Q1 2025 Earnings Summary
- Robust backlog providing strong revenue visibility: Nextracker's backlog increased quarter-over-quarter and is over $4 billion, with 80% expected to be realized over the next 8 quarters. This substantial backlog offers significant revenue visibility and supports future growth prospects. ,
- Healthy demand and market share gains in both the U.S. and international markets: The company observed healthy demand in both the U.S. and international markets, with strong bookings and increased manufacturing capacity, including over 20 factories capable of delivering products with high domestic content. This positions Nextracker favorably under the Inflation Reduction Act and enables them to capture market share. , ,
- Strategic acquisitions expanding total addressable market: The acquisitions of Ojjo and Solar Pile International enhance Nextracker's geotechnical capabilities, allowing them to provide integrated solutions for a broad range of soil conditions. This expansion can help address more projects, driving future growth. , ,
- Sequential revenue growth decline in Q2: Nextracker forecasts a mid-single-digit year-over-year growth in Q2, implying a sequential decline from the strong performance in Q1. This suggests a potential slowdown in revenue momentum due to customer scheduling and project delays. ,
- Lengthening project cycles and delayed backlog realization: The company acknowledged that project life cycles are getting longer, with 80% of the backlog expected to be realized over the next 8 quarters, compared to previous expectations of realization within that period. This shift indicates potential delays in revenue recognition caused by factors such as construction permits and interconnection delays.
- Margin compression due to higher costs and lower-margin sales mix: Nextracker anticipates lower gross and EBITDA margins in the latter part of the year, declining from 24% in Q1 to 22% for the full year, due to a higher proportion of international sales with lower margin profiles, and increased supply chain costs including steel and logistics. This may negatively impact profitability if costs cannot be fully passed through to customers. , ,
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Margin Outlook
Q: Why does annual EBITDA margin guide imply decline?
A: Despite a strong Q1 with an EBITDA margin of 24% , we expect margins to moderate due to a higher international revenue mix in the back half of the year, where margins are lower than in the U.S. -
Backlog Realization
Q: Is backlog taking longer to realize now?
A: Yes, approximately 80% of our backlog will be recognized over the next 8 quarters, a bit longer than before due to project cycle lengthening from permitting and interconnection delays. -
Q2 Guidance
Q: Why is Q2 revenue expected to decline sequentially?
A: Our Q1 was exceptionally strong with some deliveries pulled forward, and Q2 reflects customer scheduling; we're guiding to mid-single-digit growth year-over-year, focusing on annual performance. -
Acquisitions Rationale
Q: What's the strategic rationale for Ojjo and Solar Pile buys?
A: We acquired Ojjo and Solar Pile International to address difficult soil conditions, expanding where solar makes sense; timing aligns with our strong liquidity position and market needs. -
Supply Chain Costs
Q: How are rising supply chain costs affecting you?
A: We've faced higher logistics and transport costs recently, but we lock in costs with customers and offset higher U.S. production costs with the 45X manufacturing credit. -
Domestic Content Demand
Q: Are customers ordering trackers with domestic content?
A: Yes, demand is healthy; we've received firm orders ranging from 40% to 100% domestic content, with no delays awaiting further guidance. -
Election Risk Impact
Q: Are customers worried about election risks affecting projects?
A: Majority view is that solar is bipartisan; customers continue investing, believing tax credits are unlikely to be repealed, and demand remains strong despite upcoming elections. -
AD/CVD Tariff Impacts
Q: Is AD/CVD impacting project timelines and bookings?
A: AD/CVD issues are a secondary headwind causing some delays, but primary impacts are from permitting and interconnection; we're still gaining substantial market share. -
Domestic Content Pricing
Q: How does domestic content affect your pricing?
A: Domestic content is significant in the U.S.; we've reshored manufacturing to over 20 factories, enabling us to offer high domestic content and maintain pricing power. -
Market Share and Antitrust
Q: Any antitrust concerns with your acquisitions?
A: No, the acquired companies hold a very small market share; we plan to keep Ojjo's technology available to other qualified trackers, broadening market access. -
AgriPV Opportunities
Q: What is your view on AgriPV market potential?
A: AgriPV uptake varies by market; we're optimistic about combining solar with agriculture, offering community benefits and dual incomes; we're investing in R&D to optimize this. -
Backlog Coverage
Q: Does backlog provide less near-term coverage now?
A: Most backlog is within the 2 to 5-quarter window; the 80% over 8 quarters includes a long tail, but near-term coverage remains solid with lower percentages further out.
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