Nextracker Inc (NASDAQ: NXT) Q2 2025 Earnings Call dated Oct. 30, 2024
Corporate Participants:
Mary Lai — Vice President of Investor Relations
Daniel Shugar — Chief Executive Officer and Founder
Howard Wenger — President
Analysts:
Philip Shen — Analyst
Praneeth Satish — Analyst
Mark Strouse — Analyst
Dimple Gosai — Analyst
Christine Cho — Analyst
Chuck Boynton — Chief Financial Officer
Brian Lee — Analyst
Dylan Nassano — Analyst
Maheep Mandloi — Analyst
Joseph Osha — Analyst
Jonathan Kees — Analyst
Kashy Harrison — Analyst
Jon Windham — Analyst
Ben Kallo — Analyst
Jordan Levy — Analyst
Julien Dumoulin-Smith — Analyst
Presentation:
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 Second Quarter Fiscal Year 2025 Earnings Call. [Operator Instructions]. 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.
Mary Lai — Vice President of Investor Relations
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.nexttracker.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.
Daniel Shugar — Chief Executive Officer and Founder
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, when risks are considered. In all of these areas, solar shines. The US 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 US 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-XTR 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, Nextracker’s 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 optimized 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. This capability can provide tremendous benefits to US 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 for new 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.
Questions and Answers:
Operator
Thank you. We will now begin the Q&A session. [Operator Instructions]. Our first question today comes from Philip Shen with ROTH Capital Partners. Your line is now open.
Philip Shen
Hi everyone. Thanks for taking my questions. Congrats on the very strong quarter. I wanted to check in on the bookings. Our math suggests bookings were close to, if not greater than a $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 — a baseline or a 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? Thanks.
Daniel Shugar
Thank you, Phil, and thanks for the multifaceted question. Appreciate that. This is Dan. Howard, can you weigh in on the — Phil’s question?
Howard Wenger
Sure. Hey, Phil. This is Howard. So we had another strong quarter of performance, both, 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, the mix matters, what’s in, in the new bookings and what’s in the backlog. And what we said is about two-thirds of our business is the guidepost for US domestic, one-third 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, 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 two-thirds-one-third mix that we talk about. Two-thirds, US; one-third, rest of the world. And the margin profile on both — for, 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, of — do we have MSAs, VCAs in, in the bookings? And the answer is yes. Thank you, Phil, for your question.
Operator
Our next question today comes from Praneeth Satish with Wells Fargo. Your line is now open.
Praneeth Satish
Thanks. I echo Phil’s comments on a, no a strong quarter. You mentioned that you expect to realize 90% of the backlog in eight quarters. So, I think that’s a, a slight improvement from last quarter where you, you said you expect to realize 80% of the backlog in, in eight quarters. Can you talk about what’s, what’s helping shrink that timeline? Is it simply just a higher mix of international projects with a faster revenue conversion cycle? Or are you seeing an improvement on the US side?
Operator
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, it’s an equal contribution on both with shorter cycles.
Praneeth Satish
Thank you.
Daniel Shugar
Yeah.
Howard Wenger
Thank you.
Operator
Our next question today comes from Mark Strouse with JPMorgan. Your line is now open.
Mark Strouse
Great. Thank you very much for taking our questions, and congrats on the quarter. On Page five of the shareholder letter, you talked about double-digit growth, revenue growth in fiscal ’25, but then there’s growth in fiscal ’26? Maybe I’m splitting hairs here, but is there a reason, 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, 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? Thank you.
Daniel Shugar
Hi, Mark, Dan Sugar here. The — we’ll provide a lot more color on the FY ’26 revenue plan in subsequent earnings calls is the, is the answer. So we’ll provide, yeah, 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 great growth among many regions around the world. It’s — it’s super to have multiple regions in the world all contributing steady growth. And you know, quarter to quarter, one region will be a lot stronger than, than other regions. The first half of this fiscal year we saw, the first half of this fiscal year we saw real — hi, there’s some noise on the phone. Not sure where that’s coming from. Okay, thank you so. So, we saw very strong growth in higher value regions in the first half of this year, this — 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 the company double-digit growth, this year. We’re hitting our revenue plan and we’ve been able to be raised on our, on our profitability expectations. Thanks for the question.
