Nextpower Inc.

Good afternoon, ladies and gentlemen, and welcome to the Nextracker 4th Quarter and Fiscal Year 2023 Financial Results Conference Call. At this time, all lines are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press star 0 for the operator. This call is being recorded on Wednesday, May 10, 2023. I would now like to turn the conference over to Dawn Quinby. Director, Finance, and IR. Please go ahead.

Thank you. Good afternoon and welcome to Nextracker's inaugural earnings conference call for our fourth quarter and full year fiscal 2023 results. With me today is our Chief Executive Officer and Founder, Dan Sugar, our President, Howard Wenger, and our Chief Financial Officer, Dave Bennett. All three will give brief remarks followed by Q&A. Slides for today's call, as well as a copy of the earnings press release and summary financials are available on the investor relations section at nexttracker.com. This call is being recorded and will be available for replay on the investor relations section of our website. As a reminder, today's call contains forward-looking statements, which are based on our current expectations and assumptions. These statements involve risks and uncertainties that could cause actual results to differ materially. For a full discussion of these risks and uncertainties, please see the cautionary statements in our presentation, press release, or in the risk factors section of our most recent filing with the SEC. Note, this information is subject to change, and we undertake no obligation to update these forward-looking statements. Please note, we will provide non-GAAP measures on today's conference call. The full non-gap-to-gap reconciliations can be found in the appendix slides of today's presentation, as well as in the summary financials posted on the investor relations section of our website. All growth metrics will be on a year-over-year basis unless otherwise stated. Now, I'd like to turn the call over to our CEO. Dan? Thank you for joining Nextracker's first earnings call since our IPO on February 9th. We will review our full fiscal year 2023, including the fourth quarter recently completed, and also provide guidance. I'm pleased to be joined today by our President, Howard Wenger, and Chief Financial Officer, Dave Bennett. Given this is our first earnings call, we will spend extra time to introduce you to the company, industry, and the policy landscape in which we are operating. Please turn to slide four. We created Nextracker 10 years ago with a vision of a world powered by renewable energy. Our mission for achieving that was to provide the most intelligent, reliable, and productive solar power system. As a company, and together with our industry colleagues, we've made significant progress advancing our vision. Today, solar leads new power plant additions in many grids around the world. Slide five. So what does Nextracker actually do? We design, manufacture, and deliver solar trackers, control systems, and software. Our technology helps customers achieve higher profitability by increasing their energy production, lowering operation costs, and protecting the equipment in extreme weather. Our trackers enable up to 30% more energy to be produced annually compared with stationary solar arrays. The tracker, typically over 300 feet long, rotates the solar panels to follow the sun during the day. Solar panels, electrical inverters, and switch gear are provided by others to the customer. Slide six. For a sense of scale, consider a 325 megawatt project using Nextracker, such as the project we see in this image. This is a big system, but we have single sites that are five times larger. This typical project covers roughly four square miles with thousands of trackers. On average, we delivered a system of this size every week last year. Slide seven. NextTracker has been the global leader in the market as measured by shipment volume, revenue, and profitability for the last seven consecutive years. But achieving market share metrics is not an objective for NextTracker. Market share is a byproduct of what we are really focused on, innovation, operational excellence, and customer success. This focus has resulted in more than 80% of our sales orders coming from repeat business. As of today, we've delivered over 2 million trackers to dozens of countries. In total, our systems support over 74 gigawatts of solar power plants the equivalent power generating capacity of about 85 coal power plants. We achieved these metrics through innovation that will be covered by Howard, a global footprint, and relentless focus on customer service. Nextracker's greatest strength is our team and culture. Our executive leaders have over 20 years of solar experience on average. Six of my six co-founders are still with the company 10 years later, which reflects well on our high-performance culture of teamwork. We have strong, trusted customer relationships and understand the needs of developers, independent power producers, and contractors due to our deep industry domain expertise. Slide 8. We completed our fiscal 2023 on March 31st. We optimized our business for annual, not quarterly metrics. and our results validate our approach. Last year, we achieved record annual revenues of $1.9 billion and EBITDA of $209 million. Year on year, we achieved a 30% growth in revenue and more than doubled our EBITDA while generating over $100 million of free cash flow. We also achieved phenomenal sales results. finishing the year with record backlog of $2.6 billion. We define backlog as firm orders with