Nextracker Inc

NASDAQ:NXT

Earnings Call Transcript 2024-Q4

[Operator]

Good afternoon, everyone, and thank you for standing by. My name is Sierra, and I will be your conference operator today. Today's call is being recorded. I would like to welcome everyone to Nextracker's Fourth Quarter and Full Fiscal Year 2024 Earnings Call. [Operator Instructions]

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

[Mary Lai, executive]

Thank you, and good afternoon, everyone. Welcome to Nextracker's Fourth Quarter and Full Fiscal Year 2024 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 Dave Bennett, our CFO. Following our prepared remarks, we will transition to a Q&A session. As a reminder, there will be a replay of this call posted on the IR website, along with our slides and press release.

Today's call contains statements regarding our business, financial performance and operations, including the impact of our business and 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 slides in our SEC filings, including our most recently filed Form 10-Q, which are available on our IR website at investors.nextracker.com. 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 reconciliations can be found in the appendix to the press release, the slides of today's presentation as well as the financial section of the IR website.

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

[Daniel Shugar, executive]

Thank you, Mary. Welcome to our fourth quarter and full fiscal year 2024 earnings call. Fiscal year '24 was a fantastic year for Nextracker in the solar industry. As I reflect on the past year and what's before us, it's increasingly clear that solar will continue to be the leading choice for new power generation and Nextracker will continue leading solar trackers and system solutions. Our accomplishments last year significantly advanced our mission to be the most trusted and valued renewable energy company by delivering intelligent, reliable and productive solar power.

Nextracker's DNA is about meeting or exceeding expectations with our customers and all stakeholders, including investors. Our results for the last fiscal year reflect that and Q4 is our fourth consecutive quarter of beating our revenue and profit targets. In Q4, strong execution by Team Nextracker enabled us to achieve record revenue, profits and backlog. Revenue grew 40% year-on-year to $737 million. We also doubled our adjusted EBITDA year-over-year to $160 million, and this excludes significant IRA tax credit benefits.

In the quarter, both U.S. and international deliveries beat expectations. We reached record international revenue in Q4 of $242 million, nearly a 90% increase year-over-year, and we reported our fifth consecutive quarter of year-over-year double-digit revenue growth.

Looking at our fiscal year, Nextracker achieved strong execution and significant growth. We accelerated revenue, profits and cash flow to record levels. Equally important, we increased our pace of innovation and products, expanded our global supply chain and our talented global team. We exited the year with $2.5 billion in revenue, an increase of over 30% from prior year and more than doubled adjusted EBITDA to $521 million. Our growth was enabled by relentless focus on exceeding customer expectations through innovation, execution and customer service.

Moving to our new contracted bookings. Strong sales momentum globally resulted in a new record backlog of over $4 billion. Backlog increased more than 50% from last year's $2.6 billion and tripled over the last two years. As always, our backlog is defined to a strict standard of executed contracts or purchase orders with deposits, bills of material and ship dates for specific projects. With robust backlog exiting fiscal '24, we're introducing annual guidance for next year. For the full fiscal year '25, we expect revenue to be in the range of $2.8 billion to $2.9 billion and adjusted EBITDA in the range of $600 million to $650 million, approximately 20% year-over-year growth at the midpoint. Dave will share more on guidance.

We're thrilled to announce we have reached a new company milestone of 100 gigawatts shipped since inception. 100 Gigawatts of power is twice the peak load of the state of California, the world's sixth largest economy. While we are the first U.S. solar company to achieve the milestone of 100 gigawatts shipped, we view this accomplishment as a win for the entire clean power industry as well as Nextracker.

We're also pleased to announce that we have successfully expanded our global supply chain to over 50 gigawatts annually with U.S. capacity at over 30 gigawatts annually. Expanding our global supply chain footprint has been instrumental to scaling the business. We now have over 80 major suppliers strategically located across 5 continents to support our growth.

In the U.S., we played a key role in revitalizing domestic manufacturing by enabling domestic production in 20 new or expanded partner facilities since 2021. About two years ago, for example, we inaugurated a new facility in Pittsburgh with JM Steel. Just last month, we celebrated the expansion of the same facility with JM Steel and tripling annual capacity. Today, we are in an excellent strategic position globally with manufacturing partners operating more than 80 facilities with bespoke Nextracker dedicated production equipment in many of them.

We're raising the bar even higher. Just a few weeks ago, we launched the industry's first low-carbon tracker solution with up to 35% lower carbon footprint and announced sales orders from leading customers. Initially offered in the United States, the low carbon tracker solution includes life cycle assessment documentation using third-party verified analysis of environmental benefits. Nextracker also achieved a carbon footprint label certification issued by the Carbon Trust for our NX Horizon low carbon tracker.

