Mark W. Strouse

Mark Strouse with JPMorgan Chase & Co. asked for the non-AI business backlog mix in lower-cost states (which management declined to provide) and inquired about the proportion of book and ship business in 2025 and its expected trend going forward.

Answer

K.R. Sridhar, Founder, Chairman, and CEO of Bloom Energy, stated that a significant double-digit percentage of Bloom's business in 2025 came from book and ship orders, citing an example of powering a data center in 55 days. He views this as a competitive advantage, often serving customers whose previous vendors failed to deliver. Sridhar expects book and ship to remain in double-digit percentages going forward.

Mark Strouse asked for an update on Bloom Energy's long-term margin targets, specifically how gross and operating margins are expected to evolve with increasing capacity utilization, given the rapid changes in the market.

Answer

K.R. Sridhar, Founder, Chairman, and CEO of Bloom Energy, advised waiting for the annual guidance for specific targets. He highlighted Bloom's consistent double-digit cost reductions for over a decade, favorable electricity pricing due to market shortages, and strong operating discipline. Sridhar reiterated that Bloom's factories are not capital-intensive, with investments focused on people, technology, talent for scaling operations, commercial team capabilities, and R&D to enhance leadership in onsite power.

Mark Strouse from JPMorgan Chase & Co. asked for an update on Bloom Energy's long-term margin targets, considering the ongoing capacity expansion and anticipated increase in utilization.

Answer

K.R. Sridhar, Founder, Chairman, and CEO of Bloom Energy, indicated that annual guidance would be provided in 90 days. He advised considering Bloom's consistent double-digit annual cost reductions, the macro-driven pricing pressure on electricity due to shortages, and the company's strong operating discipline. He also noted that factories are not capital-intensive, with future investments focused on talent, technology, and commercial capabilities to enhance leadership.

Mark Strouse asked for clarification on the 36 GWh data center opportunities, specifically if they are in addition to the overall $30 billion pipeline or already included, and what criteria determine inclusion. He also inquired about the reason for the long-duration pipeline decreasing from 60 GWh last quarter to 30-34 GWh this quarter.

Answer

Julian Nebreda (President and CEO, Fluence Energy) clarified that the 36 GWh data center projects are opportunities Fluence is working on (some leads, some in pipeline), and if all were to convert, they would represent an upside to the $30 billion pipeline. Projects enter the pipeline if they have a greater than 50% probability of occurring within two years, driving internal investment and planning. He explained that the 60 GWh mentioned last quarter was a total addressable market (TAM) estimate, including projects in unserved markets, while the current 30-34 GWh represents actual projects in pipeline or leads within Fluence's target markets and customers, vetted for feasibility. He apologized for the previous confusion.

Mark Strouse asked for clarification on whether the 36 GWh of data center opportunities are additional to the overall pipeline and what criteria determine inclusion. He also inquired about the decrease in reported long-duration GWh from the previous quarter.

Answer

Julian Nebreda, President and CEO of Fluence Energy, clarified that the 36 GWh of data center projects are mostly leads, with some in the pipeline, representing an upside to the $30 billion overall pipeline. Projects enter the pipeline if they have a greater than 50% probability of conversion within two years. He explained that the previous 60 GWh for long-duration was a total addressable market estimate, whereas the current 30-34 GWh represents specific projects in Fluence's served markets and customer base.

Mark Strouse asked about the availability timeline for the second domestic content supplier's capacity and whether SmartStack is Fluence Energy's sole long-duration storage solution.

Answer

CFO Ahmed Pasha clarified that the new domestic cell supplier's capacity will be available in approximately 10-11 months, securing future business beyond the current backlog. President and CEO Julian Nebreda confirmed that SmartStack will be Fluence's go-to-market solution for long-duration storage, emphasizing its competitiveness.

Mark Strouse asked for clarification on the second domestic content supplier, specifically whether its capacity is immediately available or if a ramp-up period is expected, given that needs are met for the next couple of years. He also inquired if SmartStack is the sole go-to-market solution for long-duration storage or if Fluence is considering partnerships for emerging technologies.

Answer

CFO Ahmed Pasha stated that capacity from the new supplier will be available in approximately 10-11 months, and current needs for the FY26 backlog are already secured, with this new capacity intended for future business. President and CEO Julian Nebreda confirmed that SmartStack will be the go-to-market solution for long-duration storage, as it is believed to be very competitive.

