S-1 1 d139910ds1.htm S-1 S-1

As filed with the Securities and Exchange Commission on January 13, 2023

Registration No. 333-          

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

NEXTRACKER INC.

(Exact name of registrant as specified in its charter)

 

Delaware   3990   00-0000000

(State or other jurisdiction of

incorporation or organization)

 

(Primary Standard Industrial

Classification Code Number)

 

(I.R.S. Employer

Identification No.)

6200 Paseo Padre Parkway

Fremont, California 94555

(510) 270-2500

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

 

 

Léah Schlesinger, Esq.

General Counsel

Nextracker Inc.

6200 Paseo Padre Parkway

Fremont, California 94555

(510) 270-2500

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

 

Copies of all communications, including communications sent to agent for service, should be sent to:

 

Heather Childress, Esq.

Senior Vice President, Deputy General Counsel

Flex Ltd.

2 Changi South Lane

Singapore 486123

(65) 6876 9899

 

Sharon R. Flanagan, Esq.

Samir A. Gandhi, Esq.

Lindsey A. Smith, Esq.

Helen Theung, Esq.

Sidley Austin LLP

1001 Page Mill Road, Building 1

Palo Alto, California 94304

(650) 565-7000

 

Robert G. Day, Esq.

Melissa S. Rick, Esq.

Wilson Sonsini Goodrich & Rosati,

Professional Corporation

650 Page Mill Road

Palo Alto, California 94304

(650) 493-9300

Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this registration statement.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box.  

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer      Accelerated filer  
Non-accelerated filer      Smaller reporting company  
     Emerging growth company  

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act.  

 

 

 

The registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until this Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

 

 

 


Explanatory note

Nextracker Inc., the registrant whose name appears on the cover of this registration statement, is a private company incorporated under the laws of the State of Delaware (“Nextracker Inc.”). Prior to this offering and the completion of the Transactions (as described in “Our organizational structure” in the prospectus included as part of this registration statement), Nextracker Inc. had no operations and all of the business operations of Nextracker Inc. were conducted through the legacy solar tracker business of Flex Ltd. (“Flex”), including Nextracker LLC (the “LLC”), which was initially formed in 2013 as a Delaware corporation under the name NEXTracker Inc. and in 2022 was converted into a Delaware limited liability company. On February 1, 2022, Flex sold Series A Preferred Units of the LLC (the “LLC Preferred Units”) representing a 16.7% limited liability company interest of the LLC to TPG Rise Flash, L.P. (“TPG”), resulting in TPG holding all of the outstanding LLC Preferred Units and subsidiaries of Flex holding all of the outstanding common units of the LLC (the “LLC Common Units” and together with the LLC Preferred Units, the “LLC Units”). Immediately prior to the consummation of the Transactions, all of the LLC Preferred Units will be automatically converted into a certain number of LLC Common Units (the “Automatic Conversion”) and TPG will purchase from Nextracker Inc. for cash consideration a number of shares of Nextracker Inc. Class B common stock equal to the number of LLC Common Units received by TPG in the Automatic Conversion. The LLC Common Units are exchangeable into shares of Nextracker Inc. Class A common stock (or cash) and upon such exchange, a corresponding number of such holder’s Class B common stock will be cancelled. Notwithstanding the foregoing, as permitted under and in accordance with the second amended and restated limited liability company agreement of Nextracker LLC in effect prior to this offering, TPG has exercised its right to have certain blocker corporations affiliated with TPG merge with a separate direct, wholly-owned subsidiary of Nextracker Inc., with the blocker corporations surviving each such merger, in a transaction intended to qualify as a tax-free transaction, with the investors in each such blocker corporation being entitled to a number of shares of Nextracker Inc. Class A common stock with a value based on the LLC Preferred Units held by such blocker corporation. As a result of the Transactions, which will be effected upon the completion of this offering, Nextracker Inc. will be (a) a holding company, with its principal asset consisting of limited liability company interests of the LLC and (b) the managing member of the LLC and will operate and control all of the business and affairs of the LLC and its subsidiaries. Except as otherwise disclosed in the prospectus included in this registration statement, the historical combined financial statements and summary and selected historical combined financial data and other financial information included in this registration statement are those of the legacy solar tracker business of Flex, including the LLC (formerly known as NEXTracker Inc.) and its subsidiaries, and do not give effect to the Transactions.


The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state or other jurisdiction where the offer or sale is not permitted.

 

Subject to completion, dated                     , 2023

Prospectus

                Shares

 

LOGO

Class A common stock

This is an initial public offering of shares of Class A common stock of Nextracker Inc. We are offering      shares of our Class A common stock. Prior to this offering, there has been no public market for our Class A common stock. We currently expect the initial public offering price of the Class A common stock being offered to be between $         and $        per share. We have applied to list the Class A common stock on the Nasdaq Global Select Market (“Nasdaq”) under the symbol “NXT.”

We will use all of the net proceeds from this offering to purchase     LLC Common Units (as defined herein) from a subsidiary of Flex Ltd. (or         LLC Common Units if the underwriters exercise in full their option to purchase additional shares of Class A common stock) at a price per unit equal to the initial public offering price per share of Class A common stock in this offering less the underwriting discount. We will not retain any of the net proceeds of this offering.

Following the completion of this offering, we will have two classes of authorized and outstanding common stock. Each share of our Class A common stock and Class B common stock entitles its holder to one vote on all matters presented to our stockholders generally. We are offering      shares of our Class A common stock, which immediately after this offering will represent in the aggregate                % of our total outstanding shares of common stock (or    % of our total outstanding shares of common stock if the underwriters exercise in full their option to purchase additional shares of Class A common stock).

Immediately after this offering, Flex Ltd., our parent company, will own, indirectly through one or more subsidiaries,     % of the outstanding shares of our Class B common stock, representing     % of our total outstanding shares of common stock (or    % of our total outstanding shares of common stock if the underwriters exercise in full their option to purchase additional shares of Class A common stock) and, so long as it owns a controlling interest in our common stock, it will be able to control any action requiring the general approval of our stockholders, including the election and removal of directors, any amendments to our certificate of incorporation and the approval of any merger or sale of all or substantially all of our assets. Accordingly, we will be a “controlled company” within the meaning of the corporate governance rules of Nasdaq. See “Risk factors—Risks related to the Transactions and our relationship with Flex,” “Management—controlled company exemption” and “Principal stockholders.”

We will be a holding company and, upon the completion of this offering, our principal asset will consist of LLC Common Units that we acquire from a subsidiary of Flex Ltd. with the proceeds from this offering, representing     % of the total economic interest in the LLC (as defined herein) (or    % if the underwriters exercise in full their option to purchase additional shares of Class A common stock). The remaining economic interest in the LLC will be owned by subsidiaries of Flex Ltd. and TPG Rise Flash, L.P. through their ownership of LLC Common Units.

Upon the completion of this offering, we will be the managing member of the LLC. We will operate and control all of the business and affairs of the LLC and its direct and indirect subsidiaries and will conduct our business through the LLC and its direct and indirect subsidiaries.

 

     
      Per Share      Total  

Initial public offering price

   $                                $                            

Underwriting discount(1)

   $        $    

Proceeds to Nextracker Inc., before expenses

   $        $    

 

(1)   See “Underwriting” for a description of the compensation payable to the underwriters.

We have granted the underwriters an option for a period of 30 days to purchase up to an additional      shares of Class A common stock.

Investing in our Class A common stock involves a high degree of risk. See “Risk factors” beginning on page 26.

Neither the Securities and Exchange Commission nor any other regulatory body has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.

The underwriters expect to deliver the shares to purchasers on or about                    , 2023.

