Good afternoon, everyone. And thank you for standing-by. My name is Sarah, and I'll be your moderator today. Today's call is being recorded. I'd like to welcome everyone to Nextracker's Third Quarter Fiscal Year 2024 Earnings Conference Call. After the speakers' remarks, there will be a Q&A session. At this time for opening remarks, I like to pass the call over to Mary Lai, Vice-President of Investor Relations. Mary, you may begin.

Thank you and good afternoon, everyone. Welcome to Nextracker's third quarter fiscal year 2024 earnings call. I'm Mary Lai, Vice-President of Investor Relations. I'm joined by Dan Shugar, our CEO and Founder; Howard Wenger, our President; and Dave Bennett, our CFO. Following our prepared remarks, we will transition to a Q&A session. As a reminder, there will be a replay of this call posted on the IR website along with our slides and press release. Today's call contains statements regarding our business, financial performance and operations. Including the impact of our business, and industry that may be considered forward-looking statements and such statements involve risks and uncertainties that may cause actual results to differ materially from our expectations. Those statements are based on current beliefs, assumptions and expectations and speak only as of the current date. For more information on those risks and uncertainties, please review our earnings press release, slides and our SEC filings. Including our most recent filed Form 10-Q, which are available on our IR website at investors.nextracker.com. This information is subject to change and we undertake no obligation to update any forward-looking statements. As a result of new information, future events or changes in our expectations. Please note, we will provide GAAP and non-GAAP measures on today's call. The full non-GAAP to GAAP reconciliations can be found in the appendix to the press release, slides of today's presentation as well as the financial section of our IR website. And now, I will turn the call over to our CEO and Founder. Dan?

Thank you, Mary. Good afternoon, everyone. And welcome to our third quarter fiscal year 2024 earnings call. We start this call by noting how thrilled we are to be a fully independent public company after successful separation from Flex in early January. We are appreciative of our time with Flex, in eight year combination that exceeded its goals related to our growth and global expansion. And we sincerely thank the six outgoing board members, all Flex executives for their service. We're also excited to welcome Julie Blunden and Howard Wanger to our Board, further strengthening our directors deep domain expertise in solar, storage and public companies. Let's focus on Q3 results. This was another strong quarter and our fourth consecutive quarter of double digit growth, resulting in record revenue, profit and backlog. Q3 demonstrated ongoing momentum for Nextracker in the solar industry. Our revenue grew 38% year-over-year to exceed $700 million. And our adjusted EBITDA accelerated to a $168 million. It's noteworthy that we've doubled our adjusted EBITDA in the last 12 months. The significant top line and profit expansion was the result of our solid execution, further optimization of our re-architected supply chain and continued rigor and pricing discipline. Our reported $168 million of adjusted EBITDA does not include the anticipated 45X tax benefits which are expected to further increase earnings. Q3's performance was driven by exceptionally high deliveries in our U.S. business growing 70% year-over-year. We also highlight our international expansion progress by celebrating the 10 gigawatt milestone we reached in the Middle East, India and Africa. We have long-term and proven track record in these regions. Where in some cases, we have the advantage of first market mover. Our differentiated product reliability and extreme weather and ability to deliver large volumes scale are well understood by customers.…

Thank you, Dan. Q3 was another successful quarter delivering multiple proof points that our products are differentiated and our team continues to execute on fulfilling customer requirements. It's been an amazing journey as we have scaled Nextracker's revenue to over $700 million this quarter. In just a short two year span, we've more than doubled our quarterly revenue while increasing profitability. Our proactive investments are paying off. We have invested in innovation, increasing our technology lead. We've implemented a regional strategy to further enable international expansion. And we have successfully deployed a strategic pivot to localize our U.S. supply chain which is in full flight. The U.S. remains our largest served market representing 78% of total Q3 revenue. This is a higher percentage than in previous reported quarters. However, we expect our revenue mix to continue to be approximately two-thirds U.S. and one-third international for the full fiscal year '24. We did have some delays of projects in the quarter but this was more than offset by other projects pulling in ahead. As our team continued to focus on customer needs and delivery requests. The international business performed as expected with our EMEA region leading the way with project deliveries in Middle East, India and Africa. We are very pleased with our global supply chain and project management teams as they continue to collaborate with customers worldwide. Establishing local supply has further optimized our offering and provides even more reliability, improving execution on multiple continents to achieve on-time delivery for our customers. Let me now provide some details on our new Q3 bookings. Overall, we are seeing continued strong demand. We had another excellent quarter for new business with a book-to-bill ratio greater than one. Our backlog increased quarter-over-quarter to a new record and remained significantly over $3 billion. In…