deposits. A few months ago, amidst turbulent conditions in the financial markets, Nextracker completed a successful IPO. We offer our sincere appreciation to our IPO stakeholders, starting with our global customers. We thank each of our customers for your ongoing confidence and doubling down with Nextracker, enabling our backlog to grow 90% over the prior year. We value our business partners, from contract manufacturers to independent engineers, banks, and consultants that have enabled us to scale and reliably serve the global market. And we are extremely appreciative of our investors who funded our IPO, which was a success for the entire renewable power industry. We believe it is our responsibility to deliver strong investment returns through disciplined performance and ferocious focus on customer satisfaction. In addition to delivering for our investors, we believe this will demonstrate solar is an attractive investment sector such that additional capital is invested to our industry, necessary for realizing our vision of a renewably powered world. And finally, we thank our entire Nextracker team for your professionalism, customer focus, and dedication. Slide nine. Now let's focus on key industry drivers. Paramount is solar's tremendous cost reduction progress. Lazard, a leading financial advisory firm, regularly publishes a comprehensive analysis comparing the production costs of power generation technology. Their latest report shows a new power plant on an unsubsidized basis is lower cost than new coal, nuclear, or gas power generation in most of the world. In fact, solar with an average cost of $60 per megawatt hour unsubsidized is about half the cost of a new coal plant and about a third the cost of a new nuclear plant. A new gas plant at $70 per megawatt hour is slightly higher cost than standalone solar and slightly less expensive than solar plus battery storage at $74 per megawatt hour on average. Slide 10. We just reviewed solar's competitive economics today, which have decreased in cost about 600% over the last 15 years. When you consider the availability of solar incentives, In some markets, it's straightforward to understand why economics are the major factor driving solar demand. Additional policy tailwinds complementing growth are decarbonization, the desire for energy independence further amplified by the Ukraine war, the U.S. Inflation Reduction Act, with similar policies overseas, and appetite to invest in renewable energy and electrification programs. There are two major headwinds impacting solar growth in the US. The first are trade barriers to importing solar panels, especially those with Chinese content. While this situation is improving, industry growth has been materially impacted and many project schedules have extended until panels become available. The second major headwind is delays with electrical interconnection and permitting projects for construction. While these issues are usually solved on an individual project basis, they can delay the project implementation significantly. In aggregate consideration of the cost and policy factors, it's insightful to see that since 2010, solar has increased from about 10% to half of new power generation capacity added annually in recent years. Slide 11. We covered that Nextracker has maintained leading global share. The most recent regional share data from third parties is shown here, superimposed with the estimated total available market through 2030. Nextracker has lead share in North America, Latin America, Africa, and Australia. There is also meaningful markets in Europe, the Middle East, and Asia. In most of these locations, NextTracker has regional offices with sales, engineering, and service to support customers. Slide 12. NextTracker has intellectual property and know-how regarding manufacturing our products, but our strategy has been to outsource almost entirely with manufacturing partners, which is why our depreciating assets are so minimal. The prior chart illustrated the regional solar market. This chart shows how we map our supply chain to align with those local markets. In totality, Nextracker has over 50 partners across 16 countries and five continents. This global diversification provides customers with confidence we can deliver and also provides us international trade optionality that mitigates risk. We believe Nextracker has built by far the largest capacity and the most geographically diversified position in our sector. Slide 13. Let's take a deeper look at our U.S. supply chain. During the pandemic, commodities such as logistics and steel suffered steep inflationary cost pressures, and port congestion impacted our ability to deliver on time. We made a decision early on to leverage our know-how to massively ramp U.S. capacity. Last summer, we celebrated three factory dedication events in Texas, Arizona, and Pittsburgh. At the time, we reported on 10 gigawatts of reported capacity with additional plans in progress. In response to strong demand and the IRA incentives, we further increased capacity in these plans and worked with additional domestic manufacturers and select overseas partners to relocate equipment to the USA. In fact, we have another factory announcement with a key partner coming next week. At the end of fiscal 2023, we have over 25 gigawatts of capacity under contract with over 15 U.S. suppliers. Many of these plants are shipping finished goods today and ramping as they add shifts of personnel. Now I turn the call to Howard to share details about our operations, technology, and customers.

