.
Kashi Harrison: Strategy behind this deal thank you.
Kashi Harrison: Yes, we will do a two part I'll answer.
Howard Wenger: A bit on the strategy Howard will then.
Howard Wenger: Filling some of the details to the extent we can go there first we couldnt be more excited about this.
Howard Wenger: Let me just take a step back we're systems thinkers.
Howard Wenger: We've been doing this since the eighties.
Howard Wenger: And back.
Howard Wenger: Back in the day, we actually designed manufactured electrical down system.
As well as mechanical valve system and they go together just like they do in your car or a number of other components and so.
Howard Wenger: We really see there is an opportunity to for our customers.
Howard Wenger: To have.
Howard Wenger: One provider designing and supplying materials to the projects.
Howard Wenger: In.
Howard Wenger: Buildable megawatts in delivering buy blocks in a sequence that works for the customer and <unk>.
Howard Wenger: Also for these products to work well together they touch each other.
Howard Wenger: And so.
Howard Wenger: We're going to continue collaborating with the.
Howard Wenger: <unk> other <unk> providers, we have a great deal of respect for the providers that exist.
And we're going to have the den tech platform continue to support.
Howard Wenger: Fixed systems at work with our tracker with other trackers.
Howard Wenger: But to the extent, it's evolved with our tracker, we see opportunities to co optimize the solutions to add increasing value.
Howard Wenger: For the customers as we look forward.
Howard Wenger: Howard would you like to pick it up from there please sure so.
Howard Wenger: We see massive synergy between electrical balance of system in the tracker because they touch each other literally.
Howard Wenger: And they're designed at the same time.
Howard Wenger: And right now we don't design ethos, but we have.
Howard Wenger: We've announced today, we are doing that now the same project engineering team, which is very large it next cracker.
Howard Wenger: We will be doing the design and engineering of the tracker and the ethos. We also seeing synergies in the product development as Dan mentioned like really thinking about what's the best and fastest way to install a ballast with our tracker, but we're also going to make the epos solutions that.
Howard Wenger: We have available for other trackers and including fixed tilt systems. So.
Howard Wenger: We see a lot of synergy on the design side engineering side and then the sales platform. We touched the same customers, we're selling to the epc's.
Howard Wenger: The owners of the equipment really care about the tracker and they care about the boss and longevity, the reliability, the quality and having our brand and our warranty wrapped around both.
Howard Wenger: Is going to be very powerful.
Howard Wenger: We have spoken with.
Howard Wenger: Several customers already about it and they're really excited.
Howard Wenger: So.
And I will jump into how ourselves when you're finished sure.
Howard Wenger: <unk>.
Speaker Change: Theres just a lot of synergy here and just building on Howard's comment we've actually had customers just tell us point blank.
Speaker Change: They say we want to buy more from you next tracker please offer more.
Speaker Change: Components now, what we really love about Bam Tech.
Speaker Change: We did a lot of due diligence personally went on the floor.
Speaker Change: Their main operation is in San Jose, It's only 30 minutes from our headquarters in Freemont.
Speaker Change: Very well provisioned facility with spare capacity very professionally laid out then.
Speaker Change: <unk> been an early.
Speaker Change: Mover in this category are the boss for 15 years, we love their quality reliability ethos.
Speaker Change: Their culture.
Speaker Change: They're testing, 100% of the electrical harnesses before they ship.
Speaker Change: Which is.
Speaker Change: Very important for durability.
<unk> for customers and we've also spoken to a number of customers that have <unk>.
Speaker Change: <unk> been working with them for a long time for example, solve energy, which is one of the largest CPC is in the United States and the world didn't want to.
Speaker Change: The longest operating.
Speaker Change: It is both a current customer on a long term customer of <unk> Theres, a quote by George Hirschmann in our release, who CEO, saying that he really welcome. This and he has actually been encouraging us to lean in the other thing I would just say is that we need more manufacturing ores.
Speaker Change: All of the above solar in the United States and then tech.
Speaker Change: Has the ingredients to become a more.
Speaker Change: A larger player in the U S, but they were lacking financial.
Speaker Change: Our support and they were lacking a.
Speaker Change: A holistic system design type.
Speaker Change: Approach to the system, we bring those things to to them and we're going to help building out the U S supply chain for.
