Start soon. This one is a webcast, I believe, so we'll talk into the mics here. We've been not using them, but we'll use it for this one. Yeah, maybe we can get started here. My name is Praneeth Satish. I lead the clean energy effort here at Wells Fargo. Very pleased to have Chuck Boynton with us, who is the CFO of, I was about to say Next Tracker, but I caught myself, Nextpower. Yeah, I guess, you know, Chuck, maybe we'll dive into questions, and if anyone has one, feel free to jump in as well. You know, one thing I wanted to start with, the analyst day, capital markets day, a lot of positives, a lot of exciting stuff on the roadmap.
But, you know, one of the pushbacks we received was the pace of assumed tracker growth. And, I wanted to start with that, and maybe if you could help frame what went into that forecast. I know it's consultants, but, you know, are there any factors that could make this trajectory, you know, more conservative or leave some room for upside?
Yeah, great. And thank you, everyone, for being here and for listening in. So yeah, we did outline sort of a three or four-year outlook going to 2030, fiscal 2030, for the company. And what we were really excited about in that outlook is the non-tracker growth is about 40% CAGR, very, very significant growth of the non-tracker businesses. And I'm sure Praneet we'll get into that in more detail. The tracker side, what we did is we looked at the industry growth rates based on the companies that track and prognosticate on the industry. Think of those as like Bloomberg New Energy and Wood Mackenzie and many others around the world. And we sort of took an aligned view of that growth rate and assumed that our tracker business would grow in line with those growth rates. Now, I'll point out, historically, they've under-forecasted the market.
So is it just kinda continual conservatism, or is it the boy who cried wolf at some point? They're right. We didn't wanna be, you know, prognosticating the industry going out multiple years. So, you know, we also assumed kind of no share gains, and we have been gaining share over the last, you know, few years with a flight to quality. And so I think, you know, to your question on the upside, you know, certainly if the market grows faster, then I would expect us to grow faster and conversely. And so I think overall on the non-tracker side, which we'll talk about, we've assumed that that goes from roughly 10% non-tracker revenue today.
Think of that as, you know, we sell trackers, and then beyond the tracker, it's about 10% of our revenue, and that's kinda software foundations and a little bit of eBOS. We see that number going up to one-third of our revenue in 2030. But the TAM, the attach rate then is still quite conservative, and so there's the possibility that the attach rate is way higher and that business could grow even more than the tracker or even more than we've outlooked.
Okay. No, that's helpful. The other thing that you know I walked away with from the capital markets day is how much now of the products within your portfolio qualify for domestic content, are made in the U.S. You've got trackers, frames, inverters now. You know, if we look at the IRS safe harbor table and you add that all up, it's about 40 points you know versus the threshold going to 55. It's a lot. You know, I guess the question is like how do you leverage that? Does that come up in your conversations? Is there an opportunity here to maybe price at something above the sum of the parts because of these domestic content benefits?
You know, potentially. I'd say in general, we treat our customers like partners and we work with them. We wanna earn a fair and responsible margin that's good for our shareholders, but also, and this is a little bit unusual, Praneet, and I think a lot of industries' people would be like, "What are you talking about?" But in general, as the cost of solar goes down, the TAM expands.
Mm-hmm.
And so we've been on a multi-decade learning curve where the cost of installed solar is a fraction of what it was years ago. And that same trend's gonna continue. And this is what's so great about solar is the price of generating that electron continues to get cheaper every year, while the cost of energy goes up. It creates a wedge. Now, specifically for us and related to your question, over history, we've driven the cost down and we've passed on those savings to our customers while maintaining a good margin. And it's like if you keep too much of that margin, then you invite competition to come in. And if you don't have a high enough margin, then you're giving away more than you should.
Fundamentally, the margin is a representation of the R&D and the technology that you've created, that IP you've created. As we look out, you know, three, four years, we have outlooked that the margin profile would be roughly stable. Now, we can charge more for domestic content, and we do. We have a 100% domestic content tracker, and that basically meets the IRS, you know, guidelines for domestic content, and that does help significantly with the score. It costs more, so our customers pay more for that. What do they get? There's less tariffs. We've seen, you know, we've had, you know, some pretty significant tariff impacts the last quarter or two and going forward.
