NXT - NASDAQ

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 Second Quarter Fiscal Year 2025 Earnings Call. After the speakers' remarks, there will be a question-and-answer session. At this time, for opening remarks, I would like to pass the conference over to Mary Lai, Vice President of Investor Relations. Mary, you may begin.

Thank you, and good afternoon, everyone. Welcome to Nextracker's second 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. On today's call, we will open with brief remarks from our CEO, 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 our 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, 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 quarterly report on Form 10-Q and annual report on Form 10-K, 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 the 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 financial section of the IR website. And now I will turn the call over to our CEO and Founder. Dan?

Thank you, Mary, and thank you all for joining our Q2 earnings call. We are very pleased with the continued strong execution by the Company across the board in products, sales and operations, driving solid financial performance. Before we cover the Company's performance, I'd like to offer a few comments on the upcoming election in the United States, which is our largest market. There have been questions addressed to Nextracker and our sector regarding the potential impact of the election on solar. We believe our company and industry will grow, regardless of election outcome. As we have steadily grown through prior Democratic and Republican administrations, we believe we will be successful in any scenario because energy projects are less about politics and more about economics, and solar is the lowest cost form of energy in most markets. It's about the maturity of projects in development in the interconnection queue. And it's about the availability of capital to finance projects, where risks are considered. In all of these areas, solar shines. The U.S. has a growing appetite for new power, and we believe solar and battery projects are best positioned to satisfy that need. Further, most of the manufacturing investments and solar power plants in the country are located in red states, and the underpinning economic value delivered to those states is significant and real. So much so that 18 Republican members of the House of Representatives sent a unified letter to speaker Johnson in support of the IRA, demonstrating again the bipartisan support for clean energy and why we believe key elements of the Inflation Reduction Act will persist independent of the outcome of the upcoming election. In summary, we believe Nextracker will continue to grow in the U.S. under either administration. And now let's turn to our company performance. Q2 was another quarter of strong execution, marking our seventh consecutive quarter of double-digit revenue growth year-over-year. Revenue for the first half of our fiscal '25 was a record, with an increase of 29% year-over-year. We continue to see strong demand for our products globally across all regions, driven in part by a flight to quality across a range of criteria that matter to customers. 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 differentiated technology and engineering. We believe these factors will help to drive demand and enable pricing discipline. Our team is also differentiated with sector domain expertise, a robust global supply chain that delivers products on time, and a customer service ethic that measures in response to customer requirements at each phase of the customer journey. Customers are rewarding these values with sales orders. Our backlog increased significantly quarter-over-quarter to a new record of over $4.5 billion, and we are pleased with the margin profile of our backlog for this fiscal year and beyond. As a result of the new orders, we are raising our profit target for the full fiscal year by $20 million at the midpoint to $645 million. We are also receiving customer orders for our new products, including NX Horizon, NXTR 1.5, NX Horizon Low Carbon Tracker, NX Hail Pro-75 in both our new NX Foundation technologies. All of these products have been successfully deployed in the field. Most of these products resulted from focused R&D investments made by Nextracker. In Q2, we inaugurated our third global design facility in Nextracker Center of Solar Excellence in Hyderabad, India, a 13-acre facility with a 30,000 square foot state-of-the-art laboratory. Our three global design labs incubate and commercialize PV technologies, localized for regional needs and optimize products for customer requirements as we are serving projects in over 40 countries around the world. A few months ago, in response to customer demand, we accelerated to Q3 of this year, the availability of our 100% domestically manufactured tracker. We received customer orders for it, which will ship later this quarter. To our knowledge, we are the only tracker manufacturer that can deliver a 100% U.S. manufactured tracker. This capability can provide tremendous benefits to U.S. customers because it enables them to achieve a much higher score on their domestic content and can enable them to capture a 10% bonus investment tax credit, or ITC. On a typical 100-megawatt system, the 10% bonus ITC can have a value to the customer of roughly $10 million, equivalent approximately to the entire cost of the tracker. Last quarter, we announced the closing of two Foundation business acquisitions which are on track to be successfully integrated by the end of the fiscal year. At the RE+ North America Conference last month, we debuted our NX Foundation Solutions business and customer reception exceeded expectations. We have signed new bookings orders for our Foundation solutions and our NX Horizon trackers and see a robust pipeline business. We're excited for what our Foundation Solutions will do for our customers, enabling quicker, safer and more efficient solar project development on a wide range of soil types for EPC and developer customers. In summary, it was a great first half of fiscal '25, and we remain focused on executing our plan to achieve double-digit revenue growth for the full year with a raised profitability target. Looking forward, we expect fiscal 2026 to be another growth year, comprised of both our legacy products such as NX Horizon and the five new product offerings I just mentioned. The customer demand for our industry-leading products and our ability to execute and support customers' success give us the confidence to achieve our growth supported by our growing backlog. We now look forward to your questions. Let me pass the call back to the operator.