Speaker Change: And continuing to.
Speaker Change: One of the providers in the industry to support the growth of the U S solar industry down the road, we could look at bringing these products overseas and we could collaborate with others down the road as well, but this was a good first step for US we have domain expertise in this legacy.
Speaker Change: This gets us.
Speaker Change: Very prudent step.
Speaker Change: Up and running into this segment and we look forward to supporting their growth and.
Speaker Change: And serving customers.
Speaker Change: I'll, just close by saying that.
Speaker Change: There is a saying that culture eats strategy for breakfast.
Speaker Change: We are really culturally matched with <unk> they have a great leadership team over there.
Speaker Change: We've interacted with that a lot and there's just it's going to be the integration of the companies is going to is already.
Speaker Change: Seamless thanks for the question.
Speaker Change: Okay.
Speaker Change: Thank you. The next question is from Julien Dumoulin Smith with Jefferies. Your line is now open.
Speaker Change: Hey, good afternoon. Thank you guys very much and again nicely done.
Speaker Change: Maybe just to follow up on that last one a little bit let's focus on the strategy still.
Speaker Change: You're talking about a third of your business coming from non tracked revenue that's pretty impressive right I mean, even if that's five years from now even a third of the revenues would be north of $1 billion. How do you think about reconciling.
Speaker Change: He boss and or other categories I mean, how much you're thinking about scaling this business up to $1 billion plus.
Speaker Change: And realistically what is sort of the cadence of that build out I mean, what are you reflecting in guidance in 'twenty six for instance, and how do you think about that trajectory as well as given the liquidity and cash profile that you guys are alluding to here.
Speaker Change: What is the prospect for having further subsequent acquisitions reflected say by this time when you have this analyst day later this fall.
Speaker Change: You can speak to it yes, thanks, Julian Versace this scaling in North Bay.
Dan Sugar: Okay. Thanks, Julien Dan triggers here I'll take the first part then chuckle jump in on the second.
Dan Sugar: We have in addition, <unk> completed some other acquisitions recently that we have not announced yet.
Dan Sugar: And we will be speaking about those.
Dan Sugar: When we are ready to in the in the.
Dan Sugar: Coming months.
Dan Sugar: And.
Dan Sugar: Let me just pull back and just say how do we approach.
Dan Sugar: How do we approach new technology in the market.
Dan Sugar: And new products and services.
Dan Sugar: First of all we have a very strong organic internal R&D program.
Dan Sugar: We have roughly tripled.
Dan Sugar: The investment in that over the last few years.
Dan Sugar: And we're seeing the fruits of that.
Dan Sugar: In our bookings in what our shipments with our for example, our true capture technology part.
Marine following X TR technology.
Dan Sugar: Our <unk>.
Dan Sugar: <unk> pro.
Dan Sugar: Our systems, all of which we pioneered in the industry and those are quantified to an extent in the shareholder letter and the low carbon tracker. So.
Dan Sugar: We're innovating getting the job done with organic development.
Dan Sugar: Not all great technologies invented here and sometimes even if we're working on something it's more.
Dan Sugar: Prudent to serving customers and scaling is to partner with others that have been doing it for a while and myopically focused on that.
Dan Sugar: So the boss's one category, we have other things that are very exciting we'll be speaking to.
Dan Sugar: As soon as we're ready and we will be providing a lot more granularity about the build out of our non tracker products and services offerings over the coming years during the analyst day in the fall Chuck can you pick it up from there I will thank you Julien.
Dan Sugar: You think about our cash generation. This is a really a great business we.
Dan Sugar: We generate a really good return on invested capital.
Dan Sugar: The cash flow generation in 2006, even after.
Dan Sugar: The capex that we're going to do we expect to generate more than $450 million of free cash flow and even after paying for the current acquisitions in the prior acquisitions, we expect to end the year with north of $1 billion of cash now.
Speaker Change: That does not include new deals that we might do but I'll say, we're prioritizing organic investment we're investing heavily in R&D as Dan mentioned and then we'll continue to evaluate other M&A opportunities, we may or may not do any or announce any but we're looking for areas, where we can add value to our customers and companies that will integrate well with our technology platform.
Speaker Change: Thank you Julien.