Operator
Our next question — our next question today comes from Dimple Gosai with Bank of America. Your line is now open.
Dimple Gosai
Hi, good evening and thanks for the question. Can you please speak a little bit about, you know, some of the competitive dynamics, what we’re seeing in terms of, you know, 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, you know, your new customer wins, is that more in the US versus international? I think you quoted 12 — or 8 new customers, sorry.
Howard Wenger
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 Zealand. We’re, we’re seeing just across the board a lot of demand. And that’s being driven by the increased demand for electricity, electrification of the world, datacenters, hyperscalers, electric vehicles and demand for clean energy.
And so there, there is a macro overlay on the demand picture. And the election in the United States is not dampening that from our perspective. As we’re showing, we’re increasing our backlog in delivering on our metrics and then some. There is one thing on the customer side, what we’re sensing is a real flight to quality for Nextracker. And that’s — we’ve articulated the value proposition of the company. We have a very differentiated tracker. Not all trackers are architected the same. They don’t operate the same. We have a very different tracker architecture that we believe is superior and that our customers really appreciate. And then it extends from that to operations and operational excellence and the bankability of our company with a what Chuck calls a fortress balance sheet, very strong balance sheet.
We’ve $1.5 billion in liquidity as a company. And our — these projects are very expensive. They’re — I mean, they’re not expenses around work. They require a lot of capital to finance and they produce the lowest kind of form energy with solar and then some with solar and storage, but they require a lot of capital. And so it’s important for the tracker, which is the backbone of the system to operate. And so all of these things feed our value proposition and what we believe is a flight to quality differentially for Nextracker. Really appreciate the question.
Operator
Our next question today comes from Christine Cho with Barclays. Your line is now open.
Christine Cho
Good evening. Thank you for taking the question. I thought maybe I would hit on margin, so, you know, 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 in the US is slightly higher than the two-thirds 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, you know, 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 you know where you think gross margins will naturally settle out without any subsidies, whether it’s explicit 45x credits or lower bill of materials offered instead of the explicit 45x credit?
Chuck Boynton
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 over delivered 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 delivered 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 LTV [Phonetic] 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 that will probably not repeat in Q3 and Q4. It might, but our plan is it’ll be more like, you know, 1% to 2%. It was higher than that in Q2. So the, 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 US 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 two-third, one-third international US 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 two-thirds, one-third international on average, what would the margin profile look like. And we’re saying structurally, it should be in the high 20s, maybe the low 30s. But that’s a, a comment that the company’s made consistently and we’ve been overperforming that based on a really great execution. Thank you, Christine. Next question.
Operator
Our next question comes from Brian Lee with Goldman Sachs. Your line is now open.
Brian Lee
Hey, hey, guys. Thanks. Good afternoon. There’s a couple of questions I had. Just on the software piece, you know, 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 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 too small to break out. So, you know, 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, to the high 20% structural gross, like where is software coming in at? And in situations where you aren’t able to get a customer to, you know, to sort of sign up for, for TrueCapture, what, what are some of the drivers there outside of maybe just the incremental costs? Thanks, guys.
Daniel Shugar
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 work 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 and measured it and customers have become increasingly comfortable with TrueCapture. And so the — it’s, it’s well understood. And as markets mature, we go into new, new markets or, or early markets, as they 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, and then TrueCapture is used. And so as, 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 Zonal Diffuse. And you can go on, go on the, on the internet on YouTube and look at that. And we also released a feature called Split Boost, which is a highly differentiated feature that generates more energy. So if you go on YouTube and type in Split Boost Nextracker, you’ll actually see how it works. These things increase not only — well, they increase the amount of energy generated by TrueCapture. Thank you for your question.