Mark Strouse asked about the potential impact from a recent executive order on permitting, noting its absence from the company's presentation slide on government policy.

Answer

President and CEO Julian Nebreda stated that Fluence has seen no real impact from the order to date and added his understanding was that the related permitting freezes on federal lands had already been lifted.

On behalf of Mark Strouse, an analyst asked about the basis for the 30%+ revenue growth target for 2026 and the potential for U.S. market share gains. A second question sought details on the traction seen in the digital business.

Answer

President and CEO Julian Nebreda stated the 2026 growth outlook is based on the strength and growth of their internal project pipeline. On the digital business, he clarified the $100 million in Annual Recurring Revenue (ARR) includes both services (75%) and digital (25%). He highlighted successful market entries in ERCOT, MISO, and Japan, expressing confidence the business will become material soon.

Mark Strouse asked about the Electrification segment's growth, specifically how much is driven by overall market strength versus GE Vernova's specific efforts to gain market share, given the record orders in Q4.

Answer

CEO Scott Strazik emphasized that GE Vernova provides a unique solution by linking power generation and electrical equipment, enabling differentiated growth beyond simply drafting on market strength. He noted the addressable market is $150 billion, with GE Vernova at 10%, and highlighted operational improvements and new products like solid-state transformers. CFO Kenneth Parks added that the Prolec acquisition will further optimize transformer distribution and support data center growth, benefiting the electrification business.

Mark Strouse inquired about the Electrification segment's growth, specifically how much is driven by overall market strength versus GE Vernova's specific actions to gain market share, given the record orders in Q4.

Answer

CEO Scott Strazik emphasized GE Vernova's differentiated solution by linking power generation and electrical equipment, enabling outsized growth beyond just market trends. CFO Kenneth Parks highlighted the Prolec GE acquisition's role in optimizing transformer supply and providing distribution transformers for data centers, further benefiting the electrification business.

Mark Strouse inquired about GE Vernova's confidence in Prolec GE's 2028 financial targets, specifically regarding the visibility into revenue and EBITDA projections given the current backlog and the conservative approach of not including revenue synergies.

Answer

CEO Scott Strazik and CFO Ken Parks expressed confidence in Prolec GE's 2028 targets, citing a $4 billion backlog, existing framework agreements with utilities, and significant growth from data center customers (projected 20% of Prolec's business in 2025, up from 10% in 2024). Ken Parks highlighted Prolec's $300 million investment in capacity expansion to support this growth. Scott Strazik also noted the unquantified potential for international expansion of Prolec's medium and low voltage technology.

Mark Strouse asked about the visibility and confidence in GE Vernova's 2028 targets for the Prolec GE acquisition, particularly given the current backlog and the conservative approach of not including revenue synergies.

Answer

CEO Scott Strazik explained that the 2028 targets align with existing financial guidance and are supported by $4 billion in explicit backlog and framework agreements with utilities and data centers, noting data centers grew from 10% to 20% of Prolec GE's business. CFO Ken Parks added that Prolec GE has invested $300 million in capacity expansion to support this growth. Scott also highlighted the potential for international sales of medium and low voltage technology, which is not yet included in the financial guide.

Mark Strouse inquired about pricing trends within the Gas Power services business, asking for details on pricing for both the existing installed base and newly signed service agreements.

Answer

CEO Scott Strazik confirmed that GE Vernova is in a 'price up environment' for services, driven by strong market fundamentals like recent capacity market auctions. He explained that this justifies incremental pricing for upgrades that add capacity. Strazik noted these price increases will materialize in the income statement over the next 12 to 24 months, which is a shorter cycle than new equipment orders.

Mark Strouse inquired about pricing dynamics within the Gas Power services business, asking about trends for both the existing installed base and newly signed service agreements.

Answer

CEO Scott Strazik confirmed a 'price up environment' for services, driven by strong market demand for incremental capacity which justifies higher pricing for upgrades. He explained that this positive pricing will materialize in the income statement over the next 12 to 24 months, representing a shorter conversion cycle than new equipment sales.

Mark W. Strouse requested more detail on the 21 gigawatts of Power segment slot reservations, specifically asking about the breakdown by customer type, such as data centers, and by geography.