If the domestic content tracker has virtually no tariffs, so there's been a huge benefit, and we've encouraged our customers to go with domestic content trackers, but they do cost a little more. As you think about, you know, eBOS, we make our eBOS in San Jose, California. Will there be an international version at some point? Perhaps. We have launched our power conversion product that we've talked about as we wanna make that in America. That's at Alpha today. We expect Beta this summer and GA, you know, shortly thereafter. That will be, you know, likely a made-in-America type product. And so we do think American manufacturing is critical, it's good for the country, it's good for our customers, and then we're doing the same thing internationally where we're making products internationally for those local markets.
So we've done that in the same thing in Europe, in Australia, in the Middle East, where you localize manufacturing. It helps to reduce freight. It also helps to create and engender respect, and you do better on kinda RFPs and whatnot.
Got it, so I'll kinda push a little bit more on this and maybe it's too early for you to comment on it, but if you look at First Solar, you know, they earn about $0.10 premium on their panels because of the fact that it's domestic content, FEOC, their panels alone let you qualify, so now you have a scenario where either you use First Solar panels or you use solar panels made in the U.S. with cells, or you use the full suite of Nextracker products and a U.S. module, and you'll also qualify. It feels like I get the argument about, you know, charging a little more for domestic content because it costs more, but could there be something on top of that that develops over time because now you have much more than just the tracker?
and yeah, I guess, how do you think about that? And is any of that embedded in your pricing, in your guidance through 2030 in terms of the ASP assumptions?
Yeah, I'd say, you know, there's upside, of course, but in general, as it relates to the customer, we've tried to, you know, we wanna protect our margins and protect our business, and so we do better in North America, made in America, because we also get 45X credits as well. And so I think it's you wanna find that kinda Goldilocks zone where you're charging an appropriate margin. It's not too high, it's not too low.
Yeah.
And that's embedded in our outlook. So I, you know, there are cases where we have, you know, more pricing power and we'll do that, but we also, we partner with our customers to, you know, treat them like, you know, like true partners. And so in those cases, we are continually innovating, driving up quality, reliability, focused on LCOE. And then, you know, where there's an opportunity, we'll price more. But in general, we look at this as a partnership with our customers. And that, I think, long term is a better model versus trying to, you know, sort of, you know, use that leverage to have a short-term gain for, you know, long-term detriment.
Okay. Makes sense. Okay. So maybe, you know, shifting gears, you provided a lot of disclosure at the Capital Markets Day, providing forecasts through 2030 for all the various segments. Maybe we could kind of go through them a little bit and talk about the drivers. We took our best guess at separating some of these products. So you don't have to comment on if it's right or wrong, but looking at EBOS, it seems like revenue, the step up is one of the largest in EBOS, going from about $50 million in 2025 to, you know, $400 million plus by 2030. What, I guess, is that true? And then, what are you seeing in terms of booking activity and the outlook for EBOS in the near term?
So yeah, and the outlook that we provided at our capital markets day combined eBOS with power conversion. And so we'll talk about power conversion here shortly. So we didn't give you specific breakouts for eBOS, but we are very, very excited about the eBOS business. The company we acquired has had an amazing multi-decade run of great customer loyalty, quality, reliability. And when we diligenced the entire eBOS industry before we acquired Bentek. And what we liked about them was that customer loyalty and quality heritage, made in America, in San Jose, California. And importantly, they had a really unique approach from a technology standpoint to a product that we launched and announced called PowerMerge. We expect that product to be shipping this summer, and that should be a meaningful revenue driver for us. I'll talk about that in a minute.
But if you go back and look at the first quarter following the acquisition of Bentek, over multiple decades, it was the single best booking quarter in the history of the company. And that's before our new PowerMerge product is available for ship.
Mm-hmm.