J.P. Morgan    BofA Securities
Citigroup    Barclays
Truist Securities    HSBC    BNP PARIBAS
Mizuho    Scotiabank    KeyBanc Capital Markets
SMBC Nikko    BTIG    UniCredit    Roth Capital Partners

                        , 2023


LOGO

Our mission is to be the world’s leading energy solutions company by enabling the most intelligent, reliable, and productive solar power for future generations. Photo credit: Swinerton Renewable Energy Photo credit: Flex


LOGO

$1.5 Billion ANNUAL REVENUE (FY 2022)
Global Leader
FOR 7
CONSECUTIVE YEARS
IN THE SOLAR INDUSTRY (2015-2021)
Based on GW Shipped Globally
~70 GW OF TRACKER SYSTEMS SHIPPED
(AS OF 9/30/2022)
15 GW DELIVERED IN FY 2022
200+ ACTIVE CUSTOMERS
30+ COUNTRIES WITH ACTIVE CUSTOMERS


LOGO


Table of contents

 

     Page  

About this prospectus

     ii  

Basis of Presentation

     ii  

Trademarks

     iii  

Prospectus summary

     1  

Risk factors

     26  

Special note regarding forward-looking statements

     71  

Market and industry data

     73  

Use of proceeds

     74  

Our organizational structure

     75  

Dividend policy

     81  

Capitalization

     82  

Dilution

     83  

Selected historical combined financial data

     85  

Unaudited pro forma combined financial statements

     89  

Management’s discussion and analysis of financial condition and results of operations

     95  

Business

     121  

Management

     143  

Compensation discussion and analysis

     148  

Principal stockholders

     179  

Certain relationships and related party transactions

     181  

Description of indebtedness

     204  

Description of capital stock

     206  

Shares available for future sale

     213  

Material U.S. federal income tax considerations for non-U.S. holders of our Class A common stock

     215  

Underwriting

     219  

Legal matters

     232  

Experts

     232  

Where you can find additional information

     232  

Index to financial statements

     F-1  

 

i


About this prospectus

As used in this prospectus, unless the context otherwise indicates, any reference to “Nextracker,” “our Company,” “the Company,” “us,” “we” and “our” refers, prior to the completion of the Transactions (as defined herein), including this offering, to Nextracker LLC, a Delaware limited liability company (the “LLC”) (formerly known as NEXTracker Inc.), together with its consolidated subsidiaries and with the operations that comprise the legacy solar tracker business of Flex, and after the completion of the Transactions, including this offering, refers to Nextracker Inc., a Delaware corporation and the issuer of the shares of Class A common stock offered hereby (“Nextracker Inc.”), together with its consolidated subsidiaries including the LLC and the operations that comprise the legacy solar tracker business of Flex. References in this prospectus to “Flex” or “Parent” refer to Flex Ltd., a Singapore incorporated public company limited by shares and having a registration no. 199002645H, and its consolidated subsidiaries, unless the context otherwise indicates.

Neither we nor the underwriters have authorized anyone to provide you with any information or to make any representations other than that contained in this prospectus or in any free writing prospectuses prepared by or on behalf of us or to which we have referred you. Neither we nor the underwriters take any responsibility for, and provide no assurance as to the reliability of, any other information that others may give you. This prospectus is an offer to sell only the shares offered hereby, and only under circumstances and in jurisdictions where it is lawful to do so. You should assume that the information appearing in this prospectus is accurate as of the date on the front cover of this prospectus only. Our business, financial condition, results of operations and prospects may have changed since that date.

For investors outside the United States: Neither we nor the underwriters have done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. Persons outside the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the offering of the shares of Class A common stock and the distribution of this prospectus outside the United States.

Unless otherwise indicated, the information presented in this prospectus:

 

 

gives effect to the completion of the Transactions as described under the section entitled “Our organizational structure;”

 

 

assumes an initial public offering price of $         per share of our Class A common stock, which is the midpoint of the estimated initial public offering price range set forth on the cover page of this prospectus;

 

 

excludes                  shares of our Class A common stock that will be reserved for issuance under the Second Amended and Restated 2022 Nextracker Inc. Equity Incentive Plan (our “Equity Incentive Plan” or “LTIP”), which will be available for issuance upon the effectiveness of the registration statement of which this prospectus forms a part; and

 

 

assumes the underwriters’ option to purchase additional shares of Class A common stock will not be exercised.

Basis of presentation

Except as otherwise disclosed in this prospectus, the historical combined financial statements and summary and selected historical combined financial data and other financial information included elsewhere in this prospectus are those of the LLC (formerly known as NEXTracker Inc.), together with its consolidated subsidiaries, and includes the operations that comprise the legacy solar tracker business of Flex, and have been prepared in U.S. dollars in accordance with accounting principles generally accepted in the United States (“GAAP”), except for the presentation

 

ii


of Non-GAAP gross profit, Non-GAAP operating income, Non-GAAP net income, Adjusted EBITDA, Adjusted EBITDA Margin, and Adjusted Free Cash Flow, each of which is a non-GAAP financial measure. This historical financial information does not give effect to the Transactions or this offering, other than pro forma earnings per share.

The unaudited pro forma financial information of Nextracker Inc. presented in this prospectus has been derived from the application of pro forma adjustments to the historical combined financial statements of the legacy solar tracker business of Flex, including the LLC (formerly known as NEXTracker Inc.) and its subsidiaries included elsewhere in this prospectus. These pro forma adjustments give effect to the Transactions as described in “Our organizational structure,” including the completion of this offering, as if all such transactions had occurred on April 1, 2021, which was the first day of fiscal year 2022, in the case of the unaudited pro forma combined statement of operations and comprehensive income (loss) data, and as if all such transactions had occurred on September 30, 2022 in the case of the unaudited pro forma combined balance sheet data. See the section entitled “Unaudited pro forma combined financial statements” for a complete description of the adjustments and assumptions underlying the pro forma financial information included in this prospectus.

Our fiscal year ends on March 31 of each year and references in this prospectus to a fiscal year means the year in which that fiscal year ends. Accordingly, references in this prospectus to “fiscal year 2020,” “fiscal year 2021” and “fiscal year 2022” refer to the fiscal year ended March 31, 2020, March 31, 2021 and March 31, 2022, respectively, and references to a “year” made in connection with our financial information or operating results are to the fiscal year ended March 31, unless otherwise stated. The second quarter for fiscal years 2023 and 2022 ended on September 30, 2022 and October 1, 2021, respectively, which respective periods are each comprised of 91 days.

Trademarks

The name and mark, Nextracker, and other trademarks, trade names and service marks of Nextracker appearing in this prospectus are the property of Nextracker. The name and mark, Flex, and other trademarks, trade names and service marks of Flex appearing in this prospectus are the property of Flex. Solely for convenience, trademarks, trade names and service marks referred to in this prospectus may appear without the ®, or SM symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights to these trademarks, trade names and service marks. Other trademarks, trade names and service marks appearing in this prospectus are the property of their respective holders. We do not intend our use or display of other companies’ trademarks, trade names or service marks to imply a relationship with, or endorsement or sponsorship of us by, any other companies.

 

iii


Prospectus summary

This summary highlights selected information contained elsewhere in this prospectus. It does not contain all of the information that may be important to you and your investment decision. Before investing in our Class A common stock, you should carefully read this entire prospectus, including the matters set forth under the sections of this prospectus entitled “Risk factors” and “Management’s discussion and analysis of financial condition and results of operations” and our combined financial statements and related notes included elsewhere in this prospectus. In this prospectus, we make certain forward-looking statements, including expectations relating to our future performance. These expectations reflect our management’s view of our prospects and are subject to the risks described under “Risk factors” and “Special note regarding forward-looking statements.” Our expectations of our future performance may change after the date of this prospectus and there is no guarantee that such expectations will prove to be accurate. In this prospectus, unless the context otherwise indicates, any reference to “Nextracker,” “our Company,” “the Company,” “us,” “we” and “our” refers, prior to the completion of the Transactions, including this offering, to the legacy solar tracker business of Flex, including the LLC (formerly known as NEXTracker Inc.) and its consolidated subsidiaries, and after completion of the Transactions, including this offering, to Nextracker Inc., the issuer of the shares of Class A common stock offered hereby, together with its consolidated subsidiaries, including the LLC.

Our mission

Our mission is to be the world’s leading energy solutions company enabling the most intelligent, reliable and productive solar power for future generations.

Overview

We are a leading provider of intelligent, integrated solar tracker and software solutions used in utility-scale and ground-mounted distributed generation solar projects around the world. Our products enable solar panels in utility-scale power plants to follow the sun’s movement across the sky and optimize plant performance. We have led the solar industry based on gigawatts (“GW”) shipped globally in 2015 and both globally and in the United States from 2016 to 2021.1

Over the past several years, the cost of solar energy has declined significantly, and today utility-scale solar is one of the lowest cost sources of wholesale energy production, driving demand for solar energy globally. In addition, demand for renewable energy continues to increase as countries, industries and firms move to reduce their carbon footprint and pursue more aggressive decarbonization targets. Electrification, including the proliferation of electric vehicles and the replacement of natural gas with electricity in buildings and residences, is expected to drive increased demand for energy production, including solar energy. We believe that both the attractive cost of solar generation and increasing demand for renewable energy will drive continued growth in the utility-scale solar market. Approximately 59.1% of installations in the United States are larger than 5 MW and most correspond to the utility-scale segment.2

The solar tracker market plays a key part in driving the global energy transition by increasing energy production and improving the levelized cost of energy (“LCOE”). The majority of utility-scale projects installed today in mature markets such as the United States, Latin America and Australia use solar trackers and adoption of solar tracker technology is growing in developing solar markets such as the Middle East and Africa. According

 

1    Wood Mackenzie, June 2022.
2    Wood Mackenzie, December 2022 (Global solar PV market outlook update: Q4 2022).

 

1


to Wood Mackenzie, the global solar tracking market is estimated to be a $71 billion cumulative opportunity from 2020 to 2030, representing approximately 682 GW of solar capacity installed over that time period.3

By optimizing and increasing energy production and reducing costs, our tracker products and software solutions offer significant return on investment (“ROI”) for utility-scale solar projects. Single axis solar trackers generate up to 25% more energy than projects that use fixed-tilt systems that do not track the sun. To achieve these benefits, the industry initially focused on linked-row tracker architecture that moves rows of solar panels together as one unit to follow the sun. We have developed the next generation of solar trackers that enable rows to move independently, providing further benefits to customers. Our intelligent independent row tracking system incorporates proprietary technology that we believe produces more energy, lowers operating costs, is easier to deploy and has greater reliability compared to linked row, other independent tracker products and fixed-tilt systems. Our tightly-integrated software solutions use advanced algorithms and artificial intelligence technologies to further optimize the performance and capabilities of our tracker products.