Speaker Change: Question. Please.
Speaker Change: Thank you. The next question is from the line of Tim <unk> with Bank of America. Your line is now open.
Tim: Thank you so much for taking my question and congrats on the quarter.
Speaker Change: Can you. Please help unpack the durability of the structural gross margins in the low thirty's that you kind of see.
Speaker Change: Speaking to especially for 2026.
I understand the geographic exposure and the margin differential.
Speaker Change: But how much of that is kind of driven by 45 exports, it's operational execution or product mix improvements.
Speaker Change: Especially post this acquisition.
Speaker Change: As discussed.
Speaker Change: Some of the software pieces.
Speaker Change: Thank you Jeff.
Speaker Change: Next tracker is a such a great company if you look at our backlog.
Speaker Change: I'd say not all but the vast majority of 26 is contracted and so there's a lot of work to do for sure, but we have very good visibility on pricing margins and cost for 2006 now there is still work to do but.
Speaker Change: This is a business that we look at in terms of years in multi years and the structural margins for fiscal 'twenty six are largely.
Speaker Change: Booked as of today and so there's work to do still but for the most part we feel like we're really well positioned for 2006.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: The next question.
Speaker Change: The next question is from Moses Sutton with BNP Paribas. Your line is now open.
Moses Sutton: Hey, Thanks for squeezing me in two basic ones first great to see the EBIT the entry what percent market share do you think Pentax has had in recent past then and does it have sufficient manufacturing capacity and then number two are you starting to see strong pipeline and even bookings visibility for 2028. It seems many specific projects are getting greenlit already.
Speaker Change: Even before that draft Bill came out.
Speaker Change: This is Howard Hey, Moses so ventech, we put them in like the top three.
Speaker Change: Three or four E bus suppliers in the U S.
And.
Speaker Change: So they have a very I would say loyal following.
Speaker Change: They've been under capitalized frankly.
Speaker Change: So thats constrained their growth. So we're really looking forward to unlocking that.
Speaker Change: And.
As Chuck mentioned, we will be giving more details on the outlook and impact on our business.
Speaker Change: Going forward, but they do have a pipeline that does extend out.
Speaker Change: We think this is one of the areas.
Speaker Change: Of late.
Speaker Change: Blake.
Speaker Change: Our sales team.
Speaker Change: So much larger than their team and our platform for the U S and internationally is massive compared to their volume. So we think that we can really increase.
Speaker Change: Demand and supply.
Speaker Change: And really ignite this business.
Speaker Change: Okay.
Speaker Change: Thank you. Thank you.
Speaker Change: The next question is from <unk> <unk> with Wolfe Research. Your line is now open.
Speaker Change: Hey, good afternoon, Thanks for taking my question.
Speaker Change: Just a quick modeling one for me on the 45 to ask it looks like that stepped up by about $25 million in the quarter relative to the kind of run rate of the previous couple of quarters is there any one time items. We should think about there and then also in terms of 2026 guidance can you just kind of speak to what kind of tariff framework you were assuming in there and could we see movement.
Speaker Change: Towards the high end, if more deals get done by the White house or vice versa tariffs Ratchet back up and then similarly on the big Beautiful Bill some of the items that you flagged that needs. Some more work if those get soft and.
Speaker Change: Could there potentially be any impact to the guidance range.
Speaker Change: Great I'll take the first two and then Dan or Howard can take the third one.
Speaker Change: So on 45 back still and yes, Q4 was a little better than the 45 X than planned there was a couple of.
Speaker Change: Kind of one time benefits. It was small I think as we've looked in the past if you look throughout fiscal 'twenty five we averaged about 11% of U S revenue.
Speaker Change: That's probably the upper end of what we had outlook for 2006, when I've looked at roughly 11% of U S revenue and on the tariff side.
Speaker Change: We've taken a prudent approach with our outlook, we feel like we're covered for the year.
Speaker Change: It could be a little better it could be a little worse, but I think we feel like our outlook contemplates.
Speaker Change: Where things are going to land and so we feel comfortable with our prudent outlook.
Dan Sugar: Dan do you want to cover the third part I am sorry could you restate the third part of that question. Please.
Just I mean, you guys identified some some parts of the Republican proposal that maybe could use a little more work.