And so, if you think about why that's happened, it's because now behind our eBOS business is our balance sheet, our legacy, our customer relationships, and our technology. And so we're seeing a lot of interest from multiple EPCs and developers, working with Nextracker, Nextpower, sorry. I did it too myself, Praneeth.
It's hard.
It's hard, yeah. And then you look at this PowerMerge product, and this is really, really exciting. Basically, there are two different kinda collection strategies for getting the power from the electrons in the back of the panel to the inverter. And there's the traditional kinda overmold type product, a BLA, and there's you know the traditional kinda combiner box. And PowerMerge is the best of both worlds. You create effectively an overmold product, taking the electrons in the back of the panel to the PowerMerge with an overmold, so there's you know no air, no light, no water can get through. And then the one area that you want field flexibility is effectively attaching it to the bus line. And here now you have, like, the flexibility of a field-installed product and the quality of a factory-produced product.
And so it kinda creates the best of both worlds. Now, it will take a while. I'm sure the ramp will take some time, but the initial customer interest is incredibly strong. And we feel like this could, you know, likely will be a lower cost, better LCOE, and better performance. And so, again, it's early. You know, we're not shipping yet, but embedded in our outlook is effectively transforming our eBOS business to this kind of innovative new approach that, to our knowledge, no one else is doing in the market.
Yeah. Yeah, maybe following up on that. So, to reach that kind of scale, it seems like, through 2030, it feels like you need to take some share from some of the larger players that are in the space. You know, how do you position for that level of competition? Do you need, you know, to hire more people? Yeah, because there are some large established incumbents, and what kinda gives you the confidence that you'll be able to take share in this segment?
Yeah, we have a lot of respect for the incumbents in the industry. So, you know, there are some Chinese players with fairly high share that we think will end up losing a lot of that share because of their just the political environment and the made-in-America benefits, the domestic content benefits. So, you know, it's a, I think the way I look at it, it's a very big market. There's room for many, many competitors. I think we'll all do well. This is a great industry. It's not a winner-take-all, and you know, competition keeps us sharper, and we'll keep them sharper, and I'm sure, you know, there's room for many players, but I do think that you'll see this become a more structured industry over time.
Gotcha. You know, maybe ticking through the segments here. So moving on to foundations and inverters. So starting on the foundation side, again, it's our numbers, but you know, kind of looking at the ramp, it feels like there's a big uptick when you get out to like 2030. And I wasn't sure if that's tied to the existing product suite or whether, I know, you know, Dan has talked a lot about robotic installations and automation. And is there some of that embedded in there that drives that?
Yeah, there is, so if you think about, you know, we are, Dan is a phenomenal engineer. Our team, we are an engineering company at heart, 600-plus engineers. It's kinda who we are, high-quality engineering, and what Dan has mentioned is we've kinda reimagined the tracker, and the analogy that we've used is the auto industry used to be where you'd basically there would be a chassis, and then there'd be a body attached to that chassis, so the chassis was kind of not unique to the individual car or truck itself, but the body was unique, and Ford, or one of the motor companies, came along and did the unibody, where effectively they eliminated a big chunk of the frame and made the body itself have the structural integrity for the truck or the car.
The same thing is gonna happen with the tracker, the foundation, and the frame. You reimagine it as to where you can leverage the frame of the solar panel being embedded with the tracker and the foundation. What do you get with that? You get way less steel, less raw material. You have basically better performance and, as you mentioned, the ability to do, like, robotic installation. That is really, really exciting and would be kind of a next-gen view of how do you drive cost reduction down and performance and reliability up. So embedded in our view on foundations and frames is effectively this unified strategy. Now let's go a little deeper on foundations. There are effectively three kinda broad soil types. There's a rocky soil, there is a very marshy, loose, sandy soil, and there's the traditional kind of vanilla soil types.
In the old world, they would basically use an I-beam or a W-beam, and they would pile drive that in the ground, or they would drill a hole and put the I-beam in there. It was very expensive. There's a lot of wasted material. We have reimagined how to do that, partially through acquisitions and partially through hardcore engineering, to now have a solution that addresses the full gamut of soil types. What you're doing is you're not using a single I-beam, but you're using effectively tubes. Some would be screws that you drill in with a one-pass laser-guided GPS aligned, so one pass. What you get when this is perfected, and we're still working on the engineering, but what you get is effectively a much lower-cost way to install the foundation, and you get a more secure foundation.
