Nextracker Inc
NASDAQ:NXT

Watchlist Manager
Nextracker Inc Logo
Nextracker Inc
NASDAQ:NXT
Watchlist
Price: 38.85 USD 3.88% Market Closed
Market Cap: 5.7B USD
Have any thoughts about
Nextracker Inc?
Write Note

Earnings Call Analysis

Q1-2025 Analysis
Nextracker Inc

Nextracker Q1 FY 2025: Strong Revenue and Strategic Acquisitions

Nextracker kicked off fiscal 2025 with a robust first quarter, seeing a 50% year-on-year revenue growth and record adjusted EBITDA. The company reported healthy demand in both U.S. and international markets, with a backlog exceeding $4 billion. They introduced innovative products and announced solar trackers with 100% U.S. domestic content, set to ship in early 2025. Key acquisitions, such as Ojjo and Solar Pile International, aim to enhance their geotechnical capabilities for solar projects. Despite strong Q1 margins, guidance remains cautious at 22% adjusted EBITDA for the year due to anticipated international mix impacts .

Strong Start to the Fiscal Year

Nextracker's fiscal year 2025 began robustly, with a notable 50% increase in year-on-year revenue. The company achieved record adjusted EBITDA, marking the sixth consecutive quarter of double-digit growth. This growth is driven by healthy demand in both U.S. and international markets, resulting in a backlog surge to over $4 billion.

Expansion and New Offerings

During the quarter, Nextracker introduced new products like the AgriPV solution and NX Low Carbon Tracker. The company also announced orders for solar tracker solutions with 100% U.S. domestic content capability, expected to ship in early 2025. These advancements are complemented by factory expansions and strategic acquisitions, including Ojjo and Solar Pile International, enhancing their geotechnical capabilities.

Guidance and Market Expectations

Nextracker anticipates stronger revenue contributions from international markets, predicting a distribution shift to two-thirds U.S. and one-third international. Despite a strong Q1, the company maintains its annual adjusted EBITDA guidance at 22% of sales, accounting for potential margin variations and a balanced international mix.

Grid-Enhancing Technologies

Highlighting the importance of grid-enhancing technologies, Nextracker discussed the use of dynamic thermal rating and advanced conductors to improve power transmission efficiency. These innovations address the challenges of integrating renewable energy into the grid, with significant interest and support from U.S. regulatory bodies and utility commissions.

Customer Demand and Market Dynamics

Customer demand remains robust, particularly for trackers with domestic content. Nextracker is well-positioned to meet this demand, having established over 20 manufacturing facilities with a capacity exceeding 30 gigawatts. The company's strategic decisions during the pandemic to reshore manufacturing have paid off, aligning with favorable policy developments like the Inflation Reduction Act.

Acquisitions and Strategic Positioning

The acquisitions of Ojjo and Solar Pile International are set to enhance Nextracker's competencies in addressing diverse soil conditions. These technologies, validated through extensive testing, are early in their market adoption but promise significant value in expanding solar's viability in challenging environments.

Backlog and Revenue Visibility

With a backlog over $4 billion, Nextracker projects 80% of this will be realized in the next eight quarters, providing substantial visibility. The company continues to perform well in bookings, maintaining a strong market presence and capturing a fair share of the industry's growth.

Investments and Cost Management

Despite higher supply chain costs, largely due to logistics and steel price fluctuations, Nextracker has implemented strategies to mitigate these impacts. The company's investments in domestic manufacturing and hybrid supply chain strategies have positioned it strongly to manage cost variability and meet market demand effectively.

AgriPV Potential

Nextracker is optimistic about the potential of AgriPV, an innovative integration of agriculture and solar power. With projects like the Mammoth solar project in Indiana showcasing successful implementations, the company is investing in research to optimize crop yield alongside solar energy production, aiming for widespread adoption where applicable.

Outlook and Strategic Focus

Nextracker's strategic focus on customer needs, innovative product offerings, and expansion into international markets underpins its positive outlook for fiscal 2025. The company is committed to advancing the clean energy transition and maintaining its leadership position in the solar industry.