We have shipped approximately 70 GW of our solar tracker systems as of September 30, 2022 to projects on six continents for use in utility-scale and ground-mounted distributed generation solar applications worth more than $67 billion (based on recent global utility-scale system pricing).4 Our customers include engineering, procurement and construction firms (“EPCs”), as well as solar project developers and owners. We are a qualified, preferred provider to some of the largest solar EPC firms and solar project developers and owners in the world.

We have firm orders representing executed contracts, purchase orders and volume commitment agreements for projects that total approximately $2.0 billion in the aggregate as of September 30, 2022. These firm orders do not include our pipeline for projects that are currently in various stages of negotiations and contract execution.

We were founded in 2013 by our Chief Executive Officer, Dan Shugar, and were acquired by Flex Ltd. in 2015. Flex provides design, manufacturing and supply chain services through a network of over 100 locations in approximately 30 countries across five continents. Flex’s expertise in global supply chains and procurement and its strong financial backing has helped us accelerate our penetration of our end markets and run an optimized supply chain.

Our growth and success are evidenced by our operating and financial results in the six-month periods ended September 30, 2022 and October 1, 2021, and in the fiscal years 2022, 2021 and 2020:

 

 

We generated revenue of $870.4 million in the six-month period ended September 30, 2022 compared to $680.2 million in the six-month period ended October 1, 2021. We generated revenue of $1,457.6 million, $1,195.6 million and $1,171.3 million in fiscal year 2022, 2021 and 2020, respectively.

 

 

We generated gross profit of $114.4 million in the six-month period ended September 30, 2022 compared to $74.3 million in the six-month period ended October 1, 2021. Non-GAAP gross profit was $115.3 million for the six-month period ended September 30, 2022 compared to $78.9 million for the six-month period ended October 1, 2021. We generated gross profit of $147.0 million, $232.0 million and $212.9 million in fiscal year 2022, 2021 and 2020, respectively. Non-GAAP gross profit was $152.6 million, $242.0 million and $222.5 million for fiscal year 2022, 2021 and 2020, respectively.

 

3    Wood Mackenzie, December 2022 (The global solar PV tracker landscape 2022). Global total addressable market excludes China.
4    Wood Mackenzie, April 2022 (Global solar PV system price: country breakdowns and forecasts). The $67 billion value represents the estimated aggregate capital expenditures made on solar applications in order to build the projects; solar trackers generally represent approximately 12% of those capital expenditures. Such value is not necessarily indicative of the current market value of the projects as financial assets, which would depend on each project’s future projected cash flows.

 

2


 

We generated operating income of $69.2 million in the six-month period ended September 30, 2022 compared to $41.2 million in the six-month period ended October 1, 2021. Non-GAAP operating income was $73.6 million for the six-month period ended September 30, 2022 compared to $50.0 million for the six-month period ended October 1, 2021. We generated operating income of $65.9 million, $158.5 million and $148.9 million in fiscal year 2022, 2021 and 2020, respectively. Non-GAAP operating income was $90.4 million, $177.9 million and $168.0 million for fiscal year 2022, 2021 and 2020, respectively.

 

 

We generated net income of $51.2 million in the six-month period ended September 30, 2022 compared to $32.6 million in the six-month period ended October 1, 2021. We generated net income of $50.9 million, $124.3 million and $118.3 million in fiscal year 2022, 2021 and 2020, respectively.

 

 

Non-GAAP net income was $53.8 million for the six-month period ended September 30, 2022 compared to $39.0 million for the six-month period ended October 1, 2021. Non-GAAP net income was $69.9 million, $140.3 million and $134.3 million for fiscal year 2022, 2021 and 2020, respectively.

 

 

Adjusted EBITDA was $73.8 million for the six-month period ended September 30, 2022 compared to $51.1 million for the six-month period ended October 1, 2021. Adjusted EBITDA was $92.3 million, $179.2 million and $170.7 million for fiscal year 2022, 2021 and 2020, respectively.

 

 

Net income as a percentage of revenue was 5.9% for the six-month period ended September 30, 2022 compared to 4.8% for the six-month period ended October 1, 2021. Net income as a percentage of revenue was 3.5%, 10.4% and 10.1% for fiscal year 2022, 2021 and 2020, respectively.

 

 

Adjusted EBITDA as a percentage of revenue was 8.5% for the six-month period ended September 30, 2022 compared to 7.5% for the six-month period ended October 1, 2021. Adjusted EBITDA as a percentage of revenue was 6.3%, 15.0% and 14.6% for fiscal year 2022, 2021 and 2020, respectively.

Non-GAAP gross profit, Non-GAAP operating income, Non-GAAP net income, Adjusted EBITDA and Adjusted EBITDA Margin are non-GAAP financial measures. See the section entitled “—Summary historical and pro forma combined financial and other data” for definitions of Non-GAAP gross profit, Non-GAAP operating income, Non-GAAP net income, Adjusted EBITDA and Adjusted EBITDA Margin and reconciliations to the most directly comparable GAAP measures.

Industry trends

Growing demand for solar energy production is driven by the increasing cost competitiveness of solar energy and global trends including decarbonization and electrification.

Globally, many countries, industries and firms have been aggressively pursuing decarbonization standards that pledge to increase the percentage of electricity production from renewable energy sources while decreasing use of fossil fuel and nuclear generation. This pursuit, coupled with increasing demands for electrification to help achieve greenhouse gas emissions reductions, has created a significant demand for clean energy production. Electrification refers to electricity replacing other sources for energy consumption, such as the transition to electric vehicles and electric heating.

Solar is the fastest growing segment of the renewable energy sector and has become one of the most cost-effective forms of wholesale energy generation. According to Lazard, over the past decade the cost of solar generation has fallen by 90%.5 Today, solar electricity is competitive with both natural gas and wind and costs significantly less than some conventional generation technologies such as coal and nuclear.

 

5    Lazard, 2021.

 

3


Utilities are expanding solar generation both to replace pre-existing capacity from conventional plants as they are retired and to build new capacity as overall electricity demand grows. As more coal generation plants were retired than constructed, global coal capacity began to fall for the first time ever in 2020 and has fallen in 2021 and the first half of 2022.6 The U.S. Energy Information Administration (“EIA”) expects retirement of coal-fired generators to increase again in 2022—12.6 GW of coal capacity is scheduled to retire in 2022, or 6% of the coal-fired generating capacity that was operating at the end of 2021.7 The International Energy Agency expects solar power to account for more than 70% of renewable electricity net capacity additions worldwide over the next four years.8

In the United States, capacity is projected to grow with nearly 161.5 GW of new solar installations across all market segments from 2022 to 2026, more than double the increase over the prior five year period from 2017 to 2021.9 International markets are expected to grow in both more developed solar markets such as Latin America, Australia and Europe, as well as in emerging markets such as the Middle East, Africa and Southeast Asia. All such markets are experiencing growth as cost declines have made solar more attractive. Approximately 59.1% of installations in the United States are larger than 5 MW and most correspond to the utility-scale segment.10

In the 1980s, many utility scale plants in the early growth of the industry used `fixed-tilt’ mounting systems to secure PV panels. Fixed-tilt systems hold PV panels in a non-moving, fixed orientation, typically arranged in south-facing rows tilted at an appropriate elevation angle based on summer or winter energy optimization.

Fixed-tilt structures remained the predominant mounting system for ground-based projects until the commercialization of tracking systems in the early 1990s.

Today’s utility-scale solar plants have evolved from ‘fixed-tilt’ systems to generally rely on solar tracking technologies that increase electricity generation and improve economics for plant owners by enabling solar panels to rotate and follow the sun’s movement across the sky. Single axis solar trackers can increase energy yield of solar projects and generate up to 25% more energy than projects that use fixed-tilt, or stationary, panel mounting systems that do not track the sun.11 The additional cumulative revenue from energy production that trackers provide typically exceeds the incremental cost of using a tracking system, improving the LCOE and providing significant ROI for solar projects.

