Nextpower, Inc. Q2 FY2027 earnings call

• Record Financial Execution: The company reported its strongest quarter in history, with revenue exceeding $1.1 billion and adjusted EBITDA of $250 million.
• Strategic Expansion via Acquisition: Completed the acquisition of Zimmermann PV Steel Group for 230 million euros. This deal expands European footprint to 68 countries, adds structural solutions (fixed tilt, agrivoltaics), and provides access to new markets like Germany.
• Product Portfolio Diversification: Significant growth in non-tracker products (22% of revenue). Launched inverter offerings with a 1.1 GW contract and achieved record bookings in eBoss ($100M+) and Foundations.
• Supply Chain Resilience: Mitigated impacts of rising diesel, steel, and freight costs through a domestically distributed supply chain. Manufacturing finished goods closer to project sites has reduced logistics spend per unit significantly despite an 80% year-to-date increase in diesel prices.
• International Growth: International revenue grew 25% sequentially in Q2, outpacing U.S. growth (17%). The Zimmermann acquisition further accelerates international diversification.
• Capital Markets Day: Scheduled for November 16th in Las Vegas to provide deeper insights into the 2030 outlook and long-term strategy.

Revenue: Over $1.1 billion (up 23% YoY). Adjusted EBITDA: Approximately $250 million (up 12% YoY), representing a 23% margin. Backlog: Over $6 billion.

Segment Breakdown:

• Core Tracker Business: The primary revenue driver, maintaining strong momentum and record backlog. U.S. market accounted for ~82% of quarterly revenue.
• Non-Tracker Products: Contributed approximately 22% of total revenue this quarter, up from prior periods. This segment includes Energy Storage, eBoss, Foundations, and Inverters.
• Energy Storage: Delivered approximately $100 million in revenue and over $20 million in adjusted EBITDA. Key drivers include a behind-the-meter project for a Tier 1 hyperscaler AI data center.
• eBoss: Achieved record bookings of over $100 million, driven by the NX PowerMerge solution with over 2 gigawatts of firm orders secured.
• Inverters/Power Conversion: Secured a 1.1 gigawatt framework agreement for five projects and shipped the first NEXT POWER branded power conversion systems.

• Fiscal Year 2027 Revenue: Increased to $4.2 billion - $4.45 billion (previously lower).
• Fiscal Year 2027 Adjusted EBITDA: Increased to $890 million - $940 million (previously lower).
• Fiscal Year 2027 Adjusted Diluted EPS: Increased to $4.61 - $4.87 per share.
• Free Cash Flow: Increased estimates from $450 million to over $500 million.
• Sequential Outlook: Expects Q3 revenue to be down sequentially from the record Q2 but up ~10% YoY. Second-half revenue is weighted toward Q4 due to project timing factors.
• Margin Expectations: Full-year adjusted gross margins expected in the low 30s; adjusted EBITDA margins in the low 20s. Back half expects gross margins in the high 20s and EBITDA margins in the high teens.
• Capex Investment: Planning to invest approximately $40 million in capex over the next 12 months to build out US manufacturing for power conversion, with a P&L impact of ~$50 million (R&D/COGS) during the ramp-up phase.

• Cost Inflation: Significant increases in diesel, steel, freight, and logistics costs. While mitigated by supply chain positioning, these remain headwinds that may require cost-sharing negotiations with customers.
• Project Timing Volatility: Large-scale projects are subject to delays or accelerations due to weather, permitting, and interconnection issues, which can shift revenue recognition between quarters.
• Regulatory/Tariff Uncertainty: Section 232 tariffs and potential module pricing impacts in December create uncertainty, though current customer supply contracts appear stable.
• Execution Risk on New Products: Ramp-up of new lines (inverters, storage) involves initial P&L impacts and requires successful integration of acquired teams (e.g., Zimmermann, Prevalon).
• Macro/Political Risks: Dependence on tax credits (45X) and energy policy remains a factor, though management views support as bipartisan.

Q: Analyst asked about the drivers of margin compression in the back half and the timeline for resolving logistics cost headwinds.

A: Management clarified that while back-half margins are structurally lower than H1 due to investments in new product lines (power conversion/storage), full-year structural margins remain intact. Logistics costs are elevated due to diesel spikes and trucker shortages, but the domestic supply chain hedge has protected margins more effectively than previous cycles. Margins are expected to stabilize rather than improve significantly in FY28.

Q: Analyst questioned whether the surge in non-tracker revenue (to 22%) indicated slower tracker growth or reliance on acquisitions.

A: Management emphasized that core tracker business is growing strongly, evidenced by a record $6B+ backlog even excluding storage contributions. The rise in non-tracker mix is driven by successful cross-selling and attachment of new platforms (eBoss, inverters, storage) to the existing strong tracker base, not a decline in core demand.

Q: Analyst sought details on the 1.1 GW inverter contract and whether political tailwinds (FCC ban) influenced the decision.

A: CEO stated the inverter push was a strategic multi-year response to customer pain points regarding reliability and bankability, predating recent bans. However, cybersecurity concerns and FCC mandates have acted as significant tailwinds. The company is ramping US manufacturing capacity to 10+ GW by end of calendar 2027 to meet domestic demand.

Q: Analyst inquired about the energy storage economics, specifically regarding the $100M revenue/$20M EBITDA figure and LTSA opportunities.

A: CFO noted the results were driven largely by one hyperscaler data center project. Margins vary by application but are attractive. Management highlighted strong interest in Long-Term Service Agreements (LTSAs) for both storage and power conversion, viewing them as key value drivers for American-made solutions.

Q: Analyst asked about the Zimmermann acquisition adjustment and its impact on backlog/guidance.

A: Management explained that deal consideration was lowered after detailed review of Zimmermann’s pipeline, aligning forecasts with NextPower’s rigorous standards. Zimmermann’s backlog is excluded from NextPower’s reported $6B+ figure as it is primarily a 'turns' business. The acquisition is accretive and expands international reach without materially impacting near-term backlog reporting.