And we've doubled down on innovation. Over the last two years, we've doubled our R&D investments to drive product development and allow for global expansion. Fiscal '24 was a key investment year as we built out product groups program management teams, sales and engineering teams.

We also began a third global R&D center for solar excellence in India, complementing our existing R&D facilities in Brazil and headquarters in Silicon Valley. These centers all have dedicated labs and teams co-located with field testing and piloting of products and solutions.

And finally, we've trained over 1,000 solar workers in 5 of our PowerworX training academies around the world. Our training programs include tracker installation, commissioning and operations and maintenance. This is a value-added service for our EPCs, owners and developers, and we're helping elevate the solar sector with skilled workers.

We believe our technologies, protected by over 500 issued and pending patents, enable our customers to achieve the best financial returns because they operate at the lowest levelized cost of energy. We further believe this is achieved because our systems generate more energy and our lower cost to operate and lower risk across a wide range of extreme weather, including wind, hail and flooding.

We also recognize that our activities can have an impact on the environment. In our recently published environmental policy, we outlined our commitment to managing operations in an environmentally responsible manner. Providing a safe workplace for our people and our partners is one of our core values, which is why I'm pleased that we earned the ISO 45001 certification for our safety management system during the fiscal year, achieving the latest global occupational health and safety accreditation.

We'll now provide a market update. Solar deployments continue to accelerate in most of the world because solar is the lowest cost option for new power. As covered on our last call, the U.S. Energy Information Administration is forecasting Solar to be the fastest-growing energy technology with a 26% compound annual growth over the next 5 years and becoming the #1 energy source within a decade.

Nextracker's history of 30% CAGR over the last 5 years reflects favorably on the EIA forecast as does our strong backlog. On prior earnings calls, we've had questions regarding sector headwinds and interconnection permitting and other areas. We noted that these headwinds can be real for any given project or customer but that the total universe of projects and customers has grown such that in totality, the market continued strong growth.

We thought it would be helpful to put some numbers to that, using our largest market, which is the U.S. In our slides, you will find analysis from the U.S. Department of Energy's Warrens Berkeley Labs that pull source data from U.S. independent system operators related to the U.S. pipeline. The result is that solar totally dominates planned power with 60% of the current Q positions, nearly 7,000 solar projects have Q positions in the U.S. with solar and solar plus storage comprising about 1,500 gigawatts of new capacity. For context, the new solar and solar plus storage projects have more total capacity than the entire existing U.S. power generation sector. This Q position analysis by DOE provides graphic proof that solar and storage are leading the U.S. energy transition. Solar dwarfs Q positions for natural gas by an astounding factor of 25 times and there are zero new nuclear or coal plants in the queue. This trend is not a strictly U.S. phenomenon, rather a trend of multiple regions globally. Solar is leading global energy capacity additions and solar economics have never been more favorable. As the world transitions to renewable energy, Nextracker is increasingly well positioned in the solar power ecosystem to drive growth.

Now I'll turn the call over to Howard Wenger, our President, to expand on our commercial progress and products.

[Howard Wenger, executive]

Thank you, Dan. We indeed had an outstanding Q4 and full fiscal year, setting revenue records for both U.S. and international segments. We continue to see solid demand globally with significant orders where we have tracker fleets operating in nearly 40 countries. Our backlog at the end of Q4 reached a new record of over $4 billion. Backlog has increased every quarter since our IPO in February 2023. In fact, we have more than tripled our backlog in just two years. Our robust backlog is supportive of our fiscal year '25 guidance as backlog is defined to a strict standard of executed contracts or purchase orders with deposits bill of materials and project-specific ship dates.

Q4 bookings remained strong globally. In the U.S., we achieved record bookings for fiscal '24 by focusing on EPC partners and booking individual projects as well as continued strategic alignment with developers and owners. Moreover, our accelerated U.S. supply chain expansion equipped us with domestic content capabilities that tailored well to what our customers need, and now we have even more local supply capacity to pave the way for future growth. We are pleased to announce that we achieved record bookings internationally for the year as well, including sizable customer contracts in India, Australia, Europe and Brazil.

A few international milestones are noteworthy for the year. We booked our largest European project ever, a 550-megawatt power system in Greece, and we booked our largest ever Horizon XTR project at over one gigawatt in KSA or Kingdom of Saudi Arabia. And we have bookings in six new countries, South Africa, Colombia, Hungary, New Zealand, Romania and Sweden.

Now let me address the price environment. As I said on the last call, I can't stress enough that trackers are highly engineered products that factor in conditions such as soil and foundation requirements, current and future land use, topography, wind speeds, panel type, extreme weather and local permit needs, codes and standards. Trackers are the backbone of any solar power system that needs to deliver energy for 30 years or more, withstanding the elements throughout. We believe there has been a continued flight to quality even as pricing continues to be competitive. We strongly believe that Nextracker offers the highest quality and most reliable product on the market with the lowest installed cost, lowest operating cost, highest production and best technology and engineering. We further believe this results in Nextracker delivering the lowest LCOE, and highest financial returns for plant owners with unsurpassed quality and durability that discerning buyers appreciate.