Earnings Call Transcript

Earnings Call Transcript
2025-Q1

from 0
Operator

Good afternoon, everyone, and thank you for standing by. My name is Zala, and I'll be your conference operator today. Today's call is being recorded. I would like to welcome everyone to the Nextracker First Quarter Fiscal Year 2025 Earnings Call. [Operator Instructions]

At this time, for opening remarks, I would like to pass the call over to Ms. Mary Lai, Vice President of Investor Relations. Mary, you may begin.

M
Mary Lai
executive

Thank you, and good afternoon, everyone. Welcome to Nextracker's First Quarter Fiscal Year 2025 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 Chuck Boynton, our CFO. we're excited to have launched a new shareholder letter format along with our press release. On today's call, we will open a brief -- with a brief message from Dan and then immediately transition into a Q&A session. As a reminder, there will be a replay of this call posted on the IR website along with the press release and shareholder letter.

Today's call contains statements regarding our business, financial performance and operations, including our business and our 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, shareholder letter and our SEC filings, including our most recently filed Form 10-K, which are available on our IR website. 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 reconciliation can be found in the appendix to the press release and the shareholder letter as well as the Financials section of the IR website.

And now I will turn the call over to our CEO and Founder. Dan?

D
Daniel Shugar
executive

Thank you, Mary. Welcome to Nextracker's First Quarter Fiscal 2025 Earnings Call. I would like to extend a warm welcome to our new Chief Financial Officer, Chuck Boynton, who joined Nextracker several months ago and will be participating in our question-and-answer session today.

Our fiscal year is off to a strong start with another quarter of solid execution. Our first quarter had a 50% year-on-year growth in revenue and record adjusted EBITDA. It was our sixth consecutive quarter of year-over-year growth, double -- of year-over-year double-digit revenue growth. In Q1, we saw healthy demand in both the U.S. and international markets. Our backlog increased quarter-over-quarter and is over $4 billion.

In the quarter, we also shared new product solutions such as our AgriPV solution and our NX Low Carbon Tracker and celebrated several factory expansions with our manufacturing partners. And today, we announced we are taking orders for solar tracker solutions with 100% U.S. domestic content capability with an expected ship date in early calendar 2025.

We are also thrilled to welcome the teams from Ojjo and Solar Pile International to Nextracker. We have extensive experience with foundation design, supply chain, installation and the technologies we acquired broaden the geotechnical use cases for solar. We believe there is value to our customers in combining tracker systems and foundations to form an integrated solution. With these 2 acquisitions, we can provide a holistic, integrated solution for a broad range of soil conditions for utility-scale projects globally.

I'm so proud of our team. Fiscal 2025 is off to a great start, and we remain focused on executing our plan. As the world transitions to renewable energy, we are well positioned with our culture, strategy, team and market positions.

This concludes my comments. We now look forward to your questions. Let me pass the call back to the operator.

Operator

[Operator Instructions] Our first question comes from Mark Strouse with the company JPMorgan.

M
Mark W. Strouse
analyst

Appreciate the new [indiscernible]. So I wanted to start with kind of the domestic content. Can you talk about how your customer conversations are shaping up, if you're seeing firm orders yet? Just can you talk about maybe the pipeline activity? Are things kind of firing on all cylinders yet? Or are customers kind of waiting for that language to be finalized? Are they waiting for the election? Just any update there? And then I've got a quick follow-up.

H
Howard Wenger
executive

Mark, this is Howard Wenger here. I'm going to start, and then Dan is going to finish. So demand is healthy for trackers and for trackers with domestic content. We'll start there. We have firm orders for domestic content in a wide range of domestic content, typically between 40% all the way up to 100% now we're taking orders, and we actually have an order for 100% domestic content tracker.

And customers are not equivocating with respect to placing those orders. They're not waiting for additional guidance. The guidance came out from Treasury. It's very clear. It's favorable for trackers and for Nextracker. And we, as we've discussed previously, stood up over 20 facilities with manufacturing partners to deliver domestic content with an annual capacity of over 30 gigawatts. So we're really in a very good position to deliver. Dan?