[Operator Instructions] Our first question today comes from Philip Shen with ROTH Capital Partners. Your line is now open.

Congrats on the very strong quarter. Wanted to check in on the bookings. Our math suggests bookings were close to, if not greater than $1 billion for the quarter. I was wondering if you could talk through what the margin profile looks like for the bookings. Dan, I think you mentioned in your remarks that you were pleased with the margins. Can you kind of give us a base baseline or comparison to the strong margins from this quarter? And do you think the bookings are in line with that, maybe a little bit lower or higher? And then when you think about the new bookings, how much of that was your new products? And do you have any new MSA agreements or volume commitment orders or obligations in that backlog as well?

Thank you, Phil, and thanks for the multifaceted question. Appreciate that. This is Dan. Howard, can you weigh in on the Phil's question?

Sure. Phil, this is Howard. So, we had another strong quarter of performance, both on revenue, P&L profitability and bookings. And so, raising our backlog to a new record of over $4.5 billion is a great milestone for the Company. As far as the -- and the mix matters, what's in the new bookings and what's in the backlog. And what we said is about 2/3 of our business is the guidepost for U.S. domestic, 1/3 rest of world. And we call that out because the rest of the world has some select competitive markets such as the Middle East, which is the lowest cost electricity -- solar electricity market in the world, where you have a pricing that's at $0.01 to $0.02 per kilowatt hour, okay? And so, our pricing and margins can vary and do vary by region. With that said, the new bookings that we have, we're very happy with the mix. It's consistent with the 2/3-1/3 mix that we talk about: 2/3, U.S.; 1/3, rest of the world. And the margin profile on both for both of those contributions and then to the overall is very much in line with our profitability and going forward. As far as the type of -- do we have MSAs, VCAs in the bookings? And the answer is yes. Thank you, Phil, for your question.

Our next question today comes from Praneeth Satish with Wells Fargo. Your line is now open.

I echo Phil's comments on a strong quarter. You mentioned that you expect to realize 90% of the backlog in eight quarters. So, I think that's a slight improvement from last quarter where you said you expect to realize 80% of the backlog in eight quarters. Can you talk about what's helping shrink that time line? Is it simply just a higher mix of international projects with a faster revenue conversion cycle? Or are you seeing an improvement on the U.S. side?

It's both actually. We're getting orders with shorter horizons, and that's what fed the backlog increase and caused that metric to go from 80% to 90%. 90% of expected revenue -- or 90% of our revenue in backlog, we expect to recognize over the next eight quarters. And so yes, that's -- it's an equal contribution on both with shorter cycles.

Our next question today comes from Mark Strouse with JPMorgan. Your line is now open.

Congrats on the quarter. On Page 5 of the shareholder letter, you talked about double-digit growth, revenue growth in fiscal '25, but then the growth in fiscal '26 -- maybe I'm splitting hairs here, but is there a reason that you're stopping short of saying double-digit growth in fiscal '26? Are you kind of just talking about the visibility that you have from your backlog? Or is there something else that you're seeing in kind of bookings activity maybe that's making you think that it might be less than double-digit growth next year?

Mark, Dan Shugar here. We'll provide a lot more color on the FY '26 revenue plan in subsequent earnings calls is the answer. So, we'll provide more than -- I will just say, the Company has never been in a better position than it is today, $4.5 billion of backlog. We've seen Howard's covered -- we've seen fee growth among many regions around the world. It's super to have multiple regions in the world all contributing steady growth. And quarter-to-quarter, one region will be stronger than and other regions. The first half of this fiscal year, we saw -- there's some noise on the phone, not sure where that's coming from. Okay. Thank you. So, we saw very strong growth in higher-value regions, the first half of this year -- our fiscal year. And the second half of the year is we're seeing stronger planned shipments in lower value, more competitive regions, as Howard mentioned, such as the Middle East. But on balance, we're doing what we said we were going to do: going out, growing this company double-digit growth this year. We're hitting our revenue plan, and we've been able to be raised on our profitability expectations. Thanks for the question.