Finally, we believe that reductions in solar power system costs and pricing is a healthy dynamic. As the solar industry continues scaling, costs along the entire value chain have dramatically decreased, resulting in solar being among the most competitive generation technologies. Lower solar energy pricing has driven a rapidly increasing TAM. And as Dan noted, solar is now the most installed form of new power generation. This is a very exciting dynamic and growth opportunity considering that solar is less than 5% of all global electricity generation. Nextracker's innovation and cost reduction programs have enabled us to be increasingly competitive, while our volumes expand as the global power sector transitions to renewable energy.

In summary, we had a very successful year in strengthening customer partnerships, capturing new business and delivering a record year of bookings, backlog and revenue. We finished fiscal '24 with 68% of total revenue from the U.S. and 32% Rest of World. And we had double-digit year-over-year growth in most regions, demonstrating again our global scale and expansion where we had over 300 active projects around the world.

Let me now transition to products and solutions and our innovation progress. First, let's discuss our intelligent energy yield maximization software, True Capture. I'm pleased to report we saw continued increases in customer adoption in fiscal 2024 with record True Capture bookings and backlog.

Since True Capture was created, we have led the industry with over 300 projects and reaching over 50 gigawatts deployed or under fulfillment. True Capture has been extensively validated by third-party engineers, and is generally a meaningful driver of improved energy yield and LCOE for power plant owners. And True Capture is the gift that keeps on giving to our customers as we provide over-the-air updates to automatically upgrade existing true capture projects with subsequent enhancements.

In parallel, we continue to invest in desktop, cloud and mobile software that helps improve commissioning times, enables robust control and measurement of our trackers and generally enhances our customers' experience.

Now shifting to Horizon XTR, the industry's most deployed and proven all-terrain solar tracker first delivered in calendar year 2019 and with more than 90 utility scale projects operating or in fulfillment. We've had an excellent response from our customers, reaching a cumulative 15 gigawatts deployed or under fulfillment in Q4. And we booked the largest XTR project in fiscal '24, a world record first for the industry of a 1 gigawatt project for a train following tracker. Horizon XTR was developed to drastically reduce time-consuming and costly projects [ like ] grading and our XTR tracker can also allow for soil settlement and subsidence. This past fiscal year, we doubled the insulation capability of Horizon XTR to conform to even more sloping terrain, opening up even more solar siting possibilities. Unknown soil conditions and uneven train present unique risk for developers and owners. XTR can derisk projects by moving less earth and deploying shorter piles, which can reduce costs and mitigate soil erosion, leaving valuable top soil intact for future farming use.

Let's now address severe weather. There has been an increased prevalence of extreme weather around the world. We believe we have the industry's most capable and responsive tracker for severe weather, equipping owners with operational tools for mitigating risk. For example, a number of utility-scale solar systems have experienced hail damage. Hail damage depends on many factors, including hail size, wind speed and direction, panel glass thickness and construction, tracker tilt angle and operator actions. In response, Nextracker collaborated with customers to develop an industry-first [ hail stow ] technology that has helped mitigate risk with initial deployments three years ago. This year alone, Nextracker already has documented hundreds of successful hailstones in Texas through the use of our software. So far in calendar year '24, of the 27 Texas projects that were subjected to hailstorms and had our NX Navigator and [ hail stow ] installed, none of them reported hail damage.

To address the most extreme hail, Nextracker developed a next-generation fully automated [ hail stow ] technology, which we announced in September 2023 called Hal Pro, with up to a 75-degree rotation angle. Our [ Hail stow ] functionality at a high 75-degree angle can mitigate risk by dramatically reducing the probability of panel breakage. We plan to have our initial deployments later this year.

With respect to flooding, our NX Horizon tracker is designed above the flood plane with self-powered architecture in which sealed gears, controllers and motors are all mounted to the steel torque tube itself. This elevated design configuration typically provides a minimum flood clearance of 3 feet. Our NX Navigator control system has [ flood stow ] functionality that can stow to a safe position with a single press of a button by plant operators or can automatically stow when equipped with flood sensors.

Now moving to wind engineering, which is vital to trackers. We recognized early on that applying minimum static pressure wind design code standards to solar trackers is inadequate. We pioneered characterization of dynamic wind forces and Solar rays including phenomenon such as Torsional Galloping over the last decade, publishing white papers and webinar since 2019. This fundamental research, combined with full-scale outdoor field testing, at the National Renewable Energy Laboratory in Colorado was integrated into our products. As a result, Nextracker NX Horizon systems have had no substantial wind failures over the last 7 years.