Answer

CEO Scott Strazik clarified that of the total 50 gigawatts under contract (backlog plus reservations), approximately 60% is in the U.S. He noted that while the existing backlog has negligible data center exposure, about one-third of the 21 gigawatts in slot reservation agreements is directly tied to the data center build-out.

Mark W. Strouse of JPMorgan Chase & Co. questioned the customer response to recent gas power price increases and inquired about any plans for further pricing actions.

Answer

CEO Scott Strazik stated that while explicit orders were light post-holidays, the intensity of bidding activity is high. He emphasized that customer discussions are more focused on securing capacity and fulfilling power needs for '28-'29 rather than the 'last dollar of price,' indicating that securing premium slots is the main event.

Mark Strouse returned to the topic of 2025 power equipment orders, asking about the specific product mix (Aero vs. H-class) that U.S. hyperscalers are interested in and any financial differences.

Answer

CEO Scott Strazik responded that discussions with hyperscalers are definitively shifting towards HA-class gas turbines as they plan multi-gigawatt data center parks requiring baseload power. He highlighted the maturity of the HA product line and its compelling life cycle economics, which include strong equipment margins and significant long-term services revenue from high utilization rates.

Mark Strouse asked about the future outlook for Nextpower Arabia, specifically if similar gigawatt-scale orders can be expected from the joint venture over the next 12-24 months, given the 2.25 GW order.

Answer

Dan Shugar, CEO and Founder, expressed strong optimism for the Middle East market, citing double-digit gigawatt growth and ambitious targets, exemplified by a 5 GW solar project in UAE. He highlighted solar's cost-effectiveness even in oil-rich regions and Nextpower's strong performance history, including the 400 MW Sakaka project. Chuck Boynton, CFO, added that the new $500 million share repurchase program will be structured and formalized rather than opportunistic, with a cautious approach initially.

Mark Strouse asked about the reasonable expectation for gigawatt-scale orders from the Nextpower Arabia joint venture over the next 12-24 months. He also followed up on the company's approach to its newly authorized share repurchase program.

Answer

Dan Shugar, CEO and Founder, highlighted the robust MENA market with strong double-digit gigawatt growth and ambitious targets, citing a 5 GW project in the UAE as an example. Chuck Boynton, CFO, stated that the share repurchase program would be structured and formalized, rather than purely opportunistic, with a cautious initial approach.

Mark Strouse asked about Nextracker's long-term industry growth outlook through the end of the decade, considering recent policy changes like the 'One Big Beautiful Bill' and updated Safe Harbor guidelines.

Answer

Dan Shugar, CEO and Founder, emphasized strong solar fundamentals, immense safe-harbored projects in the U.S., and sustained international bookings. He highlighted solar's increasing economic viability without tax credits, citing improved panel efficiency and volatility in fossil power costs, expressing confidence in the industry's long-term prospects and Nextracker's record backlog.

Mark Strouse asked about Nextracker's perspective on industry growth through the end of the decade, considering recent policy changes like the 'One Big Beautiful Bill' and Safe Harbor updates, and how this outlook compares to initial IPO growth projections.

Answer

CEO and Founder Dan Shugar affirmed strong solar fundamentals, citing immense safe-harbored projects in the U.S. and sustained international bookings. He highlighted solar's economic viability without tax credits, referencing past projects and improved panel efficiency, and contrasted this with escalating fossil power costs. Shugar expressed confidence in long-term industry prospects and Nextracker's record backlog.

Mark W. Strouse asked for an assessment of the new House tax bill, questioning its workability regarding provisions like 'placed in service' timing and other requirements for the solar industry.

Answer

CEO Dan Shugar stated that while some aspects like 45X manufacturing incentives are favorable, areas such as transferability and 'placed in service' timing need improvement. He noted that Nextracker has been actively engaging with representatives and is cautiously optimistic about achieving a constructive outcome, emphasizing that the bill is not yet final.

Mark Strouse asked about the impact of the updated domestic content rules, questioning if they have accelerated quoting activity and if they provide Nextracker with increased pricing power.

Answer

Dan Shugar, CEO, stated the new rules were positive, simplifying the process for customers to get the 10% ITC bonus and amplifying Nextracker's value. Howard Wenger, President, added that more customers are requesting 100% domestic content, which carries a modest price premium reflecting the increased cost to the company, reinforcing their partnership approach with repeat customers.