Our next question today comes from Dimple Gosai with Bank of America. Your line is now open.

Can you please speak a little bit about some of the competitive dynamics, what we're seeing in terms of customer behavior, also ahead of elections versus rushing to kind of get some of the domestic product through the door. And then also a little bit about your new customer wins, is that more in the U.S. versus international? I think you quoted 12 -- or eight new customers, sorry.

Okay. This is Howard. So, what we're seeing in the market is continued very solid demand across all of our major regions in North America Middle East, India, Africa, Latin America, Europe, Australia, New

Our next question today comes from Christine Cho with Barclays. Your line is now open.

I thought maybe I would hit on margins. So, you guys are doing well above the high 20s guidance. And I realize this is the full year guide, and I know your mix shift to the U.S. is slightly higher than the 2/3 year-to-date. And I think your shareholder letter also talks about software coming in better at 2%. But other than that, is there anything else you would point to, to bridge the gap on where in the cost structure you might be doing better than you expected? Or alternatively, anything that should bring gross margins down in the back half of this year, other than the mix shift shifting back towards rest of world? And just lastly, when you say structural gross margin, can you help us better understand what that definition is? Does that mean where you think gross margins will naturally settle out without any subsidies? Whether it's explicit 45x credit or lower bill of materials offered instead of the explicit 45x credit?

Thank you, Christine, Chuck Boynton here. I appreciate your question. So first of all, Q1 and Q2 were incredibly strong quarters based on execution. And execution is really the key word. We overdelivered based on our product teams, our customer service teams out in the field, delivering our projects on time with quality. And when you do that with great products, deliver on time, good things tend to happen. Margins tend to be a little bit better than you plan when you deliver a great product on time, on schedule. The second thing is we've seen a really significant uptake in TrueCapture. TrueCapture is the best industry-leading software that manages the power plant that drives the best sales in the industry. TrueCapture has fairly high margins because of software, and we saw a lot of systems being commissioned in Q2. That allowed us to really accelerate margins in Q2 and that will probably not repeat in Q3 and Q4. It might, but our plan is it will be more like 1% to 2%. It was higher than that in Q2. So, then the third factor is 45x. We had some accumulated 45x benefits from prior quarters that got amortized into Q2, and that will not repeat in the back half of the year. In the letter, we talked about 300 basis points of overachievement in Q2 that are likely not to repeat in Q3 and Q4. And then Howard mentioned the international projects. In the first half, we had a really high share of U.S. projects that delivered really strong margins, great value for our customers. The back half of the year, we have some very large projects, especially in Q4, scheduled deliveries that are in very, very competitive markets, and that effectively averages out the Company to effectively 2/3:1/3 international:U.S. mix. The structural margin comment is really taking a step back, thinking about what is the business on average if you blend out the model of 2/3:1/3 international, on average, what would the margin profile look like? And we're saying, structurally, it should be in the high 20s, maybe be low 30s. So that's a comment that the Company has made consistently, and we've been overperforming that based on really great execution. Thank you, Christine. Next question.

Our next question comes from Brian Lee with Goldman Sachs. Your line is now open.

Just a couple of questions I had. Just on the software piece, Chuck or Dan, can you kind of speak to -- I don't know if you think about it in terms of attach rate, but this is the first time you broke out the percent of sales, it seems like it could be an opportunity going forward. I remember you talking to this at the time of the IPO that was probably too small to break out. So just a sense of how you guys think about attach rate? And then maybe if you can quantify kind of the margin uplift, I mean, compared to the high 20% structural growth? Like where is software coming in at? And in situations where you aren't able to get a customer to sort of sign up for TrueCapture, what are some of the drivers there outside of maybe just the incremental cost?