There are several types of tracking solutions with differing geometry and operational characteristics. The majority of the market uses single axis horizontal trackers such as our solar tracker products. We believe single axis horizontal trackers offer the best optimization of performance, cost and reliability for utility-scale solar plants. Other tracking designs, such as dual axis trackers, are typically more expensive and primarily used for niche applications.

While solar trackers have existed for over 30 years, there are many limitations to competing tracker solutions that reduce ROI for utility-scale solar plants.

 

 

Legacy architectures.    Certain tracker technologies in the market today rely on a legacy, linked-row architecture. These systems use mechanical linkages and a single large motor to simultaneously move multiple interconnected, or “linked,” rows of trackers, introducing significant single points of failure. Linked-row architectures were designed over 30 years ago primarily due to the high cost of electric motors and control systems at the time. These designs do not leverage the substantial cost reductions in motors and control systems today, and have limitations in optimizing performance, reliability and operations.

 

6    Electric Power Monthly, May 2022.
7    U.S. Energy Information Administration, January 2022.
8    International Energy Agency, 2022.
9    Wood Mackenzie, December 2022.
10    Wood Mackenzie, December 2022.
11    Joule, 2020.

 

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Lack of software and sensor capabilities.    Legacy architectures were not designed to tightly couple the solar tracker with advanced software and sensors to further increase energy production levels, optimize performance for variable site and severe weather conditions, and efficiently manage a power plant’s operating costs.

 

 

Vulnerable to damage from severe weather conditions.    Solar power plants can be damaged by severe weather conditions, including flooding, hail and extreme wind events. Other tracker architectures have exhibited significant vulnerabilities to such conditions.

 

 

Difficult to deploy.    Other solar tracker architectures may incur substantial installation costs and significant time to deploy and operationalize due to factors such as greater structural complexity. Since many project sites have varying topographies, legacy architectures can create additional deployment complexities, such as significant site grading costs and longer installation and commissioning processes.

 

 

Difficult to operate.    Legacy linked-row architectures create challenges with management of the solar array. Physically-linking tracker rows together significantly inhibits or eliminates the ability to control each row independently to increase overall power production. In addition to introducing significant single points of failure, linkages also create a physical barrier that limits vehicle access for maintenance activities, such as panel cleaning and vegetation management, thus increasing operating costs and reducing power production.

 

 

Lack of future upgradability.    Most trackers are designed with a fixed set of features and capabilities at the time of their installation. As a result, future software and mechanical upgrades are unavailable or cost prohibitive, in large part due to limited control systems and connectivity capabilities in existing solutions.

We believe that our solution addresses these limitations and provides tremendous benefits to our customers and end users.

Our solution

We provide intelligent, integrated solar tracker and software solutions that use an innovative design approach to enable new capabilities and to expand the viability of trackers across a broader range of topographical and climate conditions.

Tracking solutions portfolio

NX Horizon is our flagship solar tracking solution. NX Horizon’s smart solar tracker system delivers what we believe to be an attractive LCOE and has been deployed more than any other tracker as of December 31, 2021. Based on our internal analysis, experience and customer feedback, we believe we generally have an LCOE advantage compared to legacy linked row trackers and, depending upon terrain, climate, location and other factors, we believe this LCOE advantage can be as high as 9%. NX Horizon’s system mounts a single line of panels along a tracker row. NX Horizon’s reliable self-powered motor and control system, balanced mechanical design and independent-row architecture provide project design flexibility while lowering operations and maintenance costs. With its self-aligning module rails and vibration-proof fasteners, NX Horizon can be easily and rapidly installed. The self-powered, decentralized architecture allows each row to be commissioned in advance of site power and is designed to withstand high winds and other adverse weather conditions. NX Horizon combines several key features that improve performance, reliability and operability compared to competing designs.

NX Gemini is our two-in-portrait (“2P”) format tracker which holds two rows of solar panels along the central support beam. Ideally suited for sites with challenging soils, high winds and irregular boundaries, NX Gemini features a distributed drive system for robust stability in extreme weather, eliminating the need for dampers and minimizing energy required to stow panels in a safe position during inclement weather.

 

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In March 2022, we launched NX Horizon-XTR, our terrain-following tracker designed to expand the addressable market for trackers on sites with sloped, uneven and challenging terrain. NX Horizon-XTR conforms to the natural terrain of the site, reducing or eliminating cut-and-fill earthworks and reducing foundation lengths. These benefits help accelerate construction schedules and make trackers more economically and environmentally viable on difficult sites.

 

 

Independent rows.    Over the last decade, the substantial decrease in the cost of electric motors and control systems helped accelerate the adoption of independent row tracking systems over linked-row architectures. In addition to the ability to rotate each row individually, independent rows provide many benefits such as increased redundancy and therefore lower risk of single points of component failure, site layout flexibility including reduced grading requirements, ease of installation, and ease of maintenance and operations, including unrestricted vehicle access.

 

 

Mechanically-balanced rows.    Our patented, mechanically-balancing rows have several benefits, including greater range of motion, less energy required to rotate the panels than competing products, and reduced component wear and tear. Mechanical balancing also enables greater elevation of solar panels above a central support beam (torque tube), significantly improving energy production in bifacial applications by allowing more reflected light to reach the back side of the panel. Bifacial panels capture sunlight on both their front and back sides and are increasingly adopted in utility-scale projects.

 

 

Self-powered.    Our tracker design includes the placement of a small solar panel on each row that powers the trackers, eliminating the need for more expensive AC power. In addition, our self-powered controller also enables advanced software capabilities by collecting and distributing real-time sensor data.

 

 

Terrain following capability.    Unlike typical designs that constrain tracker rows to a plane, Nextracker’s NX Horizon-XTR tracker variant conforms to a site’s natural terrain undulations. This design eliminates or reduces the cost and impact of cut-and-fill earthworks, reduces foundation material, eases permitting and accelerates project construction schedules. NX Horizon-XTR’s ability to significantly reduce earthwork allows many otherwise infeasible sites to become economically viable for solar trackers. Less earthwork lowers upfront costs and improves scheduling while mitigating environmental impacts to topsoil, native vegetation, and natural drainage features.

 

 

Embedded sensors and connectivity.    Our embedded sensors and wireless mesh network with real-time connectivity enable visibility and system monitoring of critical components and remote maintenance, upgrades, and future software enhancements if separately purchased by the customer.

 

 

Operations and maintenance efficiency.    Our highly engineered fasteners replace standard nuts and bolts. Our fasteners increase long-term reliability and eliminate the need for periodic inspection and maintenance required by systems held together with nuts and bolts.

 

 

Sealed, elevated drive system.    All our trackers have sealed gears, motors and controllers, which are typically elevated three or more feet above the ground, protecting the system against dust, flooding and ground accumulations of snow and ice.

Software solutions portfolio

We offer a number of software solutions to optimize the performance and capabilities of our tracking solutions. Our software is licensed on a separate basis and integrated with our tracker products, leveraging the embedded sensors, communication and control capabilities in these solutions. When we develop new software features, we can provide these capabilities to both our customers’ existing installed fleet as well as new projects. Through

 

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software innovation, we have been able to improve energy yields and operability over time, providing differentiated benefits to our customers.

TrueCapture is our flagship software offering, which as of September 30, 2022 has been installed on approximately 186 projects and is under contract for approximately 38 additional projects. As of December 31, 2022, TrueCapture has been installed on approximately 192 projects, an increase of 181 installed projects from 11 installed projects as of March 31, 2019, and is under contract for approximately 52 additional projects as of December 31, 2022. TrueCapture is an intelligent, self-adjusting tracker control system that uses machine learning to increase typical solar power plant energy yield between 1-2.2% for the majority of projects. While linked row tracking systems angle all rows in an identical direction facing the sun, TrueCapture boosts solar power plant production by continuously optimizing the position of each individual tracker row in response to site features such as varying topography and changing weather conditions.

NX NavigatorTM, which is typically bundled with TrueCapture, enables solar power plant owners and operators to monitor, control and protect their solar projects. An intuitive dashboard helps plant managers to precisely visualize real-time operational data at the site, subfield and individual tracker level. In addition, NX Navigator’s risk mitigation features include Hurricane/Typhoon Stow and Hail Stow modes, both of which quickly command solar panels to rotate to safe positions in response to inclement weather that might otherwise cause significant damage to solar panels.

Benefits of our solution

We approach tracking with a holistic and forward-thinking view toward increasing solar power plant energy production levels and decreasing operating and maintenance costs. Our trackers provide high levels of performance and operability and improve over time through our separately licensed software solutions. We see trackers as not only a physical mounting and rotating platform for solar panels, but also as a nexus of intelligent control and optimization for the entire solar plant. Our innovative approach provides the following significant competitive advantages:

 

 

Next-generation architecture.    Our self-balancing, independent-row architecture provides many performance and cost advantages, including improved reliability, easier access for maintenance vehicles, a wide rotational range and the ability to optimize the tracker angle on a row-by-row basis for increased energy production. Unlike some linked-row designs, our key drive components are located well above ground to reduce risk from flooding and ground accumulations of snow and ice.