Mark W. Strouse of JPMorgan Chase & Co. questioned the company's language regarding fiscal 2026 growth. He asked why Nextracker projected 'growth' for FY26 but stopped short of specifying 'double-digit growth' as it did for FY25, probing whether this reflects backlog visibility or other booking trends.

Answer

CEO Dan Shugar responded that more color on the FY26 revenue plan will be provided in subsequent calls. He emphasized the company's strong position with a $4.5 billion backlog and steady growth across multiple global regions. He noted that while the second half of FY25 will see more shipments to competitive regions like the Middle East, the company is on track for double-digit growth this year.

Mark Strouse asked whether the U.S. government's commitment was more to the $80 billion backstop or the 10 reactors, and if cost overruns would reduce the number of reactors. He also inquired about the margin profile (EBITDA or FFO) during the three stages of reactor development.

Answer

Connor Teskey (CEO, BEP) clarified that the agreement is for $80 billion of reactor contracts prior to any cost overruns, emphasizing the government's commitment to catalyzing nuclear growth and the supply chain, not a fixed number of reactors. He highlighted the partnership as a 'flywheel' for global nuclear growth beyond the initial $80 billion. Mr. Teskey stated that Westinghouse's energy systems division typically operates at a minimum 20% margin during development and construction, expecting this to increase with scale.

Mark Strouse asked about the U.S. government's primary commitment regarding the nuclear partnership (the $80 billion investment or the number of reactors) and the expected margins for Westinghouse's Energy Systems Division across the development and construction phases.

Answer

CEO Connor Teskey stated that the U.S. government is committed to catalyzing nuclear growth and the supply chain, not a fixed number of reactors or a precise dollar amount, aiming for global leadership in nuclear power. He emphasized the partnership's role in kickstarting a multi-decade buildout beyond the initial $80 billion. He also indicated that Westinghouse's Energy Systems Division historically operates at at least a 20% margin during development and construction, expecting this to be a floor going forward with economies of scale.

Mark Strouse asked for details on Brookfield's safe harboring strategy, specifically how much of the U.S. pipeline was secured before potential 2025 rule changes and how the company balances the cost of securing credits against the risk of policy shifts.

Answer

CEO Connor Teskey responded that the vast majority of their U.S. pipeline safe harboring is already completed. He emphasized that their strategy prioritizes using the 'physical work test' over pulling forward significant capital expenditures, ensuring the incremental cost is not material. This approach aligns with their disciplined strategy of only deploying capital when both costs and revenues are locked in, minimizing financial risk.

Mark Strouse asked about the U.S. government's primary commitment – the $80 billion backstop or the 10 reactors – and the expected margin (EBITDA or FFO) for Westinghouse's energy systems division during the development and construction stages.

Answer

CEO Connor Teskey stated the agreement is for $80 billion of reactor contracts, emphasizing the government's commitment to catalyzing nuclear growth and supply chain, not a fixed number of reactors or a precise dollar amount. He explained that Westinghouse's energy systems division historically operates at at least a 20% margin during development and construction, expecting this to be a floor and potentially increase with economies of scale.

Mark Strouse of JPMorgan Chase & Co. requested details on Brookfield's safe harboring strategy for its U.S. projects through 2029. He asked for a breakdown of how much was safe harbored before 2025 versus planned for 2025 and beyond, and how the company is balancing the need to spend now against the risk of potential rule changes.

Answer

CEO Connor Teskey clarified that the vast majority of the safe harboring for their U.S. pipeline is already completed. He emphasized that their strategy prioritizes using the 'off-site on-site physical work test' approach, which minimizes the need to pull forward significant capital expenditures. As a result, Teskey stated that the incremental cost of executing this strategy is 'not particularly material' in the context of their overall organic development spending.

Mark Strouse requested more details on the process and timeline for Generac to get on the approved vendor list (AVL) for hyperscalers.

Answer

President and CEO Aaron Jagdfeld stated that Generac is already a preferred supplier for two global co-locators. For hyperscalers, the AVL process is measured in months and involves a rigorous 'gauntlet' of legal, insurance, entity, and management discussions. He indicated they are in the 'sixth or seventh inning' of this process, seeing no showstoppers, and anticipates future updates as backlog grows and hyperscaler commitments materialize, likely for 2027 and beyond.