On multiple sites and occasions around the world, Nextracker Systems have endured extreme wind events reliably, while adjacent competitive tracker system suffered extensive and widespread damage. Customers understand that engineering and technology really matter. We believe we are driving the gold standard for solar trackers and this is being rewarded with repeat customer orders. our unrivaled inventions and technologies in mechanics, electronics and software, help customers derisk projects and improve project economics, while expanding geographic areas where solar is cost-effective. Our catalog of positive attributes earned and proven over many years translates into what we believe is the most bankable product with the lowest levelized cost of energy.

In summary, we are immensely proud of our team's execution and milestones achieved this past year, and we are ready to take on and deliver a strong fiscal 2025.

Now I turn the call over to Dave Bennett, our Chief Financial Officer, to review financials. Dave?

[David Bennett, executive]

Thank you, Howard. Before I start, I'd like to remind everyone that all references to financial metrics, except for revenue are non-GAAP adjusted and all growth rates are year-over-year unless otherwise stated. As a reminder, our Q4 non-GAAP results exclude the IRA 45x benefits recognized in the current quarter for GAAP purposes.

The results for Q4 and fiscal year 2024 both set new records, delivering double-digit growth for the top line and triple-digit growth for profits. Starting with our quarterly results, Q4 was our fifth consecutive quarter of year-over-year growth since the IPO. Revenue closed at $737 million, up 42%, driven by 27% growth in the U.S. market and 89% growth in the rest of the world. Q4's revenue mix was 67% U.S. and 33% Rest of World. There was strong execution by our teams and progressing projects to plan this quarter and we did not encounter weather delays that often impact deliveries in the last two weeks of the quarter.

Gross margins for the quarter expanded by just over 10 percentage points from the prior year to 30% as a result of strong execution on our contracts, continued efforts optimizing our supply chain, and exercising consistent pricing discipline.

Adjusted EBITDA for Q4 was $160 million, an increase of $87 million or 120% growth. Our Q4 EBITDA margin of 22% was up nearly 800 basis points for the prior year. Adjusted diluted earnings per share was $0.96 in the quarter.

Turning to full year results. Fiscal year '24 was our third consecutive year of double-digit revenue growth. Revenue was $2.5 billion, up 31% with the U.S. representing 68% of the mix and the rest of the world at 32%. Despite some quarterly variations in mix throughout the year, overall, very balanced 30%-plus growth across both markets. Full year gross margins expanded to 28% as a result of our strong execution as well as our success in achieving structural enhancements to our business throughout the year, which included optimizing our global supply chain and increasing our localized content offering, resulting in lower material and logistics costs on top of faster lead times. Gross margins also benefited from a larger U.S. mix, which, on average, carries a higher pricing range and margin profile compared to the rest of the world.

Turning to operating expenses, which includes R&D expense, we have strategically increased these costs by $83 million or 86% as we continue to invest in our growth, innovation and stand-alone public company infrastructure post spin from Flex. Going forward, we expect to maintain our investment in operating expenses at between 7% and 8% of revenue.

Full year adjusted EBITDA was $521 million, an increase of $312 million or 150% growth, establishing a new annual record for the company. We have more than doubled our EBITDA dollars in the last year. Full year adjusted EBITDA margin of 21% was up nearly 10 percentage points from the prior year.

Adjusted diluted earnings per share was $3.06 for the year. As previously stated, the separation from Flex increased our public float by approximately 74 million shares but did not impact our diluted EPS. Adjusted free cash flow was $113 million for the quarter and $427 million for the year, driven by strong net working capital management, customer deposits and higher EBITDA. Net working capital at the end of Q4 was approximately 16% of trailing 12 months revenue, which was slightly above our expected 10% to 15% levels primarily due to the recognition of $126 million of vendor rebate receivables recorded in conjunction with the IRA 45x incentive that I will cover shortly.

Our high-quality balance sheet, cash flow generation and ample liquidity remain competitive advantages. We closed the quarter with $474 million in total cash. which is greater than 3x our total debt of $150 million. Total liquidity at the end of Q4 was over $800 million. We continue to operate with a debt-to-EBITDA ratio of less than one with no significant debt maturities until fiscal 2028.

Our financial strength supports our capital allocation strategy with the following key highlights. Our capital deployment is focused on enabling growth. Free cash flow conversion is expected to be greater than 70%, excluding M&A. We are in a net cash position, and our current debt-to-EBITDA ratio is less than 1 as we are committed to maintaining a differentiated capital structure. Under the current framework, we will evaluate future M&A with discipline and would expect investments to be funded through our operating cash flows and incremental debt capacity if required. In the short term, given our projected growth and limitations with our previous Flex spin-out structure, we are currently not planning to execute on a dividend or a share buyback program.