D
Daniel Shugar
executive

Mark, thanks for asking about domestic content. Building on Howard's answer, it was very hopeful when Treasury came out with the new safe harbor table. Their original rules still can be elected by customers, but what's helpful here is they call out specific components, torque tubes, fasteners, slew drives, dampers, motors, controllers, rails.

And if you can build those components to that guideline, then there's an additional credit that comes in with the production labor. Customers do value that. We stood up and had these public factory openings at 8 factories, including our electronic controller. We had an event in Silicon Valley with a partner. And it's very tangible. Customers get it, and we're getting great feedback.

Operator

Next question comes from Philip Shen with the company ROTH Capital Partners.

P
Philip Shen
analyst

To what degree are you guys dealing with the Southeast Asia AD/CVD impacts and the potential for that to be slowing the market down? Our work, as you may know, suggest 2025 slowdown. Have you seen some projects push out? Our checks also suggest that you guys are winning a substantial amount of share as well. So just curious if you're able to offset the challenges with the tariff and maybe some other uncertainty with the share gain. And then from a booking standpoint, do you expect the strength in the book-to-bill to continue to be above 1 in the coming quarters?

D
Daniel Shugar
executive

Phil, Dan Shugar here. I'll take the first half of your question dealing with the AV/CVD, and Howard will then comment on bookings. We read your reports, which are always great, and your team is very comprehensive. And actually, we tested some of those questions with our commercial team. We would characterize the AV/CVD issues as a secondary headwind. There -- it could be an issue on some projects being -- happening later than the customer would otherwise want them to.

We think the -- we've seen the primary impact of on schedule of projects relates to construction permits or interconnection delays. And our perspective is it is taking longer for projects to be fulfilled in real life due to those factors secondarily for the projects that we've chatted with customers about AV/CVD issues. And so it is a factor, but we've seen that those other issues be larger factors. Howard, do you want to comment on his bookings question?

H
Howard Wenger
executive

Sure. So we had a really strong quarter in execution and delivered $720 million in revenue for Q1. And so we're off to a great start, as Dan mentioned in his remarks. And with that, we increased our backlog quarter-over-quarter. And so it continues to be over $4 billion. That gives us a lot of visibility. One of the things we noted in the shareholder letter, which we encourage everybody to read. It's online, gives a lot more detail. One of the things we noted is that 80% of that backlog is expected to be realized over the next 8 quarters.

And so it gives us a lot of visibility. We did have a strong quarter in bookings once again. And we do not provide guidance but -- on bookings and backlog, but the color is that the market continues to be healthy. And we're getting at least our fair share of the market. Thanks, Phil.

Operator

Our next question comes from Brian Lee with the company Goldman Sachs.

B
Brian Lee
analyst

Kudos on the solid start to the year. I guess in that context, I was just curious. If I look at the guidance for the year, you had a strong start here in fiscal Q1. But the adjusted EBITDA midpoint, 22% of sales, that's remaining unchanged. You just did 24% in Q1. So it does imply some moderation when we include the year. Can you kind of speak to what's driving that? Is it price? Is it mix? Is it maybe some conservatism you're baking in? Just curious as to what's driving that cadence.

And then in the shareholder letter, which is great, I think, Dan, you mentioned the grid-enhancing technologies, which I know is getting a lot more focus. Is there an opportunity for you guys to directly participate in that? Is that part of your sort of M&A wheel house, if at all? Just would be curious if that's something you can help the industry out with directly.

C
Charles Boynton
executive

Great. I'll take the first part, and Dan or Howard can take a second. Brian, good to hear from you. So as we look at the strong Q1, really, really strong, both gross margin and EBITDA margin. And we're proud of those results. As you look out to the back half of the year, there's going to be a lot more international mix. Our expectation is -- and again, it's hard to look at it one quarter because we look at this on an annual basis or even a multiyear basis. But we look at the year, and we expect to see stronger revenue contribution from our international markets. And as you know, the margin profile in the U.S. is really, really strong.

And so overall, we're off to a great start. We do see the timing. Things move in. They move out. And Q1 really was a real tailwind for us, and we expect to have a strong year, but it's going to be a bit more balanced with our international mix. In the shareholder letter, we outlined our expectation of approximately 2/3 U.S., 1/3 north -- international. And in Q1, it was more like 71-29. Thank you, Brian.