Thanks, Brian. So, over the long term, the attach rate of TrueCapture has increased significantly. This -- we first introduced TrueCapture, which is an adaptive tracking software about seven years ago. It's operating in all our major regions around the world. There are, to my knowledge, over 300 projects that have been commissioned with TrueCapture. We worked with all the leading independent engineers that value TrueCapture. And TrueCapture has been empirically validated in the field. What does that mean? That means we've gone out there, measured it. And customers have become increasingly comfortable with TrueCapture. And so, the -- it's well understood. And as markets mature, we go into new markets or early markets as a mature TrueCapture tends to have an increasing attach rate as we go forward. One of the things we discussed during the IPO process around then is TrueCapture does have a different revenue recognition model than our hardware business, where, in the hardware business, revenue and profitability is recognized upon delivery. In the case of TrueCapture, the revenue recognition happens when the TrueCapture systems are turned on. So, then you have to -- so there's a lag between hardware delivery and when systems are commissioned, and then TrueCapture is used. And so, as Chuck mentioned, this last quarter, we saw more TrueCapture revenue because it was building up in terms of the systems were being shipped, but they weren't turned on yet, okay? So that's basically where it stands. We feel really great about the growth in the TrueCapture business globally, about the engagement by the independent engineers. We keep releasing features, technology that increases TrueCapture's efficacy in the field. For example, we released a feature called

Brian, I'll just add on the margin side, software is a little different animal because you have -- you tend to have higher R&D costs. You spend a lot of money on the IP, developing that technology. And so, the gross margin that's reported is very high, but it comes with OpEx in the R&D line. And you'll note this quarter, we've increased our investment in R&D, and we plan to increase our investment in R&D again in Q3 and Q4, and this is what's driving this additional value. Thank you.

Our next question comes from Dylan Nassano with Wolfe Research. Your line is now open.

Peer spoke on their earnings call last night. They're talking about shipping modules to warehouses for customers who aren't yet ready to accept the product. I don't know if you guys listen to that call, but just two questions on that is, have you seen any impact on your projects in your backlog specifically from those actions? And can you also just remind us what kind of recourse do you have when it comes to exercising contractual delivery rights should it be necessary?

Yes. I'm sorry, can you repeat who announced your shipping modules to warehouses?

Yes. Sorry, it was First Solar. They were just talking about, yes, shipping directly to warehouses.

This is Howard. I'll answer the question. My understanding is that it's fairly limited, at least that's what we're saying. I don't want to speak for First Solar. We're seeing very consistent activity on a project-by-project basis. What that means is a from quarter-to-quarter, we're seeing some project schedules shifting to the right, some project schedules being pulled in. And on the whole, because of our diversity of the number of EPCs that we work with, the number of owners and the number of projects that we have in the U.S. and internationally, we're able to manage these flows back and forth in totality. I think we've proven that over the last seven quarters since going public. But we're not seeing -- on an individual project basis, we can see a delay or a shift of a month, six weeks, sometimes even longer. But it's not a very concerted trend. We're not seeing that. It's not going materially up into the right relative to what we talked about last quarter. So, we're actually seeing more stability, I would say, in our shipping schedules from last quarter to this quarter. Thanks for the question.

Our next question comes from Maheep Mandloi with Mizuho. Your line is now open.

First, just on the revenue cadence. I think in the new that you've pointed to flattish in Q3. It's how this Q4 weighted. So, if you just talk about how many book and billings you still need to do for Q4 or the second half? And separately, on the structural margins or ratio of that, could you just talk about the structuring OpEx you expect? I think you talked about higher OpEx in Q3, Q4 for R&D, but how should we think about that going forward?

This is Howard. I'll answer the first part of the question, and Chuck will answer the second part about spending. So, we feel very solid about our FY '25 because of our backlog and our visibility. So, we're really, really good shape there. There is -- so that's what I'll say. We've either hit or beat our top line, which is really driven by megawatt shipments each quarter. And we have a lot of confidence going into next quarter and for the year. And that includes Q4, which, as Dan and Chuck and our comments provide color on, is it's going to -- it's -- we expect a very robust quarter. And we're quite confident in delivering on the quarter. Chuck, do you want to take the OpEx?

I will. Thank you. And just to put context, Q4 will be the single biggest quarter in the Company's history, and it's going to put a lot of pressure on our supply chain team. They are amazing and work to the challenge, but we have booked and sold a lot of business, and it's going to be a really, really strong Q4. On the OpEx side, we're making really important strategic investments, primarily in technology. We believe the Company has a very big moat with our technology, and we want to deepen and widen that moat with investments, key investments in R&D. You saw in Q2 R&D spend went up by $3 million. SG&A was flat. And we would intend in the back half of the year to continue to invest in R&D as well as sales and go-to-market in key geographies to drive revenue and sales for coming years.

Our next question comes from Joseph Osha with Guggenheim Partners. Your line is now open.