Thank you, Howard. Before I start, I'd like to remind everyone that all references to financial metrics except for revenue are non-GAAP adjusted and all growth rates are year-over-year unless otherwise stated. Please note, our Q3 results exclude any benefit from the IRA 45X tax credits related to tracker components. Q3 was another record quarter. Delivering double digit growth for both top and bottom line. And our fourth consecutive quarter of growth since the IPO. Q3 revenue closed at $710 million up 38% driven by a 70% increase in the U.S. market, offset by a decline of 17% in the rest of the world. Q3 revenue mix was 78% and 22% respectively. We saw a material uptick to U.S. revenue, primarily due to strong execution from our teams and progressing projects to schedule. We expect the U.S. to land at the high end of our previously reported full year revenue mix of 60% to 70% of total revenue. Adjusted EBITDA for Q3 was $168 million. An increase of $105 million or 168% growth establishing another new record for the company. Gross margins expanded in Q3 to 30% as a result of our strong execution and favorable mix, both by project and region. As Howard and Dan both mentioned, our teams continued to optimize our supply chain and drive pricing discipline. As I just said, Q3 also had a larger U.S. mix which has somewhat higher pricing and margins versus the rest of the world. Our Q3 EBITDA margin of 23.6% was up over 1100 basis points from the prior year and marks the seven consecutive quarter of sequential margin improvement. Despite Q3's outperformance we continue to expect project gross margins to track in the mid-20s as we manage our business to optimize annual results. Adjusted diluted earnings per share was…

Thank you, Dave. I'm so proud of our team and what we've achieved. Our execution is backed by a strong history of innovation, deep domain expertise, global supply chain and trusted relationships. We're thrilled to begin this year as a fully independent company. We will continue to make strategic investments, expand our talented team and look to pursue additional market opportunities ahead. Nextracker's well positioned to grow and scale globally. We're just getting started. We now look forward to your questions. Let me pass the call back to the operator.

Thank you. [Operator Instructions] Our first question comes from Brian Lee with Goldman Sachs. Please proceed.

Hey, guys. Good afternoon. Thanks for taking the question and kudos on great execution again. First question, I know you probably can't get into all the specifics, but if we sort of backed into what's implied by the guidance for the vendor rebate that you're going to be seeing in fiscal Q4. I guess, I get to something in the ballpark of like a third credit share with other constituents here. I know we might not have all the details to be able to get to that number, but I thought it'd be a bit higher. So is there some additional clarity you can provide as to whether one, is that in the right ballpark or two, is there something unique about your shipments in '23 that you wouldn't get the full share or 50% plus that I think has been implied thus far by you and your peers. Just wondering what we should be thinking about as we head into fiscal '25? And then, I have a follow-up.

Brian, Daniel Shugar. Thank you for your question. We're not commenting on the share that we have with our manufacturing partners. Dave, do you have more share of elaborate on that?

Yeah. Thanks, Dan. Hi, Brian. Couple of things to remember on our fiscal '24. And one is, we've previously guided without 45X, we're going to finish the year measuring our business to that standard. And trying to give you guys enough transparency to understand that we are partnering with our vendors and have a meaningful share and that's the extent of it. But '24 is a transitional year. Starting in January, we started U.S. manufacturing before 2023 but triple down on it after IRA, think about the ramp going through calendar 2023. So you're not at a full run rate at the beginning of it. So to try to measure the amount based on our cumulative catch up entry is not going to be representative of our going forward plan. And then each vendor, we're going to work contract by contract to understand their tax filing status and work with them. And then lastly Q4 is it contains a cumulative catch up for all of those periods over in the ramp. And so in a nutshell, the way we're addressing in fiscal '25, 45X will be operationalized and used as a measure to our performance for us. So it will be in our guidance for fiscal '25, but looking at it for fiscal '24 is really a transitional year. And that's kind of why we've approached it that way.

