Nextpower Inc. Class A Common Stock 2027 Q2 Earnings Call

Thank you, and good afternoon, everyone. Welcome to Nextpower's second quarter fiscal year 2027 earnings call. I'm Sarah Lee, Nextpower's Head of Investor Relations, and I'm joined by Dan Shugar, our CEO and founder, Howard Wenger, our President, and Chuck Boynton, our CFO. As a reminder, there will be a replay of this call posted on the IR website, along with the earnings 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. 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 quarterly report Form 10-Q and annual report on Form 10-K, which are available on our website at investors.nextpower.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 and the shareholder letter, as well as the financial section of the website. Now I'll turn the call over to our CEO and founder, Dan.

Good afternoon, and thank you for joining us. We're very pleased to report another quarter of strong execution and record financial results. Before discussing the company's performance, I'd like to remind everyone we will be hosting our capital markets day in Las Vegas at RE+ on November 16th. We look forward to sharing our progress on our 2030 outlook and the long-term strategy we unveiled last year, both of which have accelerated meaningfully. Given that upcoming event, we'll keep our prepared remarks brief today. Turning to our Q2 performance. Nextpower delivered record financial results in the second quarter. Revenue was over $1.1 billion. Adjusted EBITDA was approximately $250 million. We had record quarterly bookings, growing our backlog to over $6 billion. Our core tracker business strengthened further, extending the momentum from the first quarter of fiscal 2027.

We continue to see strong customer demand for our tracker products and solid execution across our global operations. At the same time, demand for our non-tracker products is ramping fast and accounted for approximately 22% of revenue this quarter. Energy storage contributed approximately $100 million of revenue and more than $20 million of adjusted EBITDA, including revenue from a behind-the-meter storage project for a tier 1 hyperscaler's AI data center. We also achieved record bookings in our Foundation and eBOS businesses, with eBOS bookings over $100 million in the quarter. Additionally, we secured a 1.1 gigawatt inverter framework agreement covering five projects, and we shipped our first Nextpower branded power conversion system to customers in the quarter. These results reflect the value of our customer relationships, differentiated technology, and execution discipline.

Customers are looking for partners who can help them accelerate project schedules, reduce risk, improve economic outcomes, and execute at scale. Our strategy remains grounded in that customer-led approach, expanding our participation across the project life cycle, solving important customer problems, and growing profit dollars while maintaining attractive margins. Electricity demand continues to accelerate, driven by end uses such as electric mobility, industrial growth and re-industrialization, and the rapid build-out of AI data centers.

Solar and storage are the fastest, lowest cost, and most scalable ways to add new capacity. We believe Nextpower is well-positioned to help customers meet these needs as the market moves toward terawatt scale deployment. Finally, before turning the call over to Howard to discuss customer demand and commercial developments from the quarter, I want to thank our customers for their continued partnership and trust in our employees for their passion in driving innovation and customer satisfaction.

Thank you, Dan. Q2 was another great quarter as we saw strong demand in both the U.S. and rest-of-world markets, with bookings well over $1 billion in the quarter. Tracker sales drove sequential backlog growth to a new record exceeding $6 billion, while our non-tracker businesses continued to gain momentum. Customers choose Nextpower because of our technology, execution, supply chain, bankability, and customer focus. We believe these attributes are reflected in our growing backlog and leading market position. Our eBOS business delivered record bookings of over $100 million for the quarter, a clear proof point of our ability to integrate and scale acquired businesses. Our patented NX PowerMerge solution was a material portion of these bookings, and we are off to a great start having secured over two gigawatts of firm orders.

Further, we have now deployed PowerMerge at commercial scale and achieved an important milestone with a 100% pass rate in post-installation functional and quality testing at the project site. Our Foundation business also achieved record quarterly bookings, reflecting growing traction for Nextpower Solutions, addressing all soil conditions. Finally, on the new product line front, we are pleased to announce a 1.1 gigawatt inverter contract, which marks a major milestone in the build-out of the Nextpower technology platform. Regionally, the U.S. remained our largest market, accounting for approximately 82% of quarterly revenue. As a complement to our very strong U.S. market position, we continue to expand our international business. After quarter end, we completed the acquisition of Zimmermann PV-Steel Group, which will significantly increase our European market footprint, as well as adding structural solutions to our product portfolio with products such as fixed tilt, agrivoltaics, and wire management.

Zimmermann brings more than 20 gigawatts of cumulative project experience and established customer relationships and extends our reach into 15 additional countries, growing our global footprint to 68 total countries. This acquisition broadens the range of ground mount solar applications we can serve and creates an opportunity to attach products across our platform through an extended European channel. Turning to project timing, our projects are large scale and typically span multiple quarters and years. It is normal for our projects to accelerate or push out based on things like weather, project schedules, and permits. Project timing for this quarter follows this pattern with manageable movements across a large and diverse portfolio of customers and geographies. As Chuck will explain, we expect that our second half revenue will be weighted more toward Q4 deliveries due to project timing factors.

Average project sizes for both solar and storage are expanding in key regions with increasing attention to bankability and quality. This dynamic further plays to our strengths. We believe we are positioned well for the future with our technology, track record, customer relationships, and expanding product portfolio. We are excited by the multiple new growth vectors we have added in the past 18 months, including eBOS, power conversion, and storage, and we look forward to sharing more with you at our Capital Markets Day in Las Vegas. With that, I will now turn the call over to our Chief Financial Officer, Chuck Boynton.

Thank you, Howard. As Dan mentioned, Q2 was the strongest quarter in the history of Nextpower, with revenue of over $1.1 billion up 23% year-over-year, and adjusted EBITDA of approximately $250 million up 12% year-over-year, and driving a 23% adjusted EBITDA margin. Adjusted free cash flow was approximately $135 million for the quarter and $240 million year to date, which helped to fund our acquisitions and stock repurchases in the quarter. We ended the quarter with over $1 billion of cash and no debt. As our platform expands, we are managing the business for the long term with a focus on cash generation and driving adjusted EBITDA dollars while investing in future growth. The quarter included for the first time, contribution from Nextpower Energy Storage. Our storage business delivered a very strong quarter with approximately $100 million of revenue and more than $20 million of EBITDA.

The sales pipeline is strong, and we are on track for a solid second half of the year. We also closed the acquisition of Zimmermann last week. We expect this acquisition to be accretive out of the gates. The total deal consideration of EUR 230 million is lower than we previously announced and was changed to an all-cash deal. We are also reducing our expectations for this business to approximately $100 million of revenue and $10 million of adjusted EBITDA for the balance of the fiscal year. This transaction, while small, is strategic as it expands and diversifies our TAM with new products and new markets, leverages fixed costs, and allows us to drive attachment of our new suite of products, such as eBOS, power conversion, Foundation, and storage. Driven by strong execution and bookings across all our businesses, we are increasing our fiscal year 2027 outlook.

We expect revenue of $4.2 billion-$4.45 billion, adjusted EBITDA of $890 million-$940 million, and adjusted diluted EPS of $4.61-$4.87 per share. We are also increasing our free cash flow estimates from $450 million to over $500 million. We will expand on our financial outlook at our Capital Markets Day on November 16th. Based on current customer delivery schedules, we expect second half revenues to be more heavily weighted toward Q4, with Q3 revenue down sequentially from our record Q2, but up approximately 10% year-over-year. This dynamic sets us up for a very strong finish to the fiscal year, with potential record revenue and adjusted EBITDA in Q4. Now, some details on what we see for second half of the year and first part of fiscal 2028. We are building out the NX Power Conversion product line for both solar and storage.