Let me now transition to the IRA 45x benefit considerations for Nextracker. We have developed valuable relationships with our critical vendors and have successfully executed multiple supply agreements, many exclusive to Nextracker. As previously stated, the IRA 45x incentives currently earned are in the form of a rebate from our vendors. The key objective is to reduce cost of materials to enable domestically made products to be more cost competitive with imports. So far, we have achieved our objective of reducing the cost of materials.

Let me provide some details. During the fourth quarter of fiscal 2024, we recorded a cumulative adjustment to recognize 45x vendor rebates on production of eligible components shipped to projects after January 1, 2023. As of the end of Q4, we recognized $126 million in other current assets related to the rebate receivable from our vendors, of which $121 million was recognized as a reduction in GAAP cost of sales. The remaining $5 million was deferred as of year-end to be recognized as a reduction to cost of sales in fiscal 2025. The $121 million GAAP cost of sales reduction exceeded our previously anticipated range of $50 million to $80 million in Q4, mainly due to increased volume and final assessment of the contractual terms impacting the timing of realization. Our fiscal 2025 guidance that I will share next includes the estimated IRA 45x benefits.

As we previously communicated, we are operationalizing the IRA 45x incentive into our procurement process and financial reporting systems. Therefore, we believe the 45x benefits should be reported with our consolidated financial results for fiscal 2025 and moving forward. Our structural margin has increased from the mid-20s to the high 20s for fiscal 2025. This expected increase factors and 45x benefits, variations in regional and customer mix, and expected pricing pressure that may lower ASPs. The 45x benefit is one element that lowers the cost of our trackers and is used in combination with other elements, including cost downs, lower logistics costs and maximizing local content, all of which come together in the form of lower LCOE that, along with pricing discipline, supports our confidence in our structural margin profile.

As always, we encourage you to evaluate Nextracker on an annual basis to reflect the nature of our large-scale projects. Therefore, we will not provide quarterly guidance, but we will provide top line comments as guideposts. Based on the current timing of projects, Q1 fiscal 2025 year-over-year revenue growth is expected in the range of 25% to 30%.

Our fiscal 2025 guidance is as follows: We expect revenue in the range of $2.8 billion to $2.9 billion. At the midpoint, we are expecting approximately 14% growth year-over-year. We expect adjusted EBITDA in the range of $600 million to $650 million. At the midpoint, we are expecting approximately 20% growth year-over-year and an implied EBITDA margin of approximately 22%. GAAP EPS is expected to be between $2.41 to $2.61 per share and includes approximately $0.48 related to stock-based compensation and intangible amortization. Adjusted EPS is expected to be between $2.89 to $3.09 per share based on 153 million weighted average shares outstanding. Net interest and other expense is expected to be between $15 million to $20 million. We expect the fiscal year adjusted income tax rate to range between 20% to 25%.

And I will now turn the call back to Dan for concluding remarks. Dan?

[Daniel Shugar, executive]

Thank you, Dave. I'm so proud of our team and what we've accomplished last year. We're excited that this new year is off to a great start, and we look forward to advancing the clean energy transition with our customers and partners.

Lastly, on behalf of the company and the Board, we want to thank Dave Bennett for a significant contribution to Nextracker, and we're thrilled to have him continue as our Chief Accounting Officer. Our new Chief Financial Officer, [ Chuck Boyton ] is expected to join Nextracker later this month and we look forward to Chuck and Dave leading our fabulous finance and accounting teams.

We now look forward to your question. Let me pass the call back to the operator.

[Operator]

[Operator Instructions] Our first question today comes from Praneeth Satish with Wells Fargo.

[Praneeth Satish, analyst]

Maybe if I could start on the backlog here, another impressive quarter. Can you give us your latest forecast for converting that into revenue? Are you seeing kind of the conversion cycle elongate?

I think you've mentioned in the past that typically the majority converts to revenue within a 12-month window. So just trying to see if there's any changes to that pattern or kind of a shift towards projects with extended time lines.

[Howard Wenger, executive]

This is Howard Wenger. Yes, we're pleased with the growth of our backlog. Typically, it results in revenue in 2 to 8 quarters and most of that in 2 to 5 quarters.

[Praneeth Satish, analyst]

And then maybe just switching to the guidance here on 45x credits. Can we assume that based on the guidance that some of that benefit, the 45x credit is going to be shared with customers based on the way you worded it in the form of potentially ASP reductions? Just trying to unpack the difference between 30% gross margin this quarter to high 20s percent gross margin for the guidance? And how much of that is based on 45x versus sharing with customers?

