Nextracker Inc. (NXT) Q1 2026 Earnings Call Transcript

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Overview

The earnings call summary and Q&A reveal strong financial performance with revenue and EBITDA exceeding forecasts, growing backlog, and strategic acquisitions. The guidance is optimistic with anticipated revenue growth, high free cash flow, and solid gross margins. Despite some uncertainties in policy impacts, the management expresses confidence in market demand and adaptability. The sentiment is further bolstered by diversification efforts and a shift towards a recurring revenue model. Overall, these factors suggest a positive outlook for the stock price in the near term.

Key Financial Performance

Q1 Revenue $864 million, representing year-over-year growth of 20%. The growth was driven by technological leadership, operational excellence, and a relentless focus on customer value.

Adjusted EBITDA $215 million, a 23% increase year-over-year. This was attributed to strong financial performance and operational efficiency.

Backlog Over $4.75 billion, hitting a new record. This reflects healthy global demand and a strong competitive position.

Adjusted EBITDA Margin 25%, an increase of approximately 100 basis points compared to the previous year. This was due to improved operational efficiency.

Adjusted Gross Margin 33%, which included a 150 basis point benefit related to historical shipments.

Adjusted Free Cash Flow $70 million, down from the same period last year. The decline was primarily driven by growth investments in capital expenditures and working capital.

Total Cash $743 million with no debt, highlighting a strong balance sheet and cash flow generation.

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Operating Highlights

NX Horizon tracker systems and TrueCapture technology: Strong demand continues for these core products.

Hail Pro system: Quarter-over-quarter sales increased by 43%, driven by its ability to reduce hail damage risk and insurance costs.

Expanded XTR tracker series: Quarter-over-quarter sales increased by 22%.

eBOS solutions: Newly introduced during the quarter, with optimistic scaling potential.

NX Earth Truss: Cumulative sales surpassed 1 gigawatt.

Global market leadership: Nextracker is the #1 tracker provider worldwide for the tenth consecutive year, with a 26% market share in 2024.

Regional leadership: Leading market position in North America, Latin America, Oceania, and Europe, with flagship projects like the 550-megawatt Oricheio solar power plant in Greece.

Revenue growth: Q1 revenue grew 20% year-over-year to $864 million.

Adjusted EBITDA: Increased 23% year-over-year to $215 million, with a margin of 25%.

Backlog: Reached a record $4.75 billion, reflecting strong global demand.

Cash flow: Generated $70 million in adjusted free cash flow during the quarter, with a projection of over $450 million for the year.

Manufacturing facilities: Expanded to over 25 facilities across the U.S.

Strategic acquisitions: Acquired Onsight Technology, Amir Robotics, and IP from SenseHawk to enhance capabilities in robotics, automation, and AI.

New leadership: Appointed Dr. Francesco Borrelli as Chief AI and Robotics Officer to lead advancements in AI and predictive model-based control systems.

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Risk or Challenges

Evolving U.S. policy environment: The ongoing changes in U.S. policy, including the need for further clarification around treasury cuts and safe harbor provisions, could impact project timing, customer investment behavior, and financial results.

Regulatory and permitting processes: Potential updates to safe harbor provisions and other regulatory actions could affect project timelines and customer investment decisions.

Supply chain management: While the company has expanded its U.S. supply chain, any disruptions or inefficiencies in the supply chain could pose risks to operational execution.

Economic uncertainties: Growth investments in capital expenditures and working capital have reduced free cash flow compared to the previous year, which could impact financial flexibility.

Market competition: The company faces competitive pressures as it seeks to maintain its leadership position in the solar tracker market globally.

Adoption of new technologies: The integration of newly acquired technologies in robotics, AI, and automation poses execution risks, including potential delays or challenges in scaling these solutions.

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Guidance & Outlook

Revenue Projections: For fiscal year 2026, revenue is expected to be in the range of $3.2 billion to $3.45 billion, with relatively balanced quarterly revenue for the remainder of the year.

Adjusted EBITDA: Expected to be in the range of $750 million to $810 million for fiscal year 2026.

Adjusted Diluted EPS: Projected to be in the range of $3.96 to $4.27 per share for fiscal year 2026.

Gross Margins: Expected to remain in the low 30% range, with operating margins in the low 20% range.

Free Cash Flow: Anticipated to exceed $450 million for fiscal year 2026.

Market Trends: Solar is predicted to become the largest source of global electricity supply within the next decade, with strong demand for solar trackers and related technologies.

Product Demand: Strong demand for NX Horizon tracker systems, TrueCapture technology, Hail Pro system, and expanded XTR tracker series. Hail Pro sales increased 43% quarter-over-quarter, and XTR tracker series sales increased 22%.

Strategic Acquisitions: Acquired Onsight Technology, Amir Robotics, and IP from SenseHawk to enhance capabilities in robotics, automation, and AI. These technologies aim to optimize performance, reduce costs, and lower risks for customers.