Yeah. Fair enough. That makes sense. So that figure there are some nuances to the number for this year. Maybe just second question, I'll pass it on. This could be for you Dan. I guess, can you talk a bit about the competitive landscape, the market share outlook, particularly in the U.S., it seems like that has become a bit more noisy of late. I know Nextracker has been winning via innovation and meeting customer requirements. So any reason to believe that won't be the case going forward. Can you maybe speak to examples (ph), where you're getting wins or feedback from customers on this being the reason you continue to win business here in the U.S.

Thank you, Brian. Yes. Product differentiation is a primary driver for winning in the market. That combined with our experience, financial condition. And at the end of the day, what does that need. Our trackers need more energy than other designs that are at scale in the market. We -- you can visually see it if you go on YouTube and you look at our TrueCapture, there's couple three minute video and there you can actually see how the systems are working empirical side by side cases where TrueCapture of operationalize or not. And we harvest more Bifacial through reported by way. About a third of the United States is it a pretty extreme health risk area. And we have operationalized or help pro technology to help customers enjoy operational performance on their system that's safer and we have many successful customers with their fleets using our technology. So there's a variety of factors there. But we've been in the shoes of the customer, what we're focused on is below LCOE. For our customers by having differentiate -- differentiated technology and really strong operational metrics.

All right. Thanks for all the color, guys. I'll pass it on.

Our next question comes from Jon Windham with UBS. Please proceed.

Perfect. Thanks. Great result. So that's about -- you did mention some project delays that you can just, any color you can add on what drove those up you at some project pull forwards to allow you still beat on revenue pre -- pretty solidly but just any commentary about the nature of delays in geography, what caused them be helpful? Thanks.

Sure. This is Howard Wenger. I'll answer that. So we had some delays for example in the Midwest, there is a lot of -- it's the wintertime and it's raining. Facing it muddy, things can get pushed a week or two weeks. So the shipments can vary from quarter-to-quarter as a result of that. Meanwhile, we've had acceleration for customers who want product faster. And so on balance, we'd be on every financial metric, which means we beat on shipments too. So on balance, we're good. But it's not -- we're in the project business where part of that's construction business and things can shift here and there. The other thing I mentioned was the conflict in the Suez Canal region. And that we have factored that into our shipping time frames. So, with our customers, so we able to mitigate and yes, product to our customers on time, so they can finish their projects on time, but things can shift a week or two as a result of different dynamics. Thanks for your question.

Great. Thank -- yeah, thanks for that. I'll take the full Flex accounting questions offline. I won't bore everyone. Thanks again.

Our next question comes from Mark Strouse with JPMorgan. Please proceed.

Good afternoon. And thank you very much for taking the questions. I'll echo my congrats as well. So pretty impressive upside to the guidance with just -- just a quarter to go in the year. I'm curious, if you kind of talking about project movements forward and backwards. If there weren't any sizable project pull forwards into the March quarter that you should call out or is this kind of just broader market acceleration?

It really is this broader market acceleration, Mark. As we noted in our previous call, we have a lot of backlog. Our backlog has grown over call quarter-over-quarter, we're over $3 billion significantly. And so customers in the strength of the market particularly in the U.S., as we noted, 78% of our revenue came from the U.S. in the quarter, which is higher than normal, it can fluctuate quarter-to-quarter, and we expect it to normally be two-thirds, one-third, but there are some pull ins in the U.S., but it's not significantly changing our demand picture at all. Our backlog grew in the quarter. So there's really nothing significant. One thing that Dan noted in his remarks is that there are simply more developers and more EPCs. And we believe we're doing a good job with our team, winning share of the business. So the strength is there, the demand strength is there. And things aren't slowing down because of IRA in anyway. So that's where we're at on balance.

Okay. I'll take the rest offline. Thank you, Howard.

Thanks, Mark.

Our next question comes from Julien Smith with Bank of America. Please proceed.