Think of it, you know, one beam in the ground is weaker than two. And so you potentially have significantly less steel and better stability. And then importantly is then you integrate the attachment of those to the tracker itself. And here we've demonstrated where the old model had 18 individual parts to attach the foundation to the tracker, and that's now down to two.
Mm-hmm.
You can just imagine the labor savings and the benefits of having that better engineered solution. You know, today we're doing all those foundation types in that non-tracker revenue mix I told you before of 10% of our revenue is non-tracker, 90% tracker. A portion of that are I-beams and some of our foundations. That should grow materially as this technology matures. We take that globally, and the industry adopts this better way of doing foundations.
So maybe just on that, you know, kind of long-term outlook here. So first question is, you know, for these robotic installations, do you need steel frames, in order to, you know, realize this, this vision? I think Dan has talked about the aluminum frames breaking and things like that. So is that kind of where this goes? And then how much, you know, competition is there in this market? And yeah, it feels like with all of these pieces, it kind of is yours to win because there's a lot of interconnecting pieces to make this happen. But maybe if you could just talk about that.
Yeah, I don't think that, you know, steel itself is a prereq for robotic installation. There are many companies that are working on robotic installation today. We're not currently working on that. We wanna enable the industry to effectively achieve robotic installation. But the reality is that it's kinda steel is a no-brainer. It's a way better material for a solar module. We have aluminum frames because of the heritage. They started off as very small modules, and aluminum frames made sense. As the format has gotten bigger and bigger and bigger, aluminum is just not the right material. It's not suited for this. First, most of it's imported from China or elsewhere. It's not really aluminum made in the US. Aluminum is a lot more expensive. It is more brittle. It doesn't have the strength of steel.
You know, steel. The one downside of steel is it's a little heavier.
Right.
But that can be. That's easily overcome, especially with local manufacturing. But then you can envision the interconnection between this new generation of steel frame, not today, but in the future, and how that gets integrated with the tracker to become part of the structural integrity of the system. And that's, you know, materially less steel overall. And so overall, you know, we think that steel is the right material. We have one big announcement today. We hope to have more in the US with T1 as a great partner who is the first order that we've had. But we do think that steel will overtake aluminum and be the dominant form for solar panels, likely worldwide, but for sure in the US.
And maybe we'll stay on frames 'cause we went there. But so from what I can tell, again, our read of the guidance, I don't think there's a whole lot embedded for the frames business in 2030 beyond what's already been announced with T1, I guess. Is that fair? And then secondly, you know, how are your conversations going with some of the other solar manufacturers in the U.S.? And anything you can share in terms of, you know, level of engagement or any that are in more advanced stages of negotiation?
Yeah, we don't comment on, like, you know, specific sales projects, but I would say the level of excitement is quite strong. It does solve a meaningful part of the domestic content and FEOC issues with solar panels. So having the frame, it's a very material part of the cost of a solar module. So there's a lot of interest in how we handle, you know, FEOC and domestic content, and so, but I would say, you know, the market interest is quite high, and our team is world-class, and you know, we were working on steel frames before we acquired a company that was specializing in this, but we do think that we've got, you know, the right team to go execute and drive this business.
The TAM in the U.S. alone is somewhere, you know, $750 million to $1 billion TAM in the U.S. alone. So it's a very, very meaningful size of business. But we have, you know, we've got pretty modest expectations for, for our business for steel frames.
So it just, I guess, staying on here. One of the, you know, pushbacks you mentioned one of them, which is the weight of steel is heavier, so the logistics costs are higher. Is there also any concern about, you know, corrosion and how that would work in certain environments? Those are kind of the two pushbacks that we've heard. Just curious for your take.