[David Bennett, executive]

Sure. This is Dave. I'll take that, and then Howard can supplement and [ NTC ] said the structural rate that you spoke about, we did increase based on a lot of factors, one of those is the fact that we do have a lower cost [ volume ] as a result of the 45x credit. That's just one of the things we use and we spoke about it as we moved through fiscal '24 into our guide for fiscal '25, we've also optimized our supply chain. We also need to exercise consistent pricing discipline. All of those come together, so in the end, the pricing element is set not necessarily specifically to share the 45x. It's a combination of what we put together. We're very focused on maintaining the price that we put out in ensuring the structural margin at the gross margin level in the high 20s, which gets you to a 22% midpoint EBITDA. So that's all baked in.

Howard, I don't know if you have anything to add.

[Howard Wenger, executive]

The only thing I'd add is that the 45x credit is doing what it's set out to do as a policy mechanism, which is to onshore and reshore supply chain to the United States. We've done that, we have over 20 facilities now that are manufacturing components in the United States. So we've really domesticated our product. And it's a mechanism to equilibrate the cost of this local supply chain to what we would have done by importing the product internationally. So it's working. And of course, we're innovating, we're driving down costs which we need to do, and we are lowering price over time in a disciplined manner because that's what the solar industry has done for the last 10 years.

As Dan mentioned in his remarks and showed graphically in the presentation is how big the solar industry has become now. And it is the dominant form of energy in the interconnection queues bigger than the total installed capacity that's serving the U.S. market. So these policies are working and the way we got there to that picture was by driving cost out, scaling up and lowering the price of solar energy to customers, and that's going to continue.

[Operator]

Our next question today comes from Philip Shen with Roth MKM.

[Philip Shen, analyst]

You guys have had, I think, five quarters in a row since you've been a publicly traded company of about $1 billion of bookings a quarter. This quarter was very strong, it seems like at least $1.2 billion. What do you expect for next quarter and the quarter beyond? And how long do you think you can keep this going?

And then as it relates to the structural margins. Can you talk about for the $1.2 billion from [ FQ4 ], would you say that those bookings had the high 20s gross margins? Or is there a chance they're different from what the FY '25 guide looks like?

[Howard Wenger, executive]

I'm not going to confirm or deny the $1.2 billion, but I will confirm that we did book more than $1 billion in the quarter. And so we are happy with our performance. It's consistent with the previous quarters, as you've mentioned. And as far as the macro going forward, the market is really strong. You saw what's in the interconnection queue, our pipeline continues to be robust. I know you like that word. And it's the truth. Demand is strong in the U.S. It's also strong in multiple regions around the world.

As for the margin question, we're not guiding to that or providing more color on that at this time. And we really are not giving guidance for bookings and going forward. But I appreciate the question.

Dave, did you have anything else you wanted to add?

[David Bennett, executive]

No. Phil, I mean, you hit it. We're looking at the entire year for the margin that is weighted across all quarters. Certainly, we execute on cost downs quarter-over-quarter. So we're going to continue to do that. So the profitability as these roll out may be on a different cost base. So all in, we've given the full weighted margin for the year of fiscal '25. And we're committed to that higher structural margin which is approaching that 30% gross margin.

[Philip Shen, analyst]

Shifting over to the overall industry with the Southeast Asia, [ ADCBD ]. I was wondering if you've seen any impact at all in your conversations with customers? I know you talked about the number of projects being strong and the Q being large, but I was wondering if you see risk at all with the industry slowing down given the number of headwinds that the industry is facing?

[Daniel Shugar, executive]

Dan Shugar. We haven't seen that issue impact velocity in the market or bookings. Demand is strong last week, there was the American Clean Power event in Minneapolis. We had other events. I didn't hear any customers bringing that up.

[Operator]

The next question today comes from Brian Lee with Goldman Sachs.

[Brett Castelli, analyst]

Kudos on the [ night ] execution. Maybe first one, just going back to the backlog. I appreciate Howard, the greater than $1 billion bookings disclosure here. So obviously, you did book-to-bill well over [ one ] in the quarter. Is that true of both the U.S. and international?

And then related to that, I guess, the last two years, U.S. and rest of world sales mix has been consistent at around 70% to 30%, is that what you'd expect in fiscal '25 or do you see either [ geo ] growing faster this year? And then I had a follow-up.

[Howard Wenger, executive]

This is Howard again. The answer is that as far as the last part of your question, we've been remarkably consistent as a company with the 2/3, 1/3. If you look at the history of hitting this 100 gigawatt milestone, 2/3 of that was shipped to the U.S. and 1/3 to international roughly. And we're seeing that quarter-by-quarter, year-over-year. So we expect that same mix going forward. We see strong growth in both markets, meaning Rest of World and the U.S. and don't see that shifting out or go up the balance going one way or the other. Both are growing at roughly the same pace.