Hey. Indeed, really very well done. Impressive indeed. Look, thank you guys very much. Appreciate it. So with respect to the 45X, just coming back to what we're seeing executive percentage. If I can ask that question slightly differently rather than what the percentages. How do you think about what a run rate might look like for instance, like how do you think about what that would trend into the '25 period. And is that fully reflective of all the various aspects of 45X as you think about torque tube and beyond?

Hi, Julien. Thanks for your question. Let me just start with the operational aspect and then Dave will speak to the financial. Nextracker is very, very serious about scaling off domestic manufacturing in the states and our other core markets. And we hit this early. And last summer, we announced 25 gigawatts of contracted capacity across the United States. We've operationalize that, we've had six public factory openings. We have over a dozen factories shipping finished goods, all across the United States. And we're going to be in a position to be any customer requests for domestic manufacturer content. And be able to arbitrage any problem with congestion at a poor for -- there is a problem in logistics route or currency or natural disaster what have you. So we're really focused on being able to operationalize that with both the supply chain. And we're achieving great success with our partners. In a number of cases, we've gone back to some of these factories we've started upwards with our partners to double or greater increased capacity in those factories. Dave?

The only thing to add would be is as I indicated there is a lot of moving parts with what quantifies the fiscal '24 Q4 amount and that isn't necessarily a good indicator for what we will be given the ramp, given the one time nature of the cumulative catch up. As we've been saying, we bring the demand, it's a meaningful partnership with our -- with our vendors and we will include that in our fiscal '25 guidance, so it will be transparent you see the uplift to our profitability for fiscal '25.

Both of you guys, thank you very much. I appreciate it. And then just related to on the mix on international, you guys were talking about one-third still. Obviously, some real success abroad, how do you think about what that proportion could trend as you think about year-over-year in terms of recognizing that revenue. And then related, how do you think about the ongoing expansion in gross margin, does that start to top out as you think about that international mix really getting going here, if you will.

Thanks, Julien. This is Howard. So it's a big world, solar works just about everywhere, we had our first project in Sweden. But typically thought it was a great solar market. So, so, but the United States remains the biggest market outside of China in the world. And certainly for Nextracker, it's going to continue to be, the biggest market for some time. But unbalanced there are more locations around the world that we can and we are driving towards increasing that one-third share of our total business because we think that's healthy for the company and provides us more levers for growth. And we're really just getting started in many countries around the world. So as far as margin on that front, we have seen that it can be more price sensitive. But we think that will change over time as customers come to realize the strength of our technology and the importance of the tracker in terms of being designed for a 40 year design life like ours is with the highest quality components, the best reliability, the best performance track record. And the owners of these projects will increasingly drive and the choice of Nextracker being the most reliable and most trusted partner. We've seen that in the United States, we think that's part of our traction. We believe we're going to see that more and more internationally as time goes on. One thing, I want to note. Dan mentioned that we've shipped over 90 gigawatts in the company's history. Two-thirds of those gigawatts is just in the last three years. So when you think about the S curve and the adoption rate and how we're going off that in the experienced space, it will pull increasingly more towards quality, a flight to quality over time. And that's played out in the U.S. already, which is our home market. It will play out internationally as well. Thanks for your question.

I'd like to pile what Howard said, which is this, it's around our philosophy for how we design, how we build, how we serve customers. I can tell you what Nextracker is not going to do. We're not going to cut any quarters on a product quality, design philosophy. You won't be seeing Nextracker's shipping lead acid batteries in any of our controllers. doing any quarter cutting on our product. We will be maintaining the highest standard. Make sure that trackers perform. And that we really set a standard, not only for Nextracker but that solar power systems are the highest performing reliable systems in power generation.

Thanks, Julian.

Our next question today comes from Philip Shen with ROTH. Please proceed.

Hey, guys. Congrats on a great quarter. Just a quick follow-up on Julien's last question there. Specifically for Q3 was international mix down due to seasonality or is it more just strength in the U.S. market. Or was there some slowdown in international growth. And then what is your expectation for the international versus U.S. mix for FQ4? Thanks.