 

 

Advanced software and sensor capabilities.    We optimize performance and operability through hardware and software integration, validated by rigorous testing and field-based measurement and verification. Our software solutions interface with our network of data-mining sensors dispersed throughout the solar plant and enable operators to optimize performance.

 

 

Ease of deployment.    Our solutions are designed to enhance system configuration and planning for customers, reduce costs associated with grading, earthworks, anchoring, deployment and other installation, and reduce time to deploy and operationalize.

 

 

Ease of operation.    Our architecture, sensors and software are designed to reduce operating costs, optimize uptime and mitigate risks such as potential damage from severe weather. Independent-row architecture reduces the cost of cleaning, vegetation management and inspection operations by providing significantly easier vehicle movement along rows. Embedded sensors provide terabytes of data that deliver individual row level insights to drive operational benefits for our customers.

 

 

Future upgradability.    We take an innovative approach to ‘future proofing’ the optimization of our trackers over time, enabling the release of improved features and capabilities to both legacy and new solar projects via future software enhancements to our separately sold software solutions.

 

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Severe weather protection.    Our systems combine multiple approaches to reduce risk of damage while maintaining as much energy production as feasible in severe weather conditions, including a feature that automatically puts the panels into stow position shortly after a loss of utility power. Our trackers use wind stowing methods and dampening based on research on dynamic wind force mitigation, increasing protection against high winds while seeking to minimize energy production impacts. Our software also provides rapid stowing modes to reduce risk of damage from hail.

 

 

Superior production for bifacial solar panels.    Our tracker platforms are designed to optimize production from bifacial solar panels. Bifacial panels capture sunlight on both their front and back sides and are increasingly adopted in utility-scale projects. Our architecture is designed to mitigate obstructions that can block reflected light from reaching the back side of the panels.

Our key strengths

 

 

Global Leader in the Solar Tracking Industry.    We are the global leader in the solar tracking industry based on GW shipped and have been for the last seven consecutive years from 2015 to 2021.12

 

 

Culture and Track Record of Innovation.    We pioneered what we believe to be today’s leading generation of tracker solutions, including many “industry first” innovations, such as self-powering and self-grounding capabilities, and associated software offerings.

 

 

Proven Solutions with a Long Track Record of Performance and Reliability.    We have an established track record of delivering what we believe to be the highest performing trackers for solar energy projects in markets around the world.

 

 

Strategic, Value-driven Relationships Throughout the Customer Value Chain.    We have developed long-term, entrenched strategic relationships throughout the value chain with leading developers, EPCs, owners and operators of solar projects.

 

 

Differentiated, Robust Intellectual Property Portfolio.    We have a large portfolio of intellectual property protecting both our hardware and software products, including 70 issued U.S. patents, 100 granted non-U.S. patents and 197 U.S. and non-U.S. patent applications pending, including provisional patent applications pending in the U.S. and pending Patent Cooperation Treaty applications as of September 30, 2022.

 

 

Visionary, Founder-Led Management Team.    Our founders and management team pioneered tracking technology and key members of our management team have an average of 20 years of experience in the solar industry.

Our growth strategies

We intend to drive the growth of our business primarily through the following strategies:

 

 

Maintain clear leadership position in sophisticated and growing U.S. market.

 

Expand in rapidly growing and maturing international markets.

 

Leverage our cutting-edge technological expertise to expand the existing addressable market.

 

Expand our product offerings and capitalize on our large installed base.

 

Pursue selective and accretive acquisitions to complement our existing platform.

Our market opportunity

Trackers are the fastest-growing utility-scale mounting system across the world, with the percentage of ground-mounted solar installations (in GW) utilizing trackers growing from 23% in 2015 to a projected 49% in 2022 globally

 

12    Wood Mackenzie, June 2022.

 

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(and was over 80% in 2022 in mature markets such as the United States and Australia), according to Wood Mackenzie.13 In addition, the most recent tracker-specific forecasts from Wood Mackenzie estimate a $4.6 billion market for trackers in 2022, the third consecutive year in which the annual market value of trackers would exceed that of fixed-tilt systems for the ground-mounted market.14 We believe that the global demand for trackers is growing faster than the overall demand for mounting systems because solar energy projects that use trackers generate significantly more ROI than projects that do not. According to Wood Mackenzie, the global tracker market is expected to be a $71 billion cumulative opportunity from 2020 to 2030, representing approximately 682 GW of solar installed over that time period.15

Impact of COVID-19

The COVID-19 pandemic resulted in a widespread public health crisis and numerous disease control measures being taken to limit its spread, including travel bans and restrictions, quarantines, shutdowns, vaccine mandates and social distancing measures. These events and control measures impacted our operations and the operations of our customers and our suppliers. We experienced disruptions due to illness and the effect of governmental mandates and recommendations, as well as the measures we took to mitigate the impact of COVID-19 at our offices around the world in an effort to protect the health and well-being of our employees, customers, suppliers and the communities in which we operate. Our operations were also affected by the disruptions experienced by our customers, suppliers, freight operators and trucking companies due to the COVID-19 pandemic and related events, including site closures, factory closures, labor shortages and wide-scale disruptions in the world-wide shipping infrastructure. During the height of the COVID-19 pandemic, our management team committed significant time, attention and resources to update our processes and business systems, and expand localized capacity. Although the COVID-19 pandemic appears to have abated, its long-term effects on the global economy, including ongoing transportation and logistics issues and rapid inflation, continue to affect our business. Furthermore, should the COVID-19 pandemic become more virulent, or should another pandemic arise, this could further negatively affect our operations and financial results. See the section entitled “Risk factors—Risks related to our business and our industry—We face risks related to the COVID-19 pandemic, which could have a material and adverse effect on our business, results of operations and financial condition” for additional information regarding the potential impact of COVID-19 on our business and operations.

Tax Receivable Agreement

We will enter into a tax receivable agreement (the “Tax Receivable Agreement”) with the LLC, Yuma, Inc., a Delaware corporation and indirect wholly-owned subsidiary of Flex (“Yuma”), Yuma Subsidiary, Inc., a Delaware corporation and wholly-owned subsidiary of Yuma (“Yuma Sub”), TPG Rise Flash, L.P., an affiliate of the private equity firm TPG (“TPG”), and the following affiliates of TPG: TPG Rise Climate Flash Cl BDH, LP, TPG Rise Climate BDH, LP and The Rise Fund II BDH, LP (collectively, the “TPG Affiliates”). The Tax Receivable Agreement will provide for the payment by us to Yuma, Yuma Sub, TPG and the TPG Affiliates (or certain permitted transferees thereof) of 85% of the tax benefits, if any, that we are deemed to realize under certain circumstances as a result of (i) our allocable share of existing tax basis in tangible and intangible assets resulting from exchanges or acquisitions of outstanding Series A Preferred Units of the LLC (the “LLC Preferred Units”) or common units of the LLC (the “LLC Common Units” and together with the LLC Preferred Units, the “LLC Units”), including as part of the Transactions or under the Exchange Agreement, (ii) increases in tax basis resulting from exchanges or acquisitions of LLC Units and shares of Class B common stock (including as part of the Transactions or under the Exchange Agreement), (iii) certain pre-existing tax attributes of certain blocker corporations affiliated with TPG that will each merge with a separate direct, wholly-owned subsidiary of us, as part of the Transactions, and

 

13    Wood Mackenzie, December 2022. Global total addressable market excludes China.
14    Ibid.
15    Ibid. Global total addressable market excludes China.

 

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(iv) certain other tax benefits related to our entering into the Tax Receivable Agreement, including tax benefits attributable to payments under the Tax Receivable Agreement. See the section entitled “Certain relationships and related party transactions—Tax receivable agreement.” Assuming no material changes in the relevant tax law and that we earn sufficient taxable income to realize all tax benefits that are subject to the Tax Receivable Agreement, we expect that the tax savings we will be deemed to realize associated with the tax benefits described above would aggregate approximately $         million over 20 years from the date of this offering based on the initial public offering price of $         per share of our Class A common stock (which is the midpoint of the estimated initial public offering price range set forth on the cover page of this prospectus), and assuming all future exchanges of LLC Units occur at the time of this offering. Under such scenario we would be required to pay the owners of LLC Units approximately 85% of such amount, or $         million, over the 20 year period from the date of this offering, and the yearly payments over that time would range between approximately $         million to $         million per year. Such payments will reduce the cash provided to us by the tax savings described above. As a result, investors purchasing shares in this offering or in the public market following this offering will not be entitled to the economic benefit of the tax benefits subject to the Tax Receivable Agreement that would have been available if the Tax Receivable Agreement were not in effect (except to the extent of our continuing 15% interest in the tax benefits subject to the Tax Receivable Agreement). See the section entitled “Certain relationships and related party transactions—Tax receivable agreement.”