Mark Strouse asked for more details on the process and timeline for Generac to get on the approved vendor lists (AVL) for hyperscalers.

Answer

President and CEO Aaron Jagdfeld explained that Generac is already a preferred supplier for two global co-locators. For hyperscalers, the AVL process is measured in months and involves a rigorous 'gauntlet' of legal, insurance, entity discussions, and high-level meetings. He described Generac's progress as being in the 'sixth or seventh inning' with most hyperscalers, with no showstoppers identified. He anticipates continued backlog growth and eventual hyperscaler commitments, likely for 2027 and beyond, as evidence of success.

Mark Strouse of JPMorgan Chase & Co. asked for details on the data center backlog, specifically whether it consists of larger hyperscalers or traditional data centers, and inquired about the feasibility, timeline, and CapEx required for potential capacity expansion.

Answer

Chairman, President & CEO Aaron Jagdfeld confirmed the pipeline includes both traditional data centers and hyperscalers, with significant traction among hyperscalers who are planning for 2027 and beyond. He explained that Generac has nine C&I facilities globally and recently commissioned a new plant in Wisconsin, which frees up other facilities for large megawatt generator production. He stated that while 2026 capacity is sufficient, the company will need to make 'big bold bets' on additional capacity for 2027, which could involve organic expansion and would be funded by strong free cash flow.

Mark W. Strouse inquired about the indirect impact of tariffs on steel prices, how hedges are buffering this, and the potential margin impact or pricing reaction required if prices remain elevated.

Answer

President and CEO Aaron P. Jagdfeld acknowledged that tariffs provide 'air cover' for price increases on key metals. He stated that while hedges are small, the guidance reflects current prices. The company would react to further increases with more pricing actions and its institutionalized 'Pape' cost-out program. He also noted that falling logistics costs could provide a partial offset.

Mark Strouse asked about the impact of tariffs, questioning Generac's medium-term strategy for its supply chain and whether the tariff situation creates a competitive advantage or disadvantage.

Answer

CEO Aaron P. Jagdfeld stated that while he couldn't speak for competitors, Generac has proactively diversified its supply chain with dual and triple sourcing to build resiliency and flexibility. He acknowledged some cost increases are likely but will be managed through supplier negotiations and minimal pricing actions. He asserted that Generac's unmatched scale in key markets is a more significant and durable competitive advantage than any tariff-related positioning.

Mark Strouse of JPMorgan Chase & Co. asked about near-term booking momentum amid regulatory uncertainty and requested more detail on the financial impact of descoping a legacy fixed-price Volume Commitment Agreement (VCA).

Answer

CEO Kevin Hostetler explained that while quoting activity is high, final awards are paused pending regulatory clarity. He detailed that the VCA reconfiguration was a net positive, as projects slipping into 2027 were repriced at current, higher-margin rates, improving the overall quality and profitability of the order book despite a reduction in total backlog value.

Mark W. Strouse asked for details on the growing interest in Volume Commitment Agreements (VCAs), potential safe harbor timelines, and whether Array would introduce new metrics for visibility. He also inquired about Q2 guidance and the status of a low-margin legacy VCA project.

Answer

CEO Kevin Hostetler confirmed active VCA discussions but stated the company is not planning new metrics to maintain the integrity of its order book. CFO Keith Jennings noted that while no specific Q2 guidance was provided, the first half is expected to be ~55% of full-year revenue. He also confirmed the margin impact from the legacy VCA is likely concluded for 2025.

Mark W. Strouse of J.P. Morgan inquired about the factors weighing on the Q1 2025 EBITDA margin guidance and asked about the volume of 'safe harbor' orders received in late 2024 or early 2025.

Answer

CFO Keith Jennings attributed the lower Q1 EBITDA margin forecast to the shipment of the second half of a large, legacy low-margin order and the roll-off of some 45X amortization. CEO Kevin Hostetler added that legacy safe harbor orders constitute less than 10% of the order book and, while new dialogues are occurring, no new safe harbor orders have been booked yet, though some are anticipated in Q1.

Mark Strouse asked about the sustainability of recent revenue growth, questioning if there were one-time benefits from safe harboring or 25D pull-forward in the Q2 results or Q3 guidance. He also inquired about the expected cadence of gross margins beyond the third quarter.