So let's just start for the full year, Phil. We expect to land at roughly one-third, two-thirds for the full fiscal year '24. Okay. So, on balance, you'll see for Q4, numbers that are closer to that. And so, we -- the U.S. market just is very strong right now. And customer are accelerating certain projects and that's what we saw this quarter. And when we can make a difference, right. If you've got one out of 13 weeks, you have some significant projects getting more products this way versus next, the next week for falling out of -- into the subsequent quarter and it can change that ratio, but we're stable at one-third and two-thirds. Yeah, [Multiple Speakers] and I do want to note that new international business is up. International business is up, year-on year, quarter-on-quarter in terms of bookings and revenue.

Got it. Thanks.

So, no slowdown there.

As it relates to booking – [Multiple Speakers] Right. No slowdown. You guys are doing very well with your bookings and your record backlog, which would assume at least $710 million in bookings, I think for FQ3. I was wondering if you could give us just a little bit of color on do you think the FQ3 bookings were closer to $1 billion or maybe closer to $750 million. And then, to what degree can you share any color on what you see for calendar '24 or better yet fiscal '25. I know you have no official guidance, but the reality is, you guys have very long lead times. And you should have good visibility to the degree you can kind of talk through that would be really helpful. Do you expect the bookings strength to continue? Do you expect to be able to continue to hit these record backlog numbers in the coming quarters? Thanks, guys.

We're going to get more detail on the next call as to where we landed on backlog for the year, we mentioned that. I think last quarter, the quarter before that we would be on an annual basis providing more detail on backlog and then quarter-to-quarter some directional guidance. So, I just want to say on the bookings and the bookings strength very consistent for since we've been public company, each quarter that we've reported, our bookings in totality worldwide EPC and BCA business, very consistent. Each quarter in terms of magnitude and very strong. each quarter. Reflecting strong demand globally. Thanks for your question, Phil.

And just on the longer-term, Phil. In my prepared remarks, I noted that the EIA is forecasting a 26% annually compounded growth in solar and states. Does that -- that sounds very high rate. Well, Nextracker's demonstrated 30% annually compounded growth for five years and up. So it is definitely in the realm of possibility, but the United States in particular is going to need a ton of power. So there's a huge opportunity here not just for Nextracker but the whole solar power industry, other tracker companies, new tracker entrants, new solar panel companies, new power electronics companies, new EPCs to really engage in the market. And we need -- we need additional companies. And companies that are serious about performing and delivering high quality products across the value chain. So I mean that is tremendous 300 gigawatts of new power needed in five years in the United States. With the EIA predicting most of that's going to come from solar. That's a big deal. Thank you, Phil.

Right. Thanks, Dan, just -- Yeah. Okay. Thanks.

Our next question comes from Kashy Harrison with Piper Sandler. Please proceed.

Good afternoon. Great quarter and thanks for taking the questions. So my first one is just on the margin. 30%, it's a pretty big number and I was wondering if you could just provide more specifics precisely on how you got to 30% this quarter. And then, Dave, I know you mentioned mid-20s is more of a sustainable level but is there a scenario in which Nextracker is generating 30% gross margins, ex credits, while simultaneously generating a lower LCOE than some of your peers? And I have a follow-up.

Yeah. Thanks for the question, Kashy. Obviously, is there a scenario where we just printed it. So I can say that there isn't a scenario. The higher gross margin for the quarter driven by some level of leverage, we were at a record revenue was at $710. We benefited from a regional mix that we already alluded to, with a high U.S. concentration that generally drives a higher margin profile. And finding better software attach rate. So that's going to move our margin profile up as well. The year-over-year increase we spoke about before but in terms of the sequential increase, it's just execution over and over, the biggest factor in my opinion is pricing discipline and cost discipline. So some of the innovations that we talked to and everyone aligns to the new product introductions that's real, but it's also about innovating our supply chain, our cost downs in enabling us to maintain that higher profitability. But to close, you really should look at it on a greater than one quarter window, if you look at the full year to date. Actually, we are at 27% gross margin and 20% EBITDA which is in that range of what we see as sustainable.

Thank you. [Multiple Speakers]

My apologies. We need to go to next question.

Thank you, Kashy.

Thank you.