Summary risk factors

Our business and our ability to execute our strategy are subject to many risks. Before making a decision to invest in our Class A common stock, you should carefully consider all of the risks and uncertainties described in the section entitled “Risk factors” and elsewhere in this prospectus. These risks and uncertainties include, but are not limited to, the following:

 

 

The demand for solar energy and, in turn, our products are impacted by many factors outside of our control, and if such demand does not continue to grow or grows at a slower rate than we anticipate, our business and prospects will suffer.

 

 

Competitive pressures within our industry may harm our business, revenues, growth rates and market share.

 

 

We face competition from conventional and renewable energy sources that may offer products and solutions that are less expensive or otherwise perceived to be more advantageous than solar energy solutions, which could materially and adversely affect the demand for and the average selling price of our products and services.

 

 

Our results of operations may fluctuate from quarter to quarter, which could make our future performance difficult to predict and could cause our results of operations for a particular period to fall below expectations.

 

 

The reduction, elimination or expiration of government incentives for, or regulations mandating the use of, renewable energy and solar energy specifically could reduce demand for solar energy systems and harm our business.

 

 

We rely heavily on our suppliers and our operations could be disrupted if we encounter problems with our suppliers or if there are disruptions in our supply chain.

 

 

Economic, political and market conditions can adversely affect our business, results of operations and financial condition, including our revenue growth and profitability, which in turn could adversely affect our stock price.

 

 

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Changes in the global trade environment, including the imposition of import tariffs, could adversely affect the amount or timing of our revenues, results of operations or cash flows.

 

 

We face risks related to the COVID-19 pandemic, which could have a material and adverse effect on our business, results of operations and financial condition.

 

 

A further increase in interest rates, or a reduction in the availability of tax equity or project debt financing, could make it difficult for project developers and owners to finance the cost of a solar energy system and could reduce the demand for our products.

 

 

A loss of one or more of our significant customers, their inability to perform under their contracts, or their default in payment, could harm our business and negatively impact our revenue, results of operations and cash flows.

 

 

Defects or performance problems in our products could result in loss of customers, reputational damage and decreased revenue, and we may face warranty, indemnity and product liability claims arising from defective products.

 

 

We may experience delays, disruptions or quality control problems in our product development operations.

 

 

Our business is subject to the risks of severe weather events, natural disasters and other catastrophic events.

 

 

Our continued expansion into new markets could subject us to additional business, financial, regulatory and competitive risks.

 

 

Our indebtedness could adversely affect our financial flexibility and our competitive position.

 

 

Electric utility industry policies and regulations may present technical, regulatory and economic barriers to the purchase and use of solar energy systems that could significantly reduce demand for our products or harm our ability to compete.

 

 

We will be required to pay Yuma, Yuma Sub, TPG and the TPG Affiliates (or certain permitted transferees thereof) for certain tax benefits that we are deemed to realize arising in connection with this offering and related transactions, and the amounts we may pay could be significant.

Incorporation of Nextracker Inc.

Nextracker Inc., a Delaware corporation, was formed on December 19, 2022 and is the issuer of the Class A common stock offered by this prospectus. Prior to the completion of the Transactions, including this offering, all of our business operations have been conducted through the LLC (formerly known as NEXTracker Inc.) and its direct and indirect subsidiaries. Nextracker Inc. has not engaged in any material business or other activities except in connection with its formation and the Transactions.

The TPG investment

On February 1, 2022, Flex sold LLC Preferred Units representing a 16.7% limited liability company interest in the LLC to TPG, resulting in TPG holding all of the outstanding LLC Preferred Units and subsidiaries of Flex holding all of the outstanding LLC Common Units. Immediately prior to this offering, as a result of accrued distributions paid in kind in respect of TPG’s outstanding LLC Preferred Units, TPG owned, through one or more subsidiaries, a     % limited liability company interest in the LLC. The LLC Preferred Units will be automatically converted into a certain number of LLC Common Units in connection with this offering as described below under “—The Transactions” and “Our organizational structure—The Transactions,” and TPG and the TPG Affiliates will be parties to the Tax Receivable Agreement.

 

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The Transactions

We will complete the following organizational and other transactions in connection with this offering:

 

 

We will amend and restate Nextracker Inc.’s certificate of incorporation to, among other things, provide for Class A common stock and Class B common stock, with each share entitling its holder to one vote on all matters presented to our stockholders generally, and provide that shares of Class B common stock may only be held by Yuma, Yuma Sub, TPG and each of their permitted transferees;

 

 

We will issue                shares of our Class A common stock to the purchasers in this offering (or                shares if the underwriters exercise in full their option to purchase additional shares of Class A common stock) in exchange for net proceeds therefrom of approximately $                million (or approximately $                million if the underwriters exercise in full their option to purchase additional shares of Class A common stock), based upon an assumed initial public offering price of $                per share (which is the midpoint of the estimated initial public offering price range set forth on the cover page of this prospectus), less the underwriting discount and estimated offering expenses payable by us;

 

 

We will issue                shares of our Class B common stock to Yuma, Yuma Sub and TPG in exchange for cash consideration, which number of shares shall be equal to the number of LLC Common Units held directly or indirectly by Yuma, Yuma Sub and TPG immediately following the Transactions, and we will repurchase all of the shares of our common stock previously issued to Yuma for cash consideration;

 

 

Immediately prior to the consummation of this Offering, the LLC will make a distribution in respect of the LLC Units in an aggregate amount of $175.0 million (the “Distribution”). With respect to such Distribution, $125.0 million shall be distributed to TPG, Yuma and Yuma Sub in accordance with their pro rata LLC Units and $50.0 million to Flex. The Distribution will be financed, in part, with net proceeds from a $150.0 million term loan under a credit agreement entered into by the LLC which will be guaranteed by Nextracker Inc., and various lenders party thereto (the “2023 Credit Agreement”).

 

 

In connection with this offering, the LLC Preferred Units held by TPG will be automatically converted into a certain number of LLC Common Units (the “Automatic Conversion”) which are exchangeable, together with a corresponding number of shares of Class B common stock, for shares of our Class A common stock (or cash). Notwithstanding the foregoing, as permitted under and in accordance with the second amended and restated limited liability company agreement of Nextracker LLC in effect prior to this offering (the “Prior LLC Agreement”), TPG has exercised its right to have certain blocker corporations affiliated with TPG merge with a separate direct, wholly-owned subsidiary of Nextracker Inc., with the blocker corporations surviving each such merger, in a transaction intended to qualify as a tax-free transaction, with the investors in each such blocker corporation being entitled to a number of shares of Nextracker Inc. Class A common stock with a value based on the LLC Preferred Units held by such blocker corporation;

 

 

We will use all of the net proceeds from this offering as consideration for Yuma’s transfer to us of                 LLC Common Units (or                LLC Common Units if the underwriters exercise in full their option to purchase additional shares of Class A common stock) at a price per unit equal to the initial public offering price per share of Class A common stock in this offering less the underwriting discount;

 

 

We will be appointed as the managing member of the LLC;

 

 

We, the LLC, Yuma, Yuma Sub and TPG will enter into an exchange agreement (the “Exchange Agreement”) under which Yuma, Yuma Sub and TPG (or certain permitted transferees thereof) will have the right, subject

 

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to the terms of the Exchange Agreement, to require the LLC to exchange LLC Common Units (together with a corresponding number of shares of Class B common stock) for newly-issued shares of Class A common stock on a one-for-one basis, or, in the alternative, we may elect to exchange such LLC Common Units (together with a corresponding number of shares of Class B common stock) for cash equal to the product of (i) the number of LLC Common Units (together with a corresponding number of shares of Class B common stock) being exchanged, (ii) the then-applicable exchange rate under the Exchange Agreement (which will initially be one and is subject to adjustment) and (iii) the Class A common stock value (based on the market price of our Class A common stock), subject to customary conversion rate adjustments for stock splits, stock dividends, reclassifications and other similar transactions; provided further, that in the event of an exchange request by an exchanging holder, Nextracker Inc. may at its option effect a direct exchange of shares of Class A common stock for LLC Common Units and shares of Class B common stock in lieu of such exchange or make a cash payment to such exchanging holder, in each case pursuant to the same economic terms applicable to an exchange between the exchanging holder and the LLC;

 

 

We, the LLC, Yuma, Yuma Sub, TPG and the TPG Affiliates will enter into the Tax Receivable Agreement described above under the section entitled “—Tax Receivable Agreement”; and

 

 

We, Yuma, Yuma Sub and TPG will enter into a registration rights agreement pursuant to which we will grant such parties (and their transferees, if any) certain registration rights with respect to any of our Class A common stock owned by them (including upon exchange of LLC Common Units and shares of Class B common stock held by them). See the section entitled “Certain relationships and related party transactions—Agreements with Flex—Registration rights agreement.”