Dan Sugar: To be more beneficial for the industry, if that were to happen and we get something kind of softer.
Dan Sugar: With the second part of the Bill could you see movement towards the higher end of the range of guidance.
Dan Sugar: Well I think what.
Speaker Change: <unk> said is in Howard this year is pretty baked.
Dan Sugar: It doesn't.
Dan Sugar: I don't see that stuff impacting this year at all to you Howard.
Dan Sugar: No.
Dan Sugar: Yes.
Dan Sugar: Look.
Dan Sugar: The important thing is.
Dan Sugar: That.
Dan Sugar: It's kind of for this year and next year.
Dan Sugar: All of our partners that we've talked with and I'm talking about many many.
Dan Sugar: Developer owners and Etc's theyre, saying that their pipelines are secure all the major tier ones yeah.
Dan Sugar: And so.
Dan Sugar: Of course is could there be upside.
Dan Sugar: Yes anything is possible, but we feel really good right now where we stand we managed to an annual basis, we provided the outlook for the year. This is the first quarter.
Dan Sugar: We feel very very good about our outlook, yes look I'll just taking the long view, we went public a little over two years ago at that time, our backlog was $2 1 billion today, it's well over $4 5 billion and we just had our.
Dan Sugar: Great quarter.
Dan Sugar: And many quarters in a row of book to Bill over one so we feel we feel very good about the business, we feel great about our margin profile our position in the market, we're going to continue operating with.
Dan Sugar: Price discipline.
Dan Sugar: And really lean in on the innovation and customer service listening customer identify with their pinpoints are either developed technology that addresses it or acquire those if we can and then move with operational excellence to crush it and basically have fantastic customer satisfaction, that's our DNA and our.
Speaker Change: Team is myopically focused on that operator, we have time for one more question. Please.
Dan Sugar: Absolutely.
Speaker Change: Last question for today is from the line of <unk> with Wells Fargo. Your line is now open.
Speaker Change: Thanks for squeezing me in here. So I know you mentioned that customers have been coming to you asking for a combined tracker EBIT solution. So it seems like there could be some pent up demand here.
Speaker Change: When we think about the go to market strategy with where you really kind of scale up the <unk> revenue is that something that could start immediately in fiscal 2026 or is it contingent on us finishing out some of the capex build that you referenced or is it a more gradual ramp that'll take you into fiscal 'twenty seven.
Speaker Change: Trying to understand how to think about and model the attach rate for the E bus offering. Thank you.
Speaker Change: Sure. Thanks.
Speaker Change: We will do a two part.
Speaker Change: Well, let me say they have real bookings.
Speaker Change: They are serving customers such as shifting.
Speaker Change: And there is there is extra capacity at Ventech.
Speaker Change: Two.
Speaker Change: Continue scaling to take incremental business.
Speaker Change: So that's that's that's the fact.
Speaker Change: Yes, we think that we can realize.
Speaker Change: Some benefits relative to their current.
Speaker Change: Run rate today.
Speaker Change: It's been like a week since we are.
Speaker Change: Since we acquired them.
Speaker Change: And realize those benefits this year FY 'twenty six we do think that we can increase their run rate this year.
Speaker Change: And just as a point of clarification.
Speaker Change: Customers have asked us to do more than he boss.
Speaker Change: If they want US there is other things customers have asked us to do in terms of adding to our scope.
Speaker Change: I mean were systems.
Speaker Change: Oriented.
Speaker Change: In the earlier days in the industry, we're doing many parts of the pie in terms of the value for customers and.
Speaker Change: So we're looking at where we can add value and where we can also complement.
Speaker Change: The existing industry and <unk>.
Speaker Change: Basically help systems achieve higher levels of actual performance, which is a major thing.
Speaker Change: We'd like to thank you all so much for joining us for.
Speaker Change: This earnings call to recap our.
Speaker Change: Fiscal year, 2025 business and as we set guidance for fiscal year, 2026, and announced our launch of our <unk> business. We very much look forward to speaking with you and callbacks and too.
Speaker Change: Hosting you at our.
Speaker Change: Analyst day coming up in the fall. This concludes the call. Thank you very much.
Speaker Change: Okay.
Speaker Change: That concludes today's call. Thank you for your participation you may now disconnect your lines.