Answer

CEO Shuky Nir confirmed that the Q3 guidance does not include any significant pull-forward of demand and reflects genuine business rebuilding. CFO Asaf Alperovitz added that future gross margin expansion will be driven by higher revenue improving fixed cost absorption, increased U.S. production leveraging 45X credits, new products with better cost structures, and continuous cost-saving efforts.

Mark Strouse requested an update on European pricing actions and their expected normalization timeline. He also asked if the company will continue to provide information on 45X tax credit generation.

Answer

CEO Yehoshua Nir explained that the results from recent pricing promotions are expected in Q2, and no further significant moves are planned until then. CFO Ariel Porat confirmed that while cash flow from 45X transfers will become part of normal business, the amount of credits generated will still be disclosed in 10-Q filings.

Mark W. Strouse of JPMorgan Chase & Co. asked about the company's strategy for refinancing or repaying its current convertible debt and inquired about the net pricing received from the recent sale of 45x tax credits.

Answer

Interim CEO Ronen Faier stated the intention is to hold the cash and repay the convertible debt when it matures in September, as the company has the funds set aside and they are currently yielding interest. CFO Ariel Porat added that the 45x tax credits were sold for approximately $40 million net, at a price in the mid-90s.

Mark Strouse of JPMorgan Chase & Co. inquired about the potential impact of the July 7 executive order on safe harbor rules for projects completing in 2027-2028, and the company's ability to accelerate construction if needed. He also asked about supply chain risks related to potential U.S. tariffs on solar panels from India and the company's ability to pass on any increased costs.

Answer

Gilad Yavetz, Co-Founder & CEO, and Jared Mckee, incoming CEO of Clēnera, responded that 6 GW of projects are already fully safe harbored, covering the majority of their plan through 2027. They affirmed the company's strong liquidity allows for accelerated investment if criteria change. Regarding supply chain, they highlighted a diversified strategy, stating current projects are not impacted by new cases and future contracts will mitigate tariff risks. Yonah Weisz, Director of IR, added that a key supply agreement is an option with no purchase liability.

Mark Strouse inquired about Enlight's ability to manage potential changes to safe harbor rules from the July 7 executive order for its COBAR and Snowflake projects, and asked about supply chain resilience, particularly concerning potential tariffs on panels from India.

Answer

CEO Gilad Yavetz and incoming Clēnera CEO Jared Mckee confirmed that 6 GW of projects are already fully safe-harbored, positioning the company well. They noted that COBAR and Snowflake are already scheduled for completion before 2027. Regarding supply, they highlighted a diversified supply chain strategy and stated that current projects in delivery are not impacted by the new ADCVD case, while future contracts will be structured to avoid it. Director of IR Yonah Weisz added that a key supply agreement is an option, not a liability.

Mark Strouse of JPMorgan Chase & Co. inquired about the potential impact of the July 7 executive order on safe harbor rules for projects completing in 2027-2028, and Enlight's ability to accelerate construction. He also asked about supply chain risks related to potential U.S. tariffs on solar panels from India and the company's capacity to pass on any increased costs.

Answer

Gilad Yavetz (Co-Founder, CEO & Director) and Jared Mckee (VP Business Development) responded. Mr. Yavetz confirmed that 6 GW of projects are already fully safe harbored, and the company has the liquidity to accelerate investments if needed, reaffirming the 2027-2028 roadmap. Mr. Mckee added that key projects like COBAR and Snowflake are already scheduled for completion before 2027. Regarding supply chain, Mr. Mckee stated current projects are not impacted by the new ADCVD case, and future contracts will mitigate this risk. Mr. Yavetz highlighted the company's diversified supply chain, and Yonah Weisz (Director of IR) clarified that a key supply agreement is an option with no purchase liability.

Mark Strouse of JPMorgan Chase & Co. inquired about the potential impact of the July 7 executive order on safe harbor rules for projects scheduled for completion in 2027-2028. He asked about Enlight's ability to accelerate these projects if necessary and questioned the company's supply chain exposure to India, particularly concerning potential tariffs and the ability to pass on costs.