We collectively refer to the foregoing organizational and other transactions and this offering as the “Transactions.”

Immediately following the completion of the Transactions (including this offering):

 

 

Nextracker Inc. will be a holding company and its principal asset will be the LLC Units it purchases from Yuma;

 

 

Nextracker Inc. will be the managing member of the LLC and will control the business and affairs of the LLC and its subsidiaries;

 

 

Nextracker Inc. will beneficially own                LLC Common Units, representing approximately    % of the economic interest in the business of the LLC (or                LLC Common Units, representing approximately    % of the economic interest in the business of the LLC, if the underwriters exercise in full their option to purchase additional shares of Class A common stock);

 

 

The purchasers in this offering will own (i)                shares of Class A common stock of Nextracker Inc., representing approximately    % of the total outstanding shares of Nextracker Inc.’s common stock (or                shares of Class A common stock, representing approximately                % of the total outstanding shares of Nextracker Inc.’s common stock, if the underwriters exercise in full their option to purchase additional shares of Class A common stock) and (ii) indirectly through Nextracker Inc.’s ownership of LLC Units, approximately                % of the economic interest in the business of the LLC (or approximately                % of the economic interest in the business of the LLC if the underwriters exercise in full their option to purchase additional shares of Class A common stock);

 

 

Flex (i) through Yuma and Yuma Sub, will own                shares of Class B common stock of Nextracker Inc., representing approximately                % of the total outstanding shares of Nextracker Inc.’s common stock (or                shares of Class B common stock, representing approximately                % of the total outstanding

 

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shares of Nextracker Inc.’s outstanding common stock, if the underwriters exercise in full their option to purchase additional shares of Class A common stock) and (ii) through Yuma and Yuma Sub, will own                LLC Common Units, representing approximately                % of the economic interest in the business of the LLC (or                LLC Common Units, representing approximately                % of the economic interest in the business of the LLC, if the underwriters exercise in full their option to purchase additional shares of Class A common stock); and

 

 

TPG will own (i)                shares of Class A common stock of Nextracker Inc., representing approximately     % of the total outstanding shares of Nextracker Inc.’s common stock (or                shares of Class A common stock, representing approximately     % of the total outstanding shares of Nextracker Inc.’s outstanding common stock, if the underwriters exercise in full their option to purchase additional shares of Class A common stock), (ii)                shares of Class B common stock of Nextracker Inc., representing approximately                 % of the total outstanding shares of Nextracker Inc.’s common stock (or                shares of Class B common stock, representing approximately     % of the total outstanding shares of Nextracker Inc.’s common stock, if the underwriters exercise in full their option to purchase additional shares of Class A common stock), and (iii)                LLC Common Units representing approximately     % of the economic interest in the business of the LLC (or                LLC Common Units, representing approximately     % of the economic interest in the business of the LLC, if the underwriters exercise in full their option to purchase additional shares of Class A common stock).

As the managing member of the LLC, we will operate and control all of the business and affairs of the LLC and, through the LLC and its direct and indirect subsidiaries, conduct our business. Immediately following the Transactions, including this offering, we will have the majority economic interest in the LLC and will control the management of the LLC as its managing member. As a result, we will consolidate the LLC and record a significant non-controlling interest in a consolidated entity in our consolidated financial statements for the economic interest in the LLC held directly or indirectly by Flex and TPG.

The separation agreement

We have entered into various agreements to provide a framework for our relationship with Flex after the Transactions, including a separation agreement, a transition services agreement and an employee matters agreement. These agreements provide for the allocation between us and Flex of Flex’s employees, liabilities and obligations attributable to periods prior to, at and after the separation. For additional information regarding the separation agreement and such other agreements, refer to the sections entitled “Risk factors—Risks related to the Transactions and our relationship with Flex” and “Certain relationships and related party transactions—Agreements with Flex.”

 

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Subsequent distribution or dispositions

Distribution or Other Dispositions

The separation agreement provides that Flex may, in its sole discretion, determine: (i) whether to proceed with all or part of a tax-free or other distribution or disposition of its retained beneficial interest in the LLC (as applicable, a “Distribution or Other Disposition”), whether directly or through a distribution or disposition of the stock of Yuma, which directly or indirectly holds Flex’s beneficial interest in the LLC; and (ii) all terms of the Distribution or Other Disposition, as applicable, including the form, structure and terms of any transaction(s) and/or offering(s) to effect the Distribution or Other Disposition and the timing of and conditions to the consummation of the Distribution or Other Disposition. In addition, the separation agreement provides that in the event that Flex determines to proceed with any Distribution or Other Disposition, Flex may at any time and from time to time until the completion of such Distribution or Other Disposition abandon, modify or change any or all of the terms of such Distribution or Other Disposition, including by accelerating or delaying the timing of the consummation of all or part of such Distribution or Other Disposition. The separation agreement also provides that upon Flex’s request, we and the LLC will cooperate with Flex in all respects to accomplish the Distribution or Other Disposition and will, at Flex’s direction, promptly take any and all actions necessary or desirable to effect the Distribution or Other Disposition, including the registration under the Securities Act of the offering of our Class A common stock on an appropriate registration form or forms to be designated by Flex and the filing of any necessary documents pursuant to the Exchange Act.

Merger Agreement

In addition to our obligations with respect to any Distribution or Other Disposition, the separation agreement provides Flex with the right, exercisable at any time following this offering, to require us, following any dividend or distribution of the equity of Yuma to the holders of ordinary Flex shares, to, at Flex’s option, effect a merger of Yuma with a wholly-owned subsidiary of ours, with Yuma surviving as a wholly owned subsidiary of ours in a tax-free transaction under Section 368(a) of the Internal Revenue Code of 1986, as amended (the “Code”). We have further agreed under the separation agreement to, at Flex’s request, at any time whether before or after this offering, fully cooperate with Flex to submit an agreement and plan of merger to effect such merger for approval by our board of directors and stockholders and the board of directors and stockholders of such subsidiary, to the extent required under Delaware law, and cause such agreement and plan of merger to be executed and delivered by our authorized officers and the authorized officers of such subsidiary, and take all other actions reasonably necessary to adopt and approve such agreement and plan of merger, to be operative when and if Flex so elects to effect such merger following this offering.

As a result, prior to this offering, we, Flex, Yuma and Yuma Acquisition Corp., our wholly-owned subsidiary (“Merger Sub”), have entered into an agreement and plan of merger (the “merger agreement”), pursuant to which, among other matters, Flex will have the right but not the obligation, to effect a merger of Yuma with Merger Sub, with Yuma surviving such merger as our wholly-owned subsidiary, in a transaction intended to qualify for tax-free treatment under Section 368(a) of the Code (the “Merger”). The Merger would, on the terms and subject to the conditions set forth in the merger agreement, be effected immediately following the distribution of all of the outstanding stock of Yuma to the holders of ordinary Flex shares as contemplated by the merger agreement (the “Merger Distribution”), with such stock of Yuma being exchanged for shares of our Class A common stock in the Merger. The number of shares of our Class A common stock that would be issued to Yuma stockholders in the Merger would equal the number of shares of Class A common stock then held directly or indirectly by Yuma and its subsidiaries (assuming for such purposes that all LLC Units and shares of

 

15


Class B common stock held directly or indirectly by Yuma and its subsidiaries have been exchanged for shares of Class A common stock as of immediately prior to the Merger pursuant to and in accordance with the Exchange Agreement).

Prior to this offering, we and each of Flex, Yuma and Merger Sub, and our stockholders and the stockholders of each of Yuma and Merger Sub, have approved the merger agreement and the transactions contemplated by the merger agreement, including the Merger. As a result, our stockholders following this offering will have no right to approve or disapprove of the Merger or the other transactions contemplated by the merger agreement or the issuance of shares of our Class A common stock to the holders of Yuma common stock in connection with the Merger. Further, our stockholders following this offering will have no right to appraisal under Section 262 of the Delaware General Corporation Law (the “DGCL”) or otherwise in connection with the Merger or the other transactions contemplated by the merger agreement.

General

Flex has no obligation (pursuant to the merger agreement or otherwise) to pursue or consummate any further distribution or disposition of its retained beneficial interest in the LLC, including by means of a Distribution or Other Disposition or the Merger Distribution and the Merger, by any specified date or at all. If pursued, any such distribution or disposition would be subject to various conditions, including receipt of any necessary regulatory or other approvals, the existence of satisfactory market conditions and, if pursued, the Merger would be subject to the conditions set forth in the merger agreement (see the section entitled “Certain relationships and related party transactions—merger agreement” for additional detail regarding the conditions to the Merger).