Yeah, corrosion's sort of an issue that's already been solved with either, you know, galvanization or ZAM. So there's, you know, already technologies out there that kinda solve the corrosion issue. And the freight is, you know, I think if you're importing it from overseas, then that is a barrier. But if you're making it locally, then the weight is sort of a non-issue. And fundamentally, with NextTracker's technology kinda superiority on the tracker side, because we're a balanced row tracker, the additional weight is sort of a non-issue for our tech to handle it.
Gotcha. Okay. You know, maybe just kind of going back to the other products here. So inverters or power conversion new product line is the opportunity here potentially disrupting a space that's kind of dominated by Chinese manufacturers and again kind of benefiting from that domestic manufacturing footprint and IRA benefits and all that?
Exactly. I mean, so we called it power conversion intentionally. If we just said, "Hey, we're announcing a new inverter," that would imply solar. But with the word calling it power conversion, it applies to multiple industries. Importantly, battery storage is one that I think would be kind of a perfect fit for our new product and platform, potentially eBOS too, but specifically with power conversion. While we're not talking about the specific technologies from a competitive landscape, we do think that our kinda revolutionary approach is one that leads to significantly better reliability, and remember, with inverters and power conversion, it tends to be the weak point of a project or a plant. Those are the items that tend to have issues and tend to fail.
We think the way ours is designed, and some of the things I'm not gonna go into make this effectively a more robust and have a more reliability, and then the technological architecture also leads to, we believe, higher conversion efficiency, and that matters greatly for solar and specifically for battery storage, and so we're really excited about this, but we do wanna kinda temper excitement because it is a couple of years away. It's not, you know, this is that we've got alpha units today. We showed our investors and analysts at our headquarters what it looks like, but we have not, it's not available for sale yet, but we are really excited about this, and then lastly the point you mentioned is spot on.
The U.S. needs an inverter company, a power conversion company made in the U.S., owned by a U.S. company. And today, that's just not the case. The dominant form of power conversion is from China, and the next is, you know, from Europe. And so we do think that, you know, having a flagship U.S. company making these is, would be really great for the country and for the industry.
Yeah, I mean, maybe following up on that. So again, our numbers, but it doesn't feel like there's much embedded for inverters in the 2030 forecast, maybe $100 million at most. So would you view this as more kind of like a, you know, one of the upside drivers if it does connect here? And then secondly, you did mention kind of stepping into some adjacent products like battery storage. Is that something that you could do organically through this product, or would you have to kind of acquire your way into it?
An organic with the product, yeah, and again, we're not, you know, you, you'd broken out your split between, you know, eBOS and inverters. I'm not gonna give you any comment on that 'cause we didn't provide that level of clarity, but I do think there's a lot of upside. This is a very large market and growing, and so we obviously have fairly modest expectations. I'll point out, Praneeth, that, you know, when you look at the overall 2030 outlook that we provided, effectively, we said the tracker business will be two-thirds, non-tracker will be one-third, whereas the overall TAM itself, the non-tracker TAM, is two times the tracker size, so we're going from 10% to effectively, you know, 33% of revenue between today and 2030, but the market opportunity for non-tracker is actually double the size of the tracker opportunity.
We have fairly modest growth expectations, but it still is a 40% CAGR. I mean, I think that's still.
Yeah.
Very impressive growth, but you know, we just wanna modulate or, or moderate people's expectations because, you know, it's easy to get very excited about the numbers, but we wanna be kinda pragmatic.
Gotcha, and then there's probably another question that you may not answer, but I'll ask it anyway 'cause it's, it's topical, but there's a, there's a lot of, you know, overlap now, especially as you go into inverters, you know, between the products you offer and the power infrastructure in data centers, and you see some of your competitors getting into, you know, combiner boxes and different things for, for data centers, is that, you know, is that an area that is of interest to you, something that you could look at down the road? How do you think about that?
I mean, I think they're very interesting. I think what we've done well, and I think, you know, Howard Wenger and Dan Shugar and our team have been very, very focused on, let's be world-class at what we do and not get distracted by doing too many different things outside of our core. You know, the power conversion and potentially eBOS for storage makes perfect sense.
Mm-hmm.