D
Daniel Shugar
executive

Okay. Brian. Thanks for the question about the grid-enhancing technologies. So when we look at such a strong percentage of the interconnection queuing, solar and solar plus storage. We've covered on previous calls over 7,000 projects have applied to the interconnected to grid. 2,000 gigawatts, much more than the interconnect capacity of the entire U.S. grid today, 80% of the queue being dominated by solar and solar plus storage. The biggest single issue governing those projects is connection with grid.

And so if you look historically, it takes a long time to build a transmission line. I started my career, an electrical engineer, as a transmission planner working for Pacific Gas and Electric Company in the very distant past, in the 1980s. But it's a big deal to build a new line. You need to get rights of way. There's eminent domain. Folks don't like to see long transmission lines built.

There are 3 grid-enhancing technologies that have become commercialized over the years that can -- you can use the existing line or the existing corridors of transmission often with the same transmission towers to get vastly more power transmitted in the same corridor. And those relate to using dynamic thermal rating where you put a device on the line to actually measure the temperature of the line in real time. If the wind is blowing perpendicular across the line, the line is cooler. You can transmit vastly more power on that line. There's new conductors where you can take the same tower and just put a new wire on the line that's the same diameter and get 50% to 100% more power on the same corridor.

The U.S. has lagged international adoption of these technologies. We've seen India and Europe really taking off on these technologies. We think there's a tremendous opportunity. Recently, I spoke at a major conference. I was there with some U.S. utility executives. We were engaged. There's a tremendous push on this from the Federal Energy Regulatory Commission, the U.S. Department of Energy. We're seeing some utility commissions pushing on it, some leading utilities starting to lean in and do this work.

And we think it's right for the rate payer, and it definitely can help really accelerate renewables. We featured all this in our shareholder letter because it's something that has been sort of not focused on, but in the renewable industry, we think it's very important, and it could provide a big part of the solution to getting these projects connecting quicker. Thanks for your question, Brian.

Operator

The next question comes from Vikram Bagri with the company Citi.

V
Vikram Bagri
analyst

I wanted to talk about the acquisitions that you guys did. You obviously have a much stronger footing with these 2 acquisitions, Solar Pile and Ojjo, in the space. I was wondering, what's the attach rate of these 2 companies combined with your systems? Where do you see that attach rate going forward? And if you can share the philosophy around acquisitions also. The letter states the acquisitions will be accretive over time. I was wondering like how much time. And what do you think is the acquisition multiple over that time period once the full potential of these acquisitions is shown in your financials? And then I had one housekeeping question. The letter mentioned gross margin was impacted by higher costs. I imagine whose supply chain costs. If you can quantify that, too.

D
Daniel Shugar
executive

Thank you, Vikram. We're very excited about the acquisitions of Ojjo and Solar Pile International because they increased the geotechnical and difficult soil areas where solar can be practical to be installed. And we're seeing an increase in the prevalence of difficult sites. For these, Ojjo has very unique means and methods and intellectual property and machines to address hard-rock type applications. Solar Pile International is more on the softer soils and the froth tees, so freezing and [ fawn ] type places, et cetera. As solar has proliferated from California to Southwest to other areas in the U.S. and overseas to other places, we've seen a higher percentage of these types of difficult soil conditions, and we've heard from our customers the same thing.

Now we're not speaking to attach rate, but what I can share is both of these technologies are fairly early in the adoption curve for these in the market. For Nextracker, when we first saw the Ojjo technology years ago, we did lean in. We supported them. We became the first UL-certified tracker of Ojjo foundation technology. We participated in some of their early projects. And what I will say is Howard and I sat down with a number of customers. There was a lot of excitement about the combination. Ojjo has fantastic technology. The company was not well capitalized. They saw Nextracker being able to significantly support the company, and the comfort factor of customers was a lot stronger.

But with both Ojjo and Solar Pile International, we had really vetted, validated these technologies, both in our test facilities that we have joining our headquarters in other locations as well as with full-scale projects with customers out in the real world. And so we're very confident about the ability of these technologies to perform and to be able to expand the range of where solar makes sense. Chuck, can you handle the next question, please, on margin?