Regulatory Environment: Monitoring updates to safe harbor provisions and other regulatory actions, which could impact project timing and customer investment behavior.

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Shareholder Return Plan

The selected topic was not discussed during the call.

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Key Q&A

Q:Can you please discuss what conversations have looked like with developers post the OBBB? Are they kind of in wait-and-see mode? And maybe you can also just expand on bookings momentum.

A:Howard Wenger stated that the company is in close contact with owner developers and is pleased with the company's performance. Developers feel good about their portfolios, and the backlog is solid with no projects dropping out. The sales team achieved sequential growth in backlog for the 15th consecutive quarter, and demand signals are strong globally.

Q:Are you planning to offer AI and robotics solutions as a service with a recurring revenue stream, or will this be primarily an equipment sale model? How do these robotic acquisitions integrate with your existing TrueCapture software?

A:Daniel Shugar explained that the company offers a range of solutions, including drones and robotic cleaning technologies. These are integrated into the TrueCapture software, creating a digital twin of sites. Some technologies are already commercially available, while others are in advanced stages of productization. More details will be shared later.

Q:Did the backlog grow quarter-over-quarter, and does that imply bookings were $900 million to $1 billion? Did you see pauses or pull forwards from customers due to policy uncertainty?

A:Howard Wenger confirmed that the backlog grew quarter-over-quarter for the 15th consecutive quarter. While the exact bookings number is not disclosed, the pipeline is growing. There were no systematic pull-ins or pushouts, but some normal project schedule adjustments occurred. Treasury guidance in the coming weeks may influence customer behavior.

Q:What is driving the 11 percentage points on gross margin this quarter, and how should we think about this number going forward?

A:Charles Boynton attributed the higher gross margin to vendor reconciliations over the past few years, adding about 150 basis points or $10 million. Going forward, the impact is expected to be 9%-10% of total revenue, driven by U.S. demand for U.S.-made products and the 45x credit offsetting higher costs.

Q:What percentage of the backlog is safe harbor, and what risks are associated with the Trump executive order and the interior memo?

A:Howard Wenger and Daniel Shugar stated that a very high percentage of the U.S. backlog is safe harbor. The industry is still digesting the interior department guidelines and upcoming treasury guidance, but early indications suggest the risks are manageable. Developers feel good about their pipelines through 2029.

Q:How do you think about the cadence of the overall industry, especially with safe harbor dynamics and potential changes in backlog activity?

A:Howard Wenger and Daniel Shugar emphasized the strong U.S. domestic supply chain and the enduring demand for solar power. They highlighted the flexibility to adapt to potential changes in safe harbor requirements and the growing need for solar and storage solutions. The global market share increased from 23% to 26%.

Q:Can you provide more details on diversification efforts and the 1/3 target over 5 years?

A:Howard Wenger and Daniel Shugar discussed the company's acquisitions and new businesses in robotics, AI, and foundation technologies. These efforts aim to diversify the product portfolio and expand internationally. More details will be shared at the Capital Markets Day in November.

Q:How much of the current backlog do you expect to ship over the next 6 to 8 quarters?

A:Charles Boynton stated that high 80s to low 90s percent of the backlog is expected to ship over the next 6 to 8 quarters, consistent with past metrics.

Q:What feedback have you received from customers regarding the Section 232 tariff specification?

A:Daniel Shugar noted that the company is flexible in working with a wide range of solar panels and highlighted the growth in U.S. solar panel manufacturing, with over 30 companies now producing panels domestically.

Q:Will Bentek expand its product offering to compete more directly with leading eBOS players?

A:Howard Wenger mentioned that Bentek has a robust product development effort and plans to add new products to its offerings. The company is also scaling to better match Nextracker's volume.

Q:Are you moving towards automating the whole assembly process with recent acquisitions?

A:Daniel Shugar stated that the company supports various automation efforts in the industry but focuses on unique robotic technologies for cleaning, site evaluation, and asset management. These efforts are customer-driven and aim to lower costs and improve system reliability.

Q:What are your thoughts on the industry post-ITC expiration and the pricing model for AI and robotics acquisitions?

A:Howard Wenger expressed confidence in the solar industry's ability to compete without subsidies, citing its affordability and reliability. The AI and robotics solutions are moving towards a robot-as-a-service model with recurring revenue, adding to the company's platform development.

Q:Review of Unclear Management Responses

A:Management avoided providing specific details on the exact bookings number, stating it is not disclosed. They also did not provide a clear answer on the potential impact of the Trump executive order and interior memo, stating that the industry is still digesting the guidelines. Additionally, they did not elaborate on potential new product developments for Bentek or fully address the question on custom harnesses.

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Earnings Word Cloud

The most frequently occurring keywords in this quarter's earning call

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NXT Report

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