Answer

Gilad Yavetz, Co-Founder & CEO, and Jared Mckee, incoming CEO of Clēnera, responded that 6 GW of projects are already fully safe harbored and the company has the liquidity to accelerate construction if needed. They noted that the key projects in question, COBAR and Snowflake, are already scheduled for completion before 2027. Regarding the supply chain, they explained that current projects are not impacted, future contracts will be structured to mitigate tariff risks, and their diversified sourcing strategy provides resilience. Yonah Weisz, Director of IR, added that a key supply agreement is an option with no purchase liability.

Mark Strouse of JPMorgan Chase & Co. asked about the potential risk to First Solar's contracted backlog through 2028 if the upcoming executive order negatively alters the Safe Harbor language.

Answer

CEO Mark Widmar clarified that the executive order is intended to address the new tech-neutral tax credits, not the legacy Section 48 and 45 credits that govern projects safe-harbored by 2024. Therefore, he stated that the company's contracted backlog through 2028 should be unaffected, and the new guidance actually creates booking opportunities out to 2030.

Mark Strouse questioned the difference between the 2025 cost per watt produced ($0.20) and sold ($0.24), asking if the company is ahead of its Analyst Day targets and if the $0.04 gap is transitory.

Answer

CFO Alex Bradley explained that while produced cost is near Analyst Day targets, it faces new headwinds from tariffs and production mix. He detailed that the $0.04/watt gap in period costs is driven significantly by a near-term surge in warehousing expenses, estimated at $250 million, due to back-end loaded shipments and inventory build. CEO Mark Widmar added that core costs are also pressured by aluminum tariffs and higher-than-expected glass costs.

Mark Strouse of JPMorgan Chase & Co. inquired about the margin drag from legacy energy projects within the MCS segment's backlog and the expected margin trajectory as it gets executed. He also asked about the sustainability of the significant margin expansion in the Applied Water segment.

Answer

CFO William Grogan quantified the impact of lower-margin legacy projects in MCS, stating they will create 50-100 basis points of sequential margin pressure in Q3 before improving in Q4. For Applied Water, he confirmed there were no one-time items, attributing about two-thirds of the 420 basis point expansion to 80/20 initiatives and the remainder to positive price-cost. He expects margins to moderate sequentially in Q3 due to some volume pull-ahead but remain robust year-over-year.

Mark Strouse sought clarification on Enphase's strategy to help its long-tail installer customers access financing, specifically asking if the company was considering using its own balance sheet as part of the solution.

Answer

President & CEO Badri Kothandaraman stated that Enphase is not currently looking at using its balance sheet for these financing initiatives. He emphasized that the company's value lies in its deep data and relationships with installers—including performance history and customer service scores—which positions Enphase as an ideal partner to help vet and facilitate financing arrangements.

Mark W. Strouse sought confirmation that the new battery supply chain would use the same LFP chemistry without a major product redesign. He also asked why the Q2 guide was based on 80% booking, which is lower than the 85% mentioned in recent quarters.

Answer

President and CEO Badri Kothandaraman confirmed the plan is to stick with LFP chemistry and avoid a major redesign, although standard qualifications for new cells are required. He explained that the 80% booking figure is healthy and not a concern, as the timing of this earnings call was earlier in the quarter compared to the previous one.

Mark Strouse asked whether the safe harbor revenue recognized in Q1 and Q2 should be modeled with gross and operating margins that differ from the corporate average.

Answer

President and CEO Badrinarayanan Kothandaraman gave a direct answer, stating that the safe harbor deals should be assumed to have the company's usual gross margins and should not be adjusted in models.

Mark Strouse questioned whether the recent spike in interest rates is causing a pause in the U.S. solar market and requested an outlook for Enphase's European business in 2025.

Answer

President and CEO Badri Kothandaraman responded that U.S. sell-through data remains positive and that he expects 2025 growth to be driven by lower interest rates, ITC adders, and rising utility prices. For Europe, he believes the market is at a bottom, with new products like 3-phase batteries and Balcony Solar set to expand the company's addressable market by $4 billion, positioning Enphase for a rebound when the cycle turns.

Mark W. Strouse asked for clarification on the newly announced strategic review, questioning how it differs from the ongoing capital structure evaluations mentioned in past quarters. He also requested initial views on the recently released House reconciliation language concerning the IRA.

Answer

President and CEO William Siwek explained that the strategic review is a more formalized process of their ongoing efforts, specifically targeting a restructuring of the balance sheet for both near-term and long-term health. Regarding the IRA, Siwek noted disappointment with the draft language, highlighting potential challenges with the 'placed into service' requirement for 45Y and the earlier 2027 end date for wind under 45X, which was treated differently than other technologies.