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

Good evening. Thank you for taking my question. Great quarter. If I could just go back to your comments on the 45X for fiscal '25, you mentioned that you expect it to be meaningful. And the objective is to reduce costs. So can you just talk through how you expect that to impact margins, years back expected in equal offset or do you anticipate it to be more and you would keep it has higher margin or do you adjust for a demand (ph)?

Hi, Christine. This is Shugar. Thanks for your questions. Look, the 45X was about rapidly spinning off the U.S. supply chain to deal with all the disruptions in the pandemic and create a bunch of jobs here. That was the premise of the 45X, be it in tracker or solar panels. And we have accomplished that. Products are competitive here. With things that are made overseas, with a 45X, and we're delivering on the U.S. product with steel sourced domestically was higher. Quality steel, it's also cleaner. Okay. With respect to our position on the 45X, Nextracker has an extremely diverse domestic supply chain across multiple manufacturing partners with a huge amount of capacity we've announced over 25 gigawatts. With comparison we've operationalize that. Which one would then have to presume or in a very strong position with respect to supporting but also negotiating position with respect to suppliers. So we're going to leave it at that. And we'll be speaking to our FY '25 guidance for the next quarter.

Thank you for your question.

Okay. Great.

Our next question comes from Praneeth Satish with Wells Fargo. Please proceed.

Thanks. I guess with the separation from Flex behind you, I'm just interested in your perspective on M&A, whether you'd be more or less inclined to pursue acquisitions now and then I guess just broadly what gaps do you see in your portfolio and what businesses do you think would be complementary and synergistic?

Thanks, Praneeth. We don't see gaps in our offering. We could expand our offering. We will be very discerning as we were when we did an acquisition of a machine learning company, seven or eight years ago that helped us accelerate our TrueCapture technology. So we just completed the Flex spin off and we are open to a variety of options, we're evaluating things but we're going to be -- have a lot of discipline about how we proceed on that. Thank you.

Our final question comes from Steve Fleishman with Wolfe Street Research. Please proceed.

Great. Excuse me. Thank you. Two quick questions. First, the strong U.S. growth. Any sense on how much that is market growth versus you taking market share? And then just would like more color on your thoughts on the commentary on the trade issues on panels and a lot of that seems backward looking, but what's the risk might be to forward-looking? Thank you.

We focus on our customers in winning and partnering with them. We're doing that with our EPC customers, we're doing that with owners developers directly and power plant owners. And we have a lot of capacity for growth. And we don't really pay attention to whether we're taking share or we're just -- we're just focused on delivering value for our customers and improving our products, investing in innovation. And doing as much solar as we possibly can. We've dedicated our whole careers to solar mainstream solar power. Dan and I have worked in the solar power industry for more than 35 years each. And that's our focus. What we do find, when we do that, but when we have that focus and when the company focuses on value, we do win and it seems like we've win disproportionately. And which is it's good for the company. But it's mainly around and we've shown that we are both global leaguer -- leader in market share. Okay. But we're just -- we're really conveying that to all of our employees at the company, focused on the comps -- customer, focus on innovation, differentiation, delivering value, lowering the cost of energy. I think that a 40 year design life highest quality, highest rollout reliability DNA and that breeds success. Thanks for your question.

We have time for one more question. Operator?

Our final question comes from Moses Sutton with BNP. Please proceed.

Hi. Thanks for squeezing me in. Just a quick one on TrueCapture. So you noted, it's slightly better software attached. Any way to quantify this at all maybe the cumulative installed gigawatt number, how much has changed on a quarter-over-quarter, year-over-year. Just anything that could help us on the TrueCapture side to the numbers. Thanks, again.

Moses, thanks for your question. As we have kept introducing new features on TrueCapture like Split Boost [indiscernible], we've seen increasing uptake on our TrueCapture fleet. And as I mentioned you can visually see it. So we reached few people to watch those videos we have on YouTube. Well, we'll go in deeper on your question after next quarter when we do the annual guidance.

Okay. Thanks again. Congratulations.

Thank you, Moses.

Great. Thank you everyone joining the call. This concludes our call. Thank you.

This will conclude today's conference call. Thank you all for your participation. You may now disconnect your line.