Turning to your 45x disclosure, I'd like to clarify. The 300 basis point uplift that you referred to is sort of the incremental credit. It does not refer to the totality of the 45x uplift. Am I reading your language correctly?

Joe, yes. Think of that the 300 basis points was a combination of TrueCapture, 45x and other, which is, I would call that great execution of our field teams. And so 45x, think of that as maybe 1/3 of that, the year-over-year benefits, though, just to be clear, Joe. 45x was not in our prior year ago numbers. We had a cumulative catch up in Q4, as you might recall, that was GAAP only. And so, when you compare year-over-year to 45x, we want to just be super transparent and clear that they're not purely comparative. Thank you.

Our next question comes from Jonathan Kees with Daiwa Capital Markets. Your line is now open.

Great. Of all your instructions, just limit myself one. I'll also add my kudos to the quarter, the results. Just wanted to ask about project cancellations. You had mentioned last quarter, you had a customer who had canceled out. It was just a small customer. Just curious if you had anything like that this quarter.

Thanks for your question. We have not had any projects canceled this quarter. And the context of that one project that canceled last quarter, the context was there were over -- that was one out of over 500 projects. And so that's where we stand.

Our next question comes from Kashy Harrison with Piper Sandler. Your line is now open.

Congrats on the quarter. So, my question is on NX Foundation. Just based on your analysis of your pipeline, I was wondering if you could discuss what proportion of sites fall under the definition of hard terrain that would be applicable to Ojjo? And then do you have any U.S. Foundation revenues, hard terrain or otherwise in fiscal '25? And then finally, when do you expect to start quantifying the Foundation backlog?

Okay. I'll take the first part of the question. And then, Chuck, you take the second part of the question, please?

Yes.

We had a fabulous launch event at RE+ of our Foundations business. And we showed a map from the U.S. geological service that shows when Bedrock is within one meter of the surface is my recollection of what the metric was. And it turns out there's a significant portion, just geographically of the U.S. that has rocked near the surface, where if you were putting a traditional pile on the ground, you hit rock. And what we've also seen is, over the years, as the solar market has broadened geographically across the U.S., a greater prevalence of the number of sites that have rock that have to be addressed or other -- it's not just rock, but also difficult soils such as frosty soils, expansive clay soils, or swampy site-type soils. And the two foundation technologies were quite to address all of the above. In terms of numbers, what we covered in that forum, there were numbers like 20% to 30-plus percent of the sites are difficult sites. Some of our customers have over half their sites depending on their geographic range of activity. So, it's very significant. That's the answer to the first part of the question. Chuck, in terms of the second half.

Yes. Kashy, thank you for the question. In Q2, we actually booked and reported revenue for our new Foundations business. So, we're super real that we have customers paying us money for this technology. We have booked new transactions. We don't expect the dollars to be significant this year. And that's a stay tuned for Analyst Day and our views on next year. We'll be -- we'll provide more color as we think about talking about next fiscal year. Thank you.

Our next question comes from Jon Windham with UBS. Your line is now open.

Perfect. Congratulations on the 100% U.S. domestic content capabilities. As you plan to ramp and ship that next year, just wondering if you could give us some thoughts or guidepost about what proportion of your U.S. business is that likely to be? I appreciate it.

Thanks, Jon. And just as a point of clarification, we actually have our first 100% U.S. tracker scheduled for delivery this quarter. So, we were able to accelerate that based on customer demand. With respect to the percentage of our business next year that could use the 100% domestic tracker. We're going to have to wait and see on that and speak to it later. It comes a bit to customer needs. It also relates to their module mix. But what we're working on is, from a supply chain standpoint, getting ahead of the curve. And that's consistent with how Nextracker massively ramped our U.S. business prior to Build Back Better, prior to IRA, we were ramping our U.S. supply chain, and we've ramped it in other key markets such as India. This quarter, in India, we announced we've had a 95% content, for example, in India, with over 10 gigs of capacity in India for India. And in the U.S., over 30 gigs of our major components in the U.S. for the U.S. We are seeing continued demand and stronger demand than we anticipated for this 100% U.S. content tracker. We'll have to wait and see before we guide to that number, we could address that potentially on our subsequent or the following earnings call or the Analyst Day that Chuck mentioned. Thank you.

Our next question comes from Ben Kallo with Baird. Your line is now open.