C
Charles Boynton
executive

Yes. Vikram, on the cost side for supply chain, the backdrop is that the revenue that we recognized in Q1 was booked many, many quarters ago in some cases. These are long projects generally. And the costs that you've seen in transport, freight, logistics, containers, has gone up in the last 3 quarters. Suez Canal created an issue where shipping rates went up. Fast boat costs have gone up. We contemplate showing the cost of steel, and generally, that is kind of hedged with our customers. But a lot of the supply chain costs can be variable. And so this quarter as opposed to last quarter, there was a slight increase in costs.

Operator

Our next question comes from Praneeth Satish with the company Wells Fargo.

P
Praneeth Satish
analyst

Let me just say I'm a big fan of this new format and the expanded Q&A. So anyway, my question, I guess I just wanted to clarify one thing on your backlog. You mentioned that approximately 80% of the backlog will be recognized over the next 8 quarters. Is that a shift at all from the prior commentary where I think you've said the backlog will be realized within 8 quarters as some of the deals got elongated at all? And then how long will it take to realize that remaining 20%?

H
Howard Wenger
executive

Thanks for the question, Praneeth. This is Howard Wenger. It is a bit of a shift, honestly. The project life cycles are getting a little bit longer Dan mentioned that permitting and interconnection are now the drivers for the long pole in the tent or getting projects perfected. That has -- is taking more time than it did 2 years ago, 3 years ago. And so in addition to things like module availability, which is a secondary or maybe even a tertiary issue, project cycles are moving somewhat to the right.

The flip side is that we're getting even more visibility, longer-term visibility, which is good for the company. Those -- that backlog is still solid. Projects are not dropping out. In fact, we did a review of our projects internally. We had literally one project drop out in the last 12 months. So it's a very, very solid backlog. And of course, we've talked about the -- we have a high bar for what goes into our backlog. So yes, project cycles are lengthening to a degree. We're -- we factor that into our outlook and feel really good about it. Chuck, did you have something you want to add?

C
Charles Boynton
executive

No, well said, Howard. I think one project is less than 3%. So it's one out of hundreds and hundreds of projects.

H
Howard Wenger
executive

Yes.

C
Charles Boynton
executive

Yes, just for context.

H
Howard Wenger
executive

Yes, less than 1%. Much less than 1%. Okay. Thank you for the question, Praneeth.

Operator

Our next question comes from Kashy Harrison with the company Piper Sandler.

K
Kashy Harrison
analyst

Just a quick one on the guidance. Q1 was quite strong relative to your expectations, but I think the mid-single-digit growth in Q2 implies a sequential decline. And I was just wondering if you could speak to the driver of the sequential decline into 2Q, whether it's conservatism or if there's something else going on there.

D
Daniel Shugar
executive

Yes, Kash. I'd say first and foremost is we're a customer-driven company. We want to deliver per our customer schedules. They have a lot of scheduled deliveries they wanted in Q1 and deals got pulled into Q1, and that's the real driver. We're not pushing to drive an outcome with our customers. We're listening to them and driving to what our customers want. And that's why you can't just look at one quarter. Q1 was a fantastic quarter. Q2, we're guiding mid-single-digit growth year-over-year. We still see growth, but it's driven by customer schedules, supported by strong backlog and looking at this really on an annual basis. Thank you.

Operator

Our next question comes from Dimple Gosai with the company Bank of America.

D
Dimple Gosai
analyst

Can we talk a little bit about these domestic [ adder ] bonuses. How do I think about that in terms of factoring it into your pricing strategy? Does it -- from a pricing power perspective or sharing benefits, can you speak a little bit more on that?

H
Howard Wenger
executive

This is Howard Wenger. It's a factor in the U.S. And of course, that's 2/3 of our business. It's the most attractive market in the world for Nextracker from a pricing and margin perspective and the strength of our relationships and the size of the market. It's a factor having domestic content. And we made the decision actually during the pandemic when we -- there are all those delays in logistics and steel costs going up overseas. We made the decision to reshore/onshore manufacturing, turn out to be a good decision because IRA came along, and we accelerated this transition to now having over 20 factories.