Mark W. Strouse of JPMorgan Chase & Co. inquired about the contractual risk allocation if new U.S. tariffs were imposed on products from Mexico. He also asked if the previous 2025 adjusted EBITDA target of over $100 million is now unattainable given the projected volume decline in Turkey.

Answer

CEO Bill Siwek explained that while contract specifics vary, tariffs would generally be included in the product cost, and the company is mitigating risk by securing additional U.S. capacity. CFO Ryan Miller addressed the 2025 outlook, stating that while it's too early for specific guidance, TPI still expects top-line growth driven by strong U.S. demand, which should outpace the reduction in Turkey. He deferred a specific update on the EBITDA target until the Q4 earnings call.

On behalf of Mark Strouse, an analyst inquired about the drivers of strong residential solar volumes and whether the historically high volume of capital requests was linked to policy or tariff uncertainty.

Answer

President and CEO Jeffrey Lipson confirmed the resi solar investments were standard mezzanine loans on asset pools, unrelated to SunStrong's corporate issues. CFO Charles Melko attributed the high demand for capital to strong underlying load growth across sectors rather than a pull-forward due to policy uncertainty.

Mark W. Strouse inquired about the timing and risk-adjusted returns for the new 'Next Frontier' investment opportunities, and whether expanding into these verticals would alter the company's goal of reducing reliance on public capital markets.

Answer

Chief Revenue & Strategy Officer Marc Pangburn explained that some new opportunities are near-term while others are further out, but they are viewed as infrastructure assets with long-term contracted cash flows, similar to current investments. President and CEO Jeffrey Lipson added that the funding strategy for these new asset classes would be consistent with the historical model and would not inherently increase or decrease capital raising needs.

Mark W. Strouse asked about the timing of tariff mitigation efforts to better understand how to model the annualized $15 million net impact throughout the remainder of the year.

Answer

CEO Tom Deitrich advised that the majority of the $15 million net cost impact should be modeled for the second half of the year. He explained this is due to the timing of when pricing mechanisms take effect, when sourcing changes are implemented, and the flow-through of existing inventory. He noted a minimal impact in Q1, a small impact in Q2, and a larger impact in H2.

Mark W. Strouse of JPMorgan Chase & Co. asked about the overall bidding activity since the ITC case reversal in January and whether new EPC customers were reversing course. He also requested more color on the 2025 cash from operations guidance.

Answer

CEO Brandon Moss affirmed that the order book remains strong, citing a 1.4 book-to-bill in Q4, and that progress with new customers is continuing unabated. CFO Dominic Bardos clarified that the 2025 cash from operations guidance is lower due to the back-half loaded revenue schedule, which requires significant working capital investment in the first half, thus delaying cash collections.

Mark W. Strouse asked for more color on why Q3 adjusted gross margins came in below the target range, specifically questioning the nonrecurring operational items.

Answer

CFO Dominic Bardos explained the margin pressure was due to a combination of elevated labor costs to manage volatile revenue, expedited freight charges, and other temporary supply chain inefficiencies. He emphasized these were not long-term issues and reaffirmed the company's long-term adjusted gross margin target of 40% to 45%.

Mark Strouse of JPMorgan Chase & Co. inquired about the pricing of the new tolling agreements in Texas and their expected impact on margin accretion. He also asked for an update on merchant pricing trends and whether there was reason for increased optimism.

Answer

CFO Assaf Ginzburg stated that the pricing for 2-hour battery tolling agreements in Texas is roughly half the value of 4-hour agreements in California. He projected that the Energy Storage segment's gross margin will improve towards 20-30% over the next few years, driven by new contracted assets like Bottleneck. Ginzburg noted that while the company still likes the merchant environment in Texas for occasional upside from weather events, the business model is shifting to a more balanced and less volatile portfolio with a higher percentage of contracted assets, which will stabilize and improve profitability.

Asked about the tax equity market, including ITC transferability and the impact of Basel III, and inquired about potential downsides of more frequent securitizations.

Answer

The company reported a strong and growing ITC transferability market with no Basel III impact yet on traditional tax equity. They stated that more frequent securitizations have no downside and are, in fact, beneficial for releasing trapped corporate capital more quickly.