Everything but the Panel: YE Call Highlighted by Expansion of Power Conversion

Research evidence excerpt

Everything but the Panel: YE Call Highlighted by Expansion of Power Conversion

guide $3.95 billion is in line with the Street and where we think buyside estimates

were. That said, top end of NXT's new EBITDA guide is flat from prior guidance despite an 8%

raise to revenue guidance at the top end. All else equal, suggests ~200 bps of EBITDA margin

compression y/y. Furthermore, if we normalize for changes in stock-based compensation even at top

end implies a modest level of absolute EBITDA growth. That said, there are some important caveats

that we think will alleviate some of the optical concerns investors may have had at first blush.

Namely, as part of a concerted effort to continue to accelerate growth in areas outside of the company's

historical core solar tracking systems, including an $80MM acquisition of Zigor Corporation's power

conversion business including its U.S. subsidiary Apex power, NXT will invest another $50MM in

incremental COGS/R&D expense to accelerate pace of deploying its power conversion solutions that

will now encompass more than just utility scale solar inverters. The incremental $50MM in expense

largely accounts for compression of EBITDA margins as opex in the near term is trending 250 bps above

company's longer-term target range of 8-9%. Expected FY 2027 FCF conversion also reduced today, but

again we think reflects the combined $130MM of additional investment announced today in acquisition

and R&D spending.

Management has consistently cast increases in R&D expense and investment in platform expansion as

core to its “everything-but-the-panel” strategy as it now offers developers integration across trackers,

foundations, eBOS, and now an expanded power conversion solution as driving greater share of wallet