Let me echo Dan by congratulating the Next Tracker team. We could not be more pleased with the company's many accomplishments. We had a very strong finish in Q4, with momentum that has put us in a great position for our new fiscal year ahead. Let me provide some background into our technological innovation, which coupled with the best-in-class team Dan discussed, allows us to win business across all regions and terrains. Please turn to slide 15. We can break down our innovations into three categories covering over 350 patents issued and pending. These innovations are designed to work together to enhance lifetime energy production at the lowest possible capital cost and operations and maintenance costs of the entire solar power plant, while also assuring the highest reliability and control to protect the system. The industry characterizes this as LCOE, which is defined as levelized cost of energy. Offering a lower LCOE is one of the primary factors that enables Nextracker to win in the market. As you can see from the next slide, 16, our inventions resulted in a leading balanced tracker that enables each tracker to be independently powered and controlled. This tracker architecture has unlocked a series of innovations that further differentiate us. For example, Our patented TrueCapture software optimizes energy yield uniquely for every tracker row. We have over 190 projects with TrueCapture deployed around the world, and we believe we lead the industry by far in this category. Our unique balanced tracker design also enables optimum light capture for bifacial solar panels that are now the standard for large-scale systems. Our extreme terrain following tracker called XTR can eliminate all site grading and enables installations on rolling hills and more challenging terrains. We have sold and deployed XTR on over 65 projects globally, again, leading the industry. Our navigator software platform connects all of our trackers back to a central hub that enables single-button control for panel sowing and cleaning, as well as site vegetation management. all backed by an onboard UPS for every single tractor in the field, assuring connectivity and control of the entire solar field, even during grid power outages. In summary, our integrated tracker architecture provides advantages that allows us to win business across all regions and site conditions, all climate zones, and all varieties of terrain around the world. This is illustrated on the next slide, number 17. where you can see Nextracker projects deployed across the United States. We win business in large sunny flat regions like Texas and the deserts of California and Nevada. We win in more diffuse light regions in the south and in the wet rolling hills of the southeast. We win in colder and higher latitude regions in the Midwest and also in the northeast where sites frequently are more constrained with irregular boundaries. This highlights the flexibility of our tracker hardware and software system architecture. With various innovations and extensions of our flagship Horizon Tracker System solution, we can win everywhere. Please turn to slide 18. Our tracker solutions' global scale, financial stability, and long-time industry experience have enabled deep and trusted customer partnerships. Over 80% of our revenue comes from repeat customers. This underscores how we partner with our customers for mutual success. a model we have deployed across the world to continually win business. For example, on the next slide, 19, we show a selection of global project wins from the last fiscal quarter, quarter four. Although this is a small subset of our project and customer wins from the quarter, this highlights the breadth of our global reach and portfolio approach to the business spanning multiple continents. We have a healthy combination of new and repeat customers. from North America to South America, from Europe to Asia and Oceania. These sample Q4 project wins also reflect the strength of our global team in sales, marketing, supply chain, training, and support that provide a platform to further scale and grow. Which brings me to our backlog. On slide 20, we ended the year with a record backlog of $2.6 billion. up 90% from the prior year. We define our backlog as signed contracts for specific projects with deposits from customers. By the end of fiscal year 2023, our backlog includes over $1.8 billion of project specific purchase orders and over $670 million of DCAs or volume commitment agreements comprising multiple specific projects. VCAs are signed contracts with deposits from developers, plant owners, and EPCs, or engineering, procurement, and construction companies. We believe our VCA program, which began last year in fiscal year 2023, provides even greater visibility into our future revenue and growth. In general, legacy backlog contracts take three to five quarters the cycle into revenue. while our VCA agreements typically cycle into revenue from three to eight quarters. In summary, as our backlog demonstrates, we are seeing significant demand strength in all of our core markets around the world, where our global revenue mix continues to be comprised of roughly two-thirds U.S. and one-third rest of world. Now, let me turn the call over to Dave Bennett, our Chief Financial Officer, to review the financial details of the quarter and to discuss our guidance for fiscal 2024.