And so we believe we are in very good position. We think we're differentially able to offer high levels of domestic content, and we're proud to be the first company to be able to deliver in early 2025 100% domestic content product. Appreciate the question. Thank you.

Operator

Our next question comes from Jordan Levy with the company Truist.

J
Jordan Levy
analyst

I appreciate all the commentary. I know you've done work in the AgriPV space before. And I appreciate everything you put in the shareholder letter about that. Nice to see specific products. So I wanted to get a sense of how you're thinking about the size and market opportunity there and the value you can bring.

D
Daniel Shugar
executive

Jordan, thanks for that. We've been passionate about AgriPV since founding the company actually at our Center of Solar Excellence in Fremont, which you visited once. So thank you for that. You saw at that time, we've been growing crops amidst the solar panels there. And I think the amount of uptake of AgriPV is going to be very market specific. Some markets, it could be a negligible percent. In some markets, it could be a dominant percent.

One of our customer projects, the Mammoth solar project, which is -- was developed by Doral, it's in Indiana. One, the -- at the -- there was a conference last month. They won the AgriPV project of the year. On that particular project, it's a combination of ranching and agriculture. They have, for example, 1,500 sheet at that project doing vegetation management, and they are commencing a program to grow produce there with local farmers.

The -- what we've seen is there can be, depending on where you are, much greater community acceptance. And it can provide a dual income stream to existing community that might be involved in agriculture or ranching. And we've developed a number of projects on multiple -- in multiple countries, on multiple continents with that.

We -- Nextracker has a very robust R&D program in solar. We have -- in addition to our headquarters R&D center, we have a very extensive Center for Solar Excellence in Brazil, and we have an extensive AgriPV R&D program that's been conducted there for several years. We're measuring things like yield per square area for different crop types, the amount of irradiance, how to optimize the operation of the solar power system in conformance with needs for crops and so forth.

So it's early days for AgriPV. We think it's a great use case. And we think our architecture with unimpeded growth to be able to navigate through the systems without a mechanical impediment facilitates more adoption in the AgriPV area. So we're excited about the prospects here. And we'll be reporting on it over time as we learn from our customers and introduce new technologies in this area.

Operator

Our next question comes from Joseph Osha with the company Guggenheim Partners.

J
Joseph Osha
analyst

Chuck, congratulations on being part of such a great team. I did -- I wanted to -- I guess the question related to what Phil asked. I think we all know that we have this December deadline looming on panels brought in under the tariff exclusion. I'm curious as to whether any of your customers are talking to you about potential complexities related to modules that aren't put in by that December deadline.

D
Daniel Shugar
executive

Thanks for your shout-out for Chuck, Joe. We're thrilled to have Chuck join our amazing finance and accounting team, which I will say, one, the Adam Smith Award last quarter as a testament to the amazing work by our Treasury Department there. Again, on the panel, AD/CVD situation and this end-of-year deadline, we have spoken to customers. We engaged our commercial team in preparation for this investor call. We've just seen that as a secondary factor where that's impacted -- that our customers are concerned about or talking to us about. The more -- the larger factors have been construction, permitting and electrical interconnection.

So those -- we just haven't seen that be a primary factor. It's also, I will say, very gratifying to see the ramping of quite a few solar panel manufacturing operations in the United States with both legacy producers in the U.S. and new producers. So -- and we encourage more of that. And we're doing everything we can to help them as they validate product on trackers and things like that. Thank you, Joe.

Operator

Our next question comes from Jon Windham with the company UBS.

J
Jonathan Windham
analyst

Perfect. I'll reiterate. I like the format and the extra time for questions. My question would be this, on the 2 acquisitions. The strategic rationale makes sense. Why now would be my question. I can't help but notice that the total acquisition spend lines almost perfectly with the cumulative 45X tax credit that you received to date. Should we view it that way, that the 45X tax credits have given you a little bit of dry powder?