Will there be other opportunities to expand, horizontally? Yes. But we do wanna maintain focus. And so, I'll say never say never, but we're very focused on, you know, customer success, customer satisfaction, solving problems for our customers. And then we'll look at expanding, you know, down the road. But today, it's to be very narrowly focused on driving success for our customers and then with that, breeds more loyalty. It's a virtuous cycle.
Gotcha. Okay. We have five minutes remaining. I'm just gonna pause for a second, see if anyone has a question. Otherwise, I'll keep going. Okay. Yeah, I wanted to ask just on the overall, taking a step back in the U.S. and the outlook that you see here for the core tracker business. I think most consultants have, like, a flattish outlook for installations here. How do you see the landscape? And it feels like it's better now than it was before we got clarity on IRA. So that certainly helps. And the other thing I wanted to kinda throw in there is just whether you're seeing any delays tied to the Trump administration. Kind of they talked about freezing permits on federal lands, but maybe there's also stuff on private lands.
Is that impacting any of your customers and projects in the U.S.?
Yeah. I mean, so far, we've been really pleased with the administration and the work that they've done to help the power deficit that we have as a country. I mean, it's, it's just so clear, it's just so clear that the demand for electricity is far outstripping the supply, and if you look out five to 10 years, it's pretty clear to me that solar will be the dominant form of electricity. It's been the dominant form of new additions over the last number of years. But because you can, you can generate the cheapest electron with solar, it's pretty clear that, that that's gonna win the day long-term. It's not the only one. You know, you're gonna have gas and nuclear and hydro and other forms, but, you know, solar will, I think, will be the dominant form of electricity.
Now, when you go between here and that 10 to 20 years out, you know, there's gonna be periods of change, and we were, I think, a year ago quite nervous what was gonna happen with policy and, you know, the Treasury guidance. There we were nervous. Where we've landed as an industry is quite favorable. If you ask in general, what would people think before versus after, it's been quite favorable, and I think the demand and the necessity for power is leading kinda, you know, cooler heads will prevail of doing the right thing. We've heard, while it's not in our backlog or whatnot, we've heard, like, good things about the Esmeralda projects in Nevada, that those are on BLM land that they will likely go through. It's what I've heard.
It's not, you know, we're not involved in those, but that's what we've heard. With the recent, you know, DOI memo, you could read that, and it has, like, the black swan kinda letters on it. When you read it, it could be very, very negative. But so far.
Mm-hmm.
It feels like there's been, you know, rational behavior from the administration on permitting, because we need power and because solar is good for America. And a lot of the components, like us, are made in America. I mean, we've got 40-plus manufacturing sites in the US. If you went back four years ago, we were one of the larger importers of steel from China. Today, none. And a lot of that steel is made in America with many, many factories that are operating to support our operations. And so I do think that, I'm really glad to see panels being made in America. What First Solar's doing is just phenomenal. And we do want a robust US supply chain of solar because it's so big, it's gonna be bigger and bigger over time that we should make that here.
It's good for the country, good for energy, and good for national security. So I'd say I've been pleasantly surprised at the environment, and the demand environment is quite robust, now that there's kinda clarity on policy.
Gotcha. Great. Yeah, final one, two minutes. Is there anything else, you know, that you wanna address that's come up? Anything that investors, you think investors or the market is missing on the story or anything you think is, you know, a larger driver than people think of the growth outlook?
Well, you know, Praneeth, thank you. Your research is phenomenal. I appreciate.
Yeah.
Your writing you do, I think, is really, really solid, and you're really good at what you do. You know, we're really bullish. You know, we are. This is a great business. It is. You know, we are really thrilled now that we have this kinda complete strategy, the rebranding from Next racker to NextPower. The future looks just incredibly bright worldwide. You know, we didn't talk in depth about international markets, but we're seeing really strong international demand as well. Not every market, but in many markets. You know, it's a lot of this is a testament to the team that we have and the focus on core technology, R&D, and customer set. So with that, thank you for hosting us, and thank you all for listening today.
Appreciate it. Thank you.
Yeah. Thanks.