Just because the international opportunity is so big, and the U.S. opportunity is better margins. What do you guys optimize for? Sales growth or margin or EPS growth, cash flow?

Ben, we're optimized, we want to grow. We want to keep growing, and we want to do so responsibly. And that means profitably and in an accretive way. So, if we go into a new region, we evaluate is accretive to the Company, it's sort of like an M&A. And so, we see it your way, which is, there is a vast international opportunity in addition to the U.S. market. I personally just came back from India. I spent a week there. They have a 500-gigawatt target for renewables by 2030. That translates to 50 gigawatts per year just for India. And that goal is more than a goal. It's really like an RPS. The states are required to comply to get this clean -- to meet this clean power goal. If they don't, they don't receive funding. That's our understanding from this trip. So, there is this movement worldwide happening on electrification and clean energy. And so, we are going to -- we are tapping into that, and we're going to keep doing that responsibly. Thanks for your question.

Our next question today comes from Jordan Levy with Truist. Your line is now open.

I think Chuck, in an earlier comment -- in an earlier question, you talked to the efforts on the R&D side around expansion into new technologies and also into new markets. I just wanted to see if we could -- not to get into too many specifics, but any additional color we could get there on what sort of opportunities are attractive to you?

Yes. So, the question is, what new R&D efforts are we taking on. Dan, maybe you should take that question.

Sure. Jordan, thank you. Jordan, I think the best way to think about this is if you look at our patents, we have over 600 patents issued and pending in three categories: mechanical, electronic and controls and software. And so, we're continuing, and these relate to each other. They're not silos. The mechanical relates to the control system, which relates to the software, for example, in TrueCapture. And these really add value for customers. So, we're really continuing to invest in all of these categories. And what we have is a very well evolved process to look at where we look at innovation and then how much value does it contribute to a customer, can that value be quantified and monetized by the customer what's the incremental investment and what's the risk and what's the time frame. These are the factors that go in and that we have a list based on the available budget we have. And then we're investing in everything that we can afford, and we've continued to increase that budget. And we've just seen a really great efficacy. And one of the things we speak about is as we release these technologies, they've been piloted in the field. And so, it's great. We've got our Hail Pro-75 out there operating with customers in real utility-scale power plants and so forth. So, it's been very productive. Now having said that, we've also acquired technology. We're open to that. We do -- we're very open to looking at technologies that can be additive to the Company. I believe we have time for one more question. And operator?

Our next question comes from Julien Dumoulin-Smith with Jefferies. Your line is now open.

Guys, can you hear me, okay?

Crystal, Julien.

Awesome. Sorry about that. I wasn't sure if it was coming through earlier. Just to follow up. Earlier on the U.S. content, how many points you qualifying for under the domestic content just to clarify the 100% product? And then just coming back to the margin question quickly here. Obviously, first half versus back half, as you think about that exit run rate in the back half year, is that kind of what you should be thinking about in terms of an EBITDA margin going forward for the remainder of that backlog? Or is the first half of this year really kind of a good indicator of what you can put up as you think about embedded in that backlog across the $4.5 billion?

Thank you, Julien, this is Howard. I'll answer the first part. Chuck, the second. So, on the domestic content, really happy to be able to deliver that this quarter for our customers. We're seeing a higher take-up than we anticipated for that. Why? In large part because we now can enable that customer to qualify for 24.7 points out of 100. I don't know. So, a quarter towards the 40% or 45% that's required, okay? So, if you need -- and that's increasing over time. So, if you need 40 or 45 points, we're more than half of the points to get to a 10% credit. So, we're seeing customers really interested in that. They're thinking about, okay, tracker plus how much panel domestic panels do they need to achieve that hurdle. So, that's the answer to the first part of your question. Chuck?

Yes. Julien, we're not going to sort of do our outlook for next year and beyond today. But a lot of the factors, the structural kind of high 20s, maybe low 30s gross margins would translate into, call it, 20-ish EBITDA margin it's too really right now to say what that's going to look like next year because there's a lot of factors, mix, attach rates of TrueCapture, our new Foundations businesses. And it's more appropriate to talk about that at our Analyst Day or at our Q4 earnings call as we roll out the outlook for next year. Dan, do you want to close?

Yes. First, thank you, everyone, for joining our earnings call. We thank the entire Nextracker team, our shareholders and our highly valued customers and partners as we march ahead for renewably powered world. Thanks for joining our call today.

Thank you. This concludes our Q2 earnings call.