[Brian Lee, analyst]

So growth in both areas, that's good to hear. And then just a follow-up on the margins and the IRA credits discussion here again. Dave, you mentioned during your remarks that there was $60 million roughly more in IRA credits recognized and guided at the midpoint. So I guess, wanted to dive into that a little bit. I would have expected maybe more EBITDA growth apples-to-apples on the mid-teens revenue growth you're guiding for in fiscal '25 when we're including the [ IRA ] RNA impact for both '24 and '25. So how much of that pull forward is coming out of 25 into '24, you would have otherwise recognized over the next 12 months? And then how much of this -- and maybe it's just the pricing and passing through more of the credit that you mentioned during your remarks as well.

[David Bennett, executive]

I understand. Yes, let me be very clear. None of it was pulled into '24 from '25, okay? The beat relative to what we guide was simply due to the evolving of kind of the second half of my prepared remarks, The sentence was and final determination of the realization, you'll see that others deferred a larger portion than we did and determining that element was what was kind of uncertain at the time we did the guidance. We kind of -- and then also we beat with higher revenues as we get for Q4.

So that's really driving the incremental amount in terms of fiscal '25 and the amount is as we've been talking about, 45x is part of our combination of elements we use to lower the cost. It's a meaningful part of it, it's not the only part, along with what we expect to have some pricing pressures that are normal that Howard spoke to, all of those come together. So to some extent, it is covering some of that pricing pressure to maintain the margin and increase it if I could ask.

[Operator]

Our next question today comes from Mark Strouse with JPMorgan.

[Mark W. Strouse, analyst]

I wanted to go back to Phil's question on [ ADCBD]. Assuming that there is an investigation and some of your customers might be looking to switch the type of panels that they are using. Can you talk about how easy that process is? Does that result in a change order with you? And if so, can you talk about who is responsible for bearing that? Is that something that you would share with the customer? Are they on the hook for that?

[Daniel Shugar, executive]

Dan Shugar. Thanks for the question. I'll point out that, first, Solar is a much larger part of the U.S. supply position today than it has been in recent past as sort of thing one.

Think too, there's been a homogenization around the mechanical side of [ Crystal ]and Solar panels over the last few years, there's basically two classes of panels. The, I'll call it, 700-watt class and the 605- class or 550-watt class solar panels. So whether it's Nextracker, or a different tracker usually, when you're laying out a system, you need to know is that the first [ order ] is that the lower power class of [ crystal ] and power, the higher power [ plant ].

The other thing I'd point out is that we are making substantially well, the vast majority of the tubes that are going to U.S. projects are happening in the United States. Our lead time is short. Our flexibility is higher, and we just don't see that type of switch being an issue or imposing a significant cost on the customer. It would be my high-level response to that question.

[Mark W. Strouse, analyst]

And then just a real quick follow-up, I'll take the rest offline. Last quarter, you talked about [indiscernible] curious if that's still happening or if you're back to normal yet.

[Daniel Shugar, executive]

I'm sorry, you faded out for just a sec, Mark, you said last quarter and then we lost you for a second.

[Mark W. Strouse, analyst]

Yes. I'm so sorry. Just an update from last quarter, you talked about the Red Sea rerouting some of your shipping. Is that still happening? Or are you back to normal?

[Daniel Shugar, executive]

That's a nonmaterial issue for our results this last quarter for our plan.

[Operator]

[Operator Instructions] Our next question today comes from Vikram Bagri with Citi.

[Vikram Bagri, analyst]

Dan, you mentioned and we know you've been beating estimates since going public, which is very impressive. When you look ahead, what catalyst do you think could play out that would make you exceed revenues or margins this fiscal year. There are a number of topics on our mind, which can make you exceed those targets, whether it's a higher conversion of faster conversion of backlog, higher IRA credits that you're baking in. Just wanted to see like from your vantage point, what catalyst do you have on top of mind, which would make you exceed the guidance.

And related to that, your peers have indicated that in their backlog, they have not shared 45x credits with any of their customers. It's not in their contracts yet. Is that true for you guys as well?

[Daniel Shugar, executive]

Dan Shugar. Look, we covered on prior calls, there are a lot of tailwinds in the sector. But the way we roll at Nextracker is we establish plans that are resilient to be able to endure unknowns. And then we want to be able to perform reliably. So are there any number of tailwinds that could allow the plan to be exceeded? Definitely. But we're building a robust plan and managing the business to be able to meet or exceed performance.

With respect to 45x credits, Howard commented what the motivation of those was to really focus with onshoring. Look, I really want to point out something we covered also on a prior call, which is that most of the projects being done in the U.S. today were predicated on much smaller investment tax credits typically in the 10% region. They're now 30%, in some cases, 40%. So the developer owners are enjoying that significant benefit in the increased credit that which is order of magnitude plus higher than what we're talking about for the 45x. So that's our comment on that.