D
Daniel Shugar
executive

Yes. So the rationale, look, we went public 1.5 years ago. And we were -- we completed our spinout just a few quarters -- 1.5 quarters ago. The -- we have -- our liquidity has -- is in a growing and strong place. We mentioned in the shareholder letter we upsized our revolver now. And so we have also the ability to execute those strategic acquisitions. I will say we're very disciplined. We're very diligent. We approach things from a customer value from an engineering standpoint. We want to see things tested in the field. We have a long history with both Ojjo and with Solar Pile International. And in the case of those 2 technologies, we've just seen an increased prevalence of these very difficult geotechnical site conditions. These 2 technologies offer real value to customers to lower cost, to have less uncertainty on the project.

In the case of also the Ojjo technology, it's light on land, meaning that in some of the areas where solar is getting deployed, there's concern around vehicular traffic on the site. Both disturbance to sites that have -- there's concern about the environmental aspects of the site. So if you have -- with the Ojjo technology, one, you pass a machine. You can do the job that 2 to 3 legacy type machines would do. And so for all these reasons, there's a market need. We validated it. We're in a position where we can actually transact and add value to customers. So that was -- those were the factors that build on our strategic rationale, Jon. Thank you.

Operator

Our next question comes from Dylan Nassano with the company Wolfe Research.

D
Dylan Nassano
analyst

So I know you guys have shared your views in the past on just IRA risks and election risks. But just curious in your conversations with your customers. Specifically, how do they view the election risks? And is there any way that it would impact their time lines or -- as they wait certainty?

H
Howard Wenger
executive

This is Howard Wenger. There's -- of course, you're going to get some differences in views. But I would say the majority is a shared view that solar is bipartisan, that from a manufacturing and jobs perspective, where the projects are going, where the manufacturing is taking place is predominantly or majority in the so-called red states, Republican controlled states. And so it actually benefits both parties. We, as a company, have done well in all administrations. We did well in the Obama administration, the Trump administration previously.

So what -- and so there's the fundamental belief because it's reality that solar is the lowest cost form of energy on the planet. And that's going to be the driver in addition to it being clean power, which if you look at the demand that's increasing the electric demand has increased in the U.S. It's being driven very much by server farms that are supporting AI, data centers, electric vehicles. And so it's part of the electric and clean power revolution that's taking place in the United States, which is needed and is a fundamental premise and underpinning for the Inflation Reduction Act.

And so Dan mentioned that tax credits -- and particularly, the 30% ITC is the fundamental pillar of Inflation Reduction Act. I mean if -- and tax credits historically have not been repealed. In fact, that would be unprecedented. So the vast majority from the customer perspective, they're continuing to develop their pipelines. They're continuing to invest millions, tens of millions, hundreds of millions of dollars. You're seeing more money actually going into development and power plant ownership. And so as we mentioned before, the demand for our products is still very healthy in the U.S. even with the election upcoming. Appreciate the question.

Operator

Our next question comes from Maheep Mandloi with the company Mizuho.

M
Maheep Mandloi
analyst

And apologize for some background here. And just on the Ojjo and the tracker foundation acquisitions, can you talk about like the market share over there? Trying to think if there's any antitrust concerns with that acquisition. And separately, in the prepared remarks, you kind of talked about other technologies, other great technologies. Is that kind of directing new acquisitions or like the direction that you would move? Or any guidance on that would be appreciated.

D
Daniel Shugar
executive

Thanks for your question, Maheep. With respect to the market share of Ojjo and the Solar Pile International acquisitions in the foundation market, it's a very, very small percentage, a de minimis percentage in those markets. As we noted in the Ojjo press release, we do plan to continue to make that technology available to other trackers that have been qualified to use that technology on a go forward. We think it can help really broaden the range for -- that solar can be used out in the market. And so we're very, very excited about that. And I'm sorry, the second half of your question?

H
Howard Wenger
executive

Both of these deals are closed. So they're -- we looked at them and there's no issue there.

D
Daniel Shugar
executive

Yes. So thanks for that question. I appreciate it.

Operator

Our next question is from Sean McLoughlin with the company HSBC.

S
Sean McLoughlin
analyst

Appreciate the time to ask questions. And compliments on another [indiscernible] set of numbers. I had a 2-part question, if I may. Firstly, you talked about higher supply chain costs. I mean where is cost inflation concentrated? And how do you think about your ability to pass through the costs? And secondly, how do I square that with price reductions? Is this a temporary adjustment? Are you working with suppliers and customers to factor in gains from tax credits? Is this related to international volumes? Or am I missing something?