Chuck Boynton
Hey, Brian. I’ll just add on the margins side. Software is a little different animal because you have, you tend to 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 on 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.
Operator
Our next question comes from Dylan Nassano with Wolfe Research. Your line is now open.
Dylan Nassano
Peers 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 listened to that call, but just two questions on that is, have you seen any impact on your projects and 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, and should it be necessary? Thank you.
Daniel Shugar
Yeah, I’m sorry. Can you repeat, who announced their shipping modules to warehouses?
Dylan Nassano
Yeah, sorry, it was First Solar, they were just talking about, yeah, shipping directly to warehouses.
Howard Wenger
This is Howard. I’ll answer the question. My understanding is that look, it’s fairly limited, at least that’s what we’re seeing. I don’t want to speak for First Solar. We’re not seeing — we’re seeing very consistent activity on a project-by-project basis. What that means is, and 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 US 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. It’s gone public, but we’re not, we’re not seeing, on an individual project basis, we can see a, a delay or a shift of a month or six weeks, sometimes even longer, but it’s, it’s not a, a very concerted trend. We’re not, 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, from last quarter to this quarter. Thanks for the question.
Operator
Our next question comes from Maheep Mandloi with Mizuho. You line is now open.
Maheep Mandloi
Hey, good evening. Thanks for taking the question. So first, just on the revenue cadence, I think the newsletter pointed to flattish in Q3, so as to have this Q4 weighted. So could 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 related to that, could you just talk about the structural opex you expect? I think, you just talked about higher opex in Q3, Q4 for R&D. But how should we think about that going forward? Thanks.
Howard Wenger
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 in really, really good shape there. There is — so that’s, 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, and that includes Q4, which as Dan and Chuck in our comments provide color on is it’s going to — it’s, it’s — we expect a very robust quarter and we’re quite confident in delivering on the quarter. Chuck, you want to take the opex?
Chuck Boynton
I will, thank you. And just to put context, you know, Q4 will be the single biggest quarter in the company’s history and it’s going to put a lot of pressure on the supply chain team. They are amazing and were up to the challenge. But we have, 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. We 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.
Operator
Our next question comes from Joseph Osha with Guggenheim Partners. Your line is now open.
Joseph Osha
Turning to your 45X disclosure, I’d like to clarify that the 300 basis point up that, that you refer to is, it’s sort of the incremental credits. It does not refer to the totality of the, of the 45X uplift. Am I reading your language correctly.
Daniel Shugar
So, Joe, yeah, 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 a third 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 for 45X, we want to just be super transparent and clear that they’re not purely — or comparative. Thank you.
Operator
Our next question comes from Jonathan Kees with Daiwa Capital Markets. Your line is now open.
Jonathan Kees
Hi, great. Thank you for taking my question. And I’ll follow your instructions, and just, just limit myself to 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. So a small customer. Just curious if you had anything like that this quarter?
Daniel Shugar
Hey, thanks for your, 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, that’s where we stand.
Jonathan Kees
Great.
Operator
Thank you. Our next, our next question comes from Kashy Harrison with Piper Sandler. Your line is now open.
Kashy Harrison
Good afternoon. Thanks for taking the question and congrats on the quarter. So my, my question is on NX Foundation. Just, 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 US Foundation revenues, hard terrain or otherwise in fiscal ’25.And then finally, when do you expect to start quantifying the Foundation backlog? Thank you.
Daniel Shugar
Okay, I’ll take the first part of the question and then Chuck, you take the second part of the question, please.
Chuck Boynton
Yes.
Daniel Shugar
We had a fabulous launch event at RE+ of our Foundations business. And we showed a map from the US Geological Service that shows when bedrock is within one meter of the surface is my recollection of what the, the metric was. And it turns out there’s a significant portion just geographically of the US that has rock, you know, near the surface where if you were putting a traditional pile in the ground, you would hit rock. And what we’ve also seen is over the years, as the solar market has broadened geographically across the US, 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 frost heave soils, expansive clay soils, or swampy site type soils. And the two Foundation technologies were acquired to address all the above. In terms of numbers, what we covered in, 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, the second half.