[Operator]

Our next question comes from Christine Cho of Barclays.

[Christine Cho, analyst]

So could you give us an idea of the breakdown of your [ BCA, non-DCA ], Rest of World and U.S. in your backlog. And when we think about pricing pressure that you mentioned at the end of the year, based on your comments, it sounds like you've already baked it into your contracts, but how much of it will depend on what your competitors are doing? Is there some extra cushion in here? And because you guys always talk about being disciplined on pricing, and you're talking about high 20s gross margin. So how do you define discipline on pricing, where is the right level that you wouldn't go [ below ]?

[Howard Wenger, executive]

Howard Wenger here. So we are not breaking out [ BCAs ] in our backlog, why because we have a strict standard for backlog, which the [ BCAs ] meet and they're just considered part of our backlog like any other contract or purchase order because they contain deposit specific project names, specific ship dates. And so -- and the commitment -- a binding commitment. So we're not breaking it out for that reason, backlog is backlog.

As far as pricing and so forth, every project is different. And you have to think about these projects, they're in the order of $150 million, $200 million, $300 million, $500 million of investment. And we comprise less than 10% of these projects, the cost of these projects. So being the backbone of the system being so critical to the operation of the plant for 30 years plus quality, durability, really, really matter and discerning buyers really pay attention to track record and third-party validation of all of the claims that a company like Nextracker and others make. So that said, it is competition works and capitalism works. And we want to continue to drive costs down and prices down over time for our customers so we can increase the total TAM, and that's exactly what we're doing, and that's what we plan on doing.

[Operator]

Next question comes from the [ Dylan ] [indiscernible] with Wolf Research.

[Unknown Analyst]

I just want to go back to the revenue guidance relative the backlog. So if I look at the 2024 your initial guidance range and kind of compare that to the backlog of [ $2.6 million ] at the time, I mean obviously, you ended up beating raising and you ended up realizing almost 100% of that backlog. But just comparing that to the guidance for this year relative to the backlog. Where -- I mean, it seems like there's some conservatism embedded in there, just can you just provide any color on where exactly that would be or anything that would kind of make last year different from this year?

[Daniel Shugar, executive]

Yes, I think Howard just really kind of touched on this with the -- it's about individual projects and their timing to delivery and the content of our backlog that we consider [ BCAs ] and EPC contracts, the same in that backlog now. So relative to the rollout, Howard touched on it at a 2 to 8 quarter clip. I think in the past, that's not meaningfully different, but the specific projects that are in that backlog have a timing to shift now, and that really is what supports our guide. And keep in mind, our guide has historically, we've proven to you guys that we do factor in the headwinds that can happen I spoke to it every quarter. We kind of factor in a little conservatism relative to weather and other things in logistics may happen that push individual deliveries out that may impact our achieving a number. So we've factored that into our guide. And overall, I think you can see the strong backlog at a record over $4 billion certainly supports the guidance range.

[Operator]

Our final question today comes from Maheep Mandloi from Mizuho.

[Maheep Mandloi, analyst]

Just a question on the 45x in the guidance here. Could you just point to how much that would be math suggest it could be somewhere around $100 million? I'm just trying to understand the target gross margin, excluding the vendor credit. In the past, you kind of talked about those mid-20s gross margin. It seems like that still works out. But just wanted to double check that.

[David Bennett, executive]

The 45x action in [indiscernible] speaking to this is just one of the elements that lowers our cost. It is interchangeable with other elements that lower our costs. So we don't really plan on breaking that out going forward. For fiscal '24, we were not guiding to it. The accounting was uncertain, the treatment was uncertain from the treasury. So that was one element we kept separate from our '24 results. But going into fiscal '25 is absolutely operationalized with our procurement systems, our financial systems and is included in our guide, including , and it was a driver in increasing that structural gross margin profile from the mid-20s up to the high 20s. And that's something we expect to be able to sustain over time. And the 45x credit to the extent we receive it is going to be part of that. That's kind of the extent of what we're going to be breaking it out though.

[Daniel Shugar, executive]

This is Dan Sugar. I just want to thank the Nextracker team, all our customers are investors for a fantastic year for fiscal '24. We're really excited about the industry. We think it's a rising tide here. for the industry for many participants. It's going to -- and these really pipeline numbers we're seeing in the Q, are overwhelming. It's very exciting. So we're on a path here with solar to be the #1 source of energy in the U.S. and the world, and it's great to be part of it.

If we didn't get to your question, apologies for that, but we will speak to you in the callbacks. Thank you very much.

[Operator]

That will conclude today's conference call. Thank you all for your participation. You may now disconnect your lines.