D
Daniel Shugar
executive

I appreciate the question. We'll have a 2-part. I'll first speak to the supply chain situation, and then Howard will speak to the commercial aspects of it. I'd like to, again, go back, a little flash back 4 to 5 years ago. What happened was we saw in an unprecedented speed, probably since World War II, the biggest disruption in the supply chain. We saw logistics triple in less than 2 quarters in cost, and we saw steel roughly double at that time period. Nextracker was largely protected then due to our mature sourcing experience with how we think about placing orders in a back-to-back way with customer orders. But really the logistics piece caught us and most companies really off guard.

And so we developed this hybrid strategy for building out significant supply chain within key markets. We speak a lot on these calls about the U.S., but we've done a similar thing in India, where we built out 10 gigawatts of tracker capacity in India for that market and in other markets around the world, where we can either supply the local market with locally produced materials or we can export or do a hybrid of that.

And so this is hard stuff, okay? It was very difficult for us to achieve 100% domestic content in the United States for deliveries that are happening early in the calendar year. But that's -- what that did was that provided us a natural hedge on logistics because we also optimized the location of our manufacturing partners with the market as we saw and we set up multiple vendors. So we feel we're in a very strong position on that and to be able to give customers confidence and certainty and not have to go back with changes after contracts are being executed. Howard, can you speak to the commercial aspects of that question, please?

H
Howard Wenger
executive

Yes. I just want to add also that when we reference higher supply chain costs, it's -- the 45X manufacturing credit for the U.S. production is intended to put U.S. production more competitive and on par with international imports. That's the purpose of it. So we do have higher costs in the U.S., and the 45X serves to offset that. So that's important in the context of that language in the shareholder letter. Chuck did mention that logistics costs, they peaked up some in the quarter. There's quarter-by-quarter variability in some of the supply chain costs. But we work very hard to lock in our supply chain costs with our customers because we're sharing visibility of their pipeline with our team, and we're able to then forecast and lock in cost.

So -- and on a commercial basis, we've proven that over time, we can -- through cost reduction efforts, through design efforts, through R&D., we can reduce steel while still providing a high reliability, high-quality product that we can stand behind, lowering cost, lowering price, increasing TAM and enabling the company to scale and drive costs down and open up the market more for solar to the point now where the last 2 or 3 years, solar's been the #1 source of new power generation in the world.

So the formula is working. We're part of that as the market leader. We're pleased to celebrate our ninth year of market leadership. And we have time for one more question and I appreciate your question, Sean.

Operator

Our next question comes from Sean Milligan with the company Janney.

S
Sean Milligan
analyst

Thanks, everyone, for taking the question today. I was looking at the backlog commentary, the over $4 billion and 80% over 8 quarters and kind of thinking that maybe there was a little bit less coverage than I thought previously kind of in the near term. So I was just curious if you could comment historically or kind of expected sort of intra-year book-to-ship, what that maybe looks like because it seems like in any given year, you're also like booking, shipping a lot of revenue and just was trying to get a sense for what that could be.

H
Howard Wenger
executive

Yes. As we talked about in previous calls, most of the backlog is in the 2 to 5-quarter window, and then the remaining above 5 quarters, we're giving slightly different color where 80% is over the next 8 quarters. You can still think of it as a long tail to the backlog. So as you get further out in 6, 7, 8, 9, 10 quarters out, it's a much lower percentage. So that should address your question.

D
Daniel Shugar
executive

Great. I'd like to -- okay. Great. And thank you for that. Really appreciate all the positive feedback on our shareholder letter. Our team worked really hard on this. Going to this new format could give us more time for questions and provides better resolution, we think, for folks to understand our business. We're excited about what's come this year, and we look forward to advancing the clean energy transition with customers and partners. Thank you for joining our call today. Mary?

M
Mary Lai
executive

Thank you. This concludes our earnings call.

H
Howard Wenger
executive

Thank you.

Operator

That will conclude today's conference call. Thank you for your participation and enjoy the rest of your day.

All Transcripts

Back to Top