Chuck Boynton
Yeah, Kashy, so thank you for the question. In Q2, we actually booked and recorded revenue for our new Foundations business. So we’re super thrilled 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 I’d say, stay tuned for analyst day and our reviews 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.
Jon Windham
Perfect. I appreciate you taking some time to do the questions. Congratulations on the 100% US domestic content capabilities. And as you plan to ramp and ship that next year, I’m just wondering if you’d give us some thoughts or guideposts about what proportion of your US business is that likely to be. I appreciate it.
Daniel Shugar
Thanks, Jon. And just as a point of clarification, we actually have our first 100% US 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, 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, 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 US business. Prior to Build Back Better, prior to IRA, we were ramping our US supply chain and we’ve ramped it in other key markets such as India.
This quarter in India, we announced we’ve hit 95% content, for example, in India with over 10 gigs of capacity in India, for India. And in the US over 30 gigs of our major components in the US for the US. We are seeing continued demand and stronger demand than we anticipated for this 100% US content tracker. We’ll have to wait and see before we guide to that number. Well, we could address that potentially on our subsequent or the following earnings call or the analyst day that Chuck mentioned. Thank you.
Operator
Our next question comes from Ben Kallo with Baird. Your line is now open.
Ben Kallo
Hey guys, just, just to get the international opportunity is so big and the US opportunity is better margins, what do you guys optimize for sales growth or margin or EPS growth, cash flow?
Daniel Shugar
Hey Ben. We’re optimized. We want to grow. We want to keep growing and we want to do it so responsibly. And that’s — and that, 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 US 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 55 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.
Jordan Levy
Absolutely. No, thanks for all the commentary. 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, and also into new markets. I just wanted to see if we could not to get into too many specifics, but any, any additional color we could get there on, what sort of opportunities are attractive to you all?
Howard Wenger
Yeah. So the question is what new R&D are we taking on? Dan, maybe you should take that question.
Daniel Shugar
Sure. Hey Jordan, thank you. Jordon, 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 timeframe? These are the factors that go in and then 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, it’s, it’s been very productive. Now having said that, we’ve also acquired technology. We’re open to that. We do, we were very open to looking at technologies that can be additive to the company. I believe, we have time for one more question. And operator?
Operator
Our next question comes from Julien Dumoulin-Smith from Jefferies.
Daniel Shugar
Operator, we’re ready for the next question.
Operator
Your line is now open.
Julien Dumoulin-Smith
Hey guys, can you hear me okay?
Daniel Shugar
Crystal, Julien.
Julien Dumoulin-Smith
Awesome. Hey, sorry about that. I wasn’t sure if it was coming through earlier. Hey, appreciate the time. Just to follow up earlier on the US content, how many points are you qualifying for into the domestic content, just to clarify the 100% product? And then just coming back to the margin question super quickly here, obviously first half versus back half, as you think about that exit run rate in the back half here, 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 what you can put up as you think about embedded in that backlog across the $4.5 billion?
Howard Wenger
Thank you, Julien. This is Howard. I’ll answer the first part, Chuck, 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 are now can enable that customer to qualify for 24.7 points out of 100, out of — so a quarter of four, 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, 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?
Chuck Boynton
Yes, Julien. You know, we’re not going to sort of do our outlook for next year and beyond today. But a lot of the factors, these structural kind of high 20s, maybe low 30s gross margins would translate into, you know, call it 20ish EBITDA margin. It’s too early 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?
Daniel Shugar
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 a renewably-powered world. Thanks for joining our call today.
Mary Lai
Thank you. This concludes our Q2 earnings call.
Operator
That will conclude today’s conference call. Thank you for your participation. You may now disconnect.