Release Date: October 30, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- NEXTracker Inc (NXT, Financial) reported its seventh consecutive quarter of double-digit revenue growth, with a 29% year-over-year increase for the first half of fiscal 2025.
- The company's backlog reached a new record of over $4.5 billion, indicating strong demand and future revenue potential.
- NEXTracker Inc (NXT) successfully launched new products, including the NX Horizon XTR 1.5 and NX Hail Pro 75, which have been well-received by customers.
- The company has a robust global supply chain and customer service ethic, contributing to its ability to deliver products on time and maintain strong customer relationships.
- NEXTracker Inc (NXT) is the only tracker manufacturer capable of delivering a 100% US-manufactured tracker, providing significant benefits to US customers in terms of investment tax credits.
Negative Points
- The company faces competitive pricing pressures in certain international markets, such as the Middle East, which could impact margins.
- There is uncertainty regarding the impact of the upcoming US election on the solar industry, although NEXTracker Inc (NXT) remains optimistic about its growth prospects.
- The structural gross margin is expected to be in the high 20s to low 30s, which may be lower than recent performance due to competitive pressures and mix shifts.
- The company anticipates increased R&D and sales expenses in the coming quarters, which could impact profitability.
- NEXTracker Inc (NXT) has not provided specific guidance on the proportion of its US business that will utilize the 100% domestic content tracker, indicating potential variability in future revenue streams.
Q & A Highlights
Q: Can you discuss the margin profile of your recent bookings and how they compare to previous quarters?
A: Howard Wenger, President, explained that the new bookings have a consistent mix with two-thirds from the US and one-third from the rest of the world. The margin profile is in line with their profitability goals, and they have Master Service Agreements (MSAs) and volume commitment orders in the backlog.
Q: You mentioned realizing 90% of the backlog in eight quarters. What is driving this improvement?
A: Howard Wenger noted that they are receiving orders with shorter horizons, contributing to the backlog increase. This improvement is due to both international projects with faster revenue conversion cycles and improvements on the US side.
Q: Why did you not specify double-digit growth for fiscal 2026 in your shareholder letter?
A: Dan Shugar, CEO, stated that more details on the FY26 revenue plan will be provided in future earnings calls. He emphasized that the company is in a strong position with a $4.5 billion backlog and steady growth across multiple regions.
Q: Can you elaborate on the competitive dynamics and customer behavior ahead of the US elections?
A: Howard Wenger highlighted that demand remains strong across all major regions, driven by electrification and clean energy needs. The US election is not dampening demand, and there is a flight to quality towards NEXTracker due to their differentiated product and strong balance sheet.
Q: What factors contributed to the strong margins in the first half of the year, and what should we expect for the second half?
A: Charles Boynton, CFO, attributed the strong margins to excellent execution, increased uptake of their TrueCapture software, and accumulated 45X benefits. However, these factors are not expected to repeat in the second half, and margins will likely align with the structural high 20s to low 30s range.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