The conditions to any such distribution or disposition, including by means of a Distribution or Other Disposition or the Merger Distribution and the Merger, may not be satisfied. Flex may decide not to consummate any distribution or disposition, including by means of a Distribution or Other Disposition or the Merger Distribution and the Merger, even if the conditions thereto are satisfied or Flex may decide to waive one or more of these conditions and consummate such a distribution or disposition, even if all of the conditions thereto are not satisfied.

Accordingly, we have no certainty when such transactions (and the effectiveness of our related obligations under the separation agreement and the merger agreement) will occur following this offering or if they will occur at all.

 

16


Corporate structure

The following diagram sets forth a simplified view of our corporate structure after giving effect to the completion of the Transactions, including this offering. This chart is for illustrative purposes only and does not represent all legal entities affiliated with the entities depicted.

 

LOGO

 

Note:   For the purposes of this diagram only, shares of Class A common stock not outstanding and subject to options, warrants or other rights that will be outstanding upon completion of the Transactions are deemed outstanding for purposes of calculating the percentage total outstanding common stock and economic interest of the various entities depicted in the diagram.

Corporate information

Our principal executive offices are located at 6200 Paseo Padre Parkway, Fremont, California 94555 and our telephone number at that address is (510) 270-2500. Our website is www.nextracker.com. Information contained on, or accessible through, our website is not a part of, and is not incorporated into, this prospectus.

 

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The offering

 

Class A common stock we are offering

                 shares of Class A common stock (or                  shares if the underwriters exercise in full their option to purchase additional shares of Class A common stock).

 

Option to purchase additional shares

We have granted the underwriters a 30-day option to purchase up to                  additional shares of Class A common stock at the initial public offering price less the underwriting discount.

 

Class A common stock to be outstanding immediately after this offering

                 shares of Class A common stock, representing approximately     % of the total outstanding shares of the Company’s common stock (or                  shares, representing approximately     % of the total outstanding shares of all of the Company’s common stock, if the underwriters exercise in full their option to purchase additional shares of Class A common stock),     % of the economic interest in the Company and     % of the indirect economic interest in the LLC.

 

Class B common stock to be beneficially owned by Flex immediately after this offering

                 shares of Class B common stock, representing approximately     % of the total outstanding shares of all of the Company’s common stock (or                  shares, representing approximately     % of the total outstanding shares of all of the Company’s common stock, if the underwriters exercise in full their option to purchase additional shares of Class A common stock) and no economic interest in the Company.

 

Class A common stock to be beneficially owned by TPG immediately after this offering.

                 shares of Class A common stock, representing approximately     % of the total outstanding shares of all of the Company’s common stock (or                  shares, representing approximately     % of the total outstanding shares of all of the Company’s common stock, if the underwriters exercise in full their option to purchase additional shares of Class A common stock).

 

Class B common stock to be beneficially owned by TPG immediately after this offering

                 shares of Class B common stock, representing approximately     % of the total outstanding shares of all of the Company’s common stock (or                  shares, representing approximately     % of the total outstanding shares of all of the Company’s common stock, if the underwriters exercise in full their option to

 

18


 

purchase additional shares of Class A common stock) and no economic interest in the Company.

 

LLC Common Units to be beneficially held by us immediately after this offering

                LLC Common Units (or                 LLC Common Units if the underwriters exercise in full their option to purchase additional shares of Class A common stock), representing approximately    % of the total economic interest in the LLC (or                % if the underwriters exercise in full their option to purchase additional shares of our Class A common stock).

 

LLC Common Units to be beneficially owned by Flex immediately after this offering

                    LLC Common Units (or                 LLC Common Units if the underwriters exercise in full their option to purchase additional shares of Class A common stock), representing approximately    % of the total economic interest in the LLC (or                % if the underwriters exercise in full their option to purchase additional shares of our Class A common stock).

 

LLC Common Units to be beneficially owned by TPG immediately after this offering

                    LLC Common Units (or                 LLC Common Units if the underwriters exercise in full their option to purchase additional shares of Class A common stock), representing approximately     % of the total economic interest in the LLC (or                % if the underwriters exercise in full their option to purchase additional shares of our Class A common stock).

 

Ratio of shares of Class A common stock to LLC Common Units

Our amended and restated certificate of incorporation and the LLC Agreement (as defined below) will require that we and the LLC at all times maintain a one-to-one ratio between the number of shares of Class A common stock outstanding and the number of LLC Common Units owned by us, except as otherwise determined by us.

 

Ratio of shares of Class B common stock to LLC Common Units

Our amended and restated certificate of incorporation and the LLC Agreement will require that we and the LLC at all times maintain a one-to-one ratio between the number of shares of Class B common stock owned by Yuma, Yuma Sub, TPG and each of their permitted transferees and the number of LLC Common Units owned by Yuma, Yuma Sub, TPG and each of their permitted transferees, except as otherwise determined by us.

 

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Permitted holders of shares of Class B common stock

Immediately after the Transactions, Yuma and Yuma Sub will own     % and TPG will own     % of the outstanding shares of our Class B common stock. Only Yuma, Yuma Sub, TPG and each of their permitted transferees of Class B common stock as described in this prospectus will be permitted to hold shares of our Class B common stock. Shares of Class B common stock are exchangeable for shares of Class A common stock only together with an equal number of LLC Common Units. See the section entitled “Certain relationships and related party transactions—Nextracker LLC agreement.”

 

Use of proceeds

We expect to receive net proceeds from this offering of approximately $                million (or approximately $                million if the underwriters exercise in full their option to purchase additional shares of Class A common stock), based on an initial public offering price of $    per share, which is the midpoint of the estimated initial public offering price range set forth on the cover page of this prospectus, after deducting the estimated underwriting discount and estimated offering expenses payable by us.

 

  We will use all of the net proceeds from this offering to purchase                 LLC Common Units from Yuma (or                LLC Common Units if the underwriters exercise in full their option to purchase additional shares of Class A common stock) at a price per unit equal to the initial public offering price per share of Class A common stock in this offering less the underwriting discount. See the section entitled “Use of proceeds” for additional information.

 

Voting rights; controlled company

Upon the completion of this offering, the holders of our Class A common stock and Class B common stock will be entitled to one vote per share. Holders of shares of our Class A common stock and Class B common stock will vote together as a single class on all matters requiring approval by our common stockholders unless otherwise required by law. For a description of the rights of the holders of our Class A common stock, see the section entitled “Description of capital stock—Class A common stock.”

 

  Flex, as the indirect owner of     % of the outstanding shares of the Company’s common stock, will have the ability to control the outcome of matters submitted to our stockholders for approval, including the election of directors, amendments of our organizational documents and any merger, consolidation, sale of all or substantially all of our assets or other major corporate transactions. See the sections entitled “Principal stockholders” and “Description of capital stock.”

 

  Additionally, upon completion of this offering we will be a “controlled company” within the meaning of the rules of Nasdaq and, as a result, will qualify for, and intend to rely on, exemptions from certain corporate governance requirements. See the section entitled “Management—Controlled company exemption.”

 

20


Dividend policy

Immediately prior to the consummation of this Offering, the LLC will make the Distribution in respect of the LLC Units in an aggregate amount of $175.0 million. With respect to such Distribution, $125.0 million shall be distributed to TPG, Yuma and Yuma Sub in accordance with their pro rata LLC Units and $50.0 million to Flex. The Distribution will be financed, in part, with net proceeds from a $150.0 million term loan under the 2023 Credit Agreement entered into by the LLC which will be guaranteed by Nextracker Inc., and various lenders party thereto. We currently do not anticipate paying any cash distributions or dividends on our Class A common stock after this offering and for the foreseeable future. Holders of our Class B common stock are not entitled to participate in any dividends declared by our board of directors. The payment of any dividends on our Class A common stock in the future, and the timing and amount thereof, is within the discretion of our board of directors. The board’s decisions regarding the payment of dividends will depend on many factors, such as our financial condition, earnings, capital requirements, debt service obligations, restrictive covenants in our debt facilities, industry practice, legal requirements and other factors that our board deems relevant. Our ability to pay dividends will depend on our ongoing ability to generate cash from operations, the ability of the LLC to make distributions to us, and on our access to the capital markets for liquidity. We cannot guarantee that we will pay a dividend in the future or continue to pay any dividends if we commence paying dividends. Under the LLC Agreement, the LLC generally is required from time to time to make pro rata cash distributions, or tax distributions, to the holders of LLC Units to help each of the holders of the LLC Units to pay taxes on such holder’s allocable share of taxable income of the LLC. Investors in our Class A common stock will not be entitled to receive any such distributions. Investors should not purchase our Class A common stock with the expectation of receiving cash dividends. See “Dividend policy.”

 

Proposed listing

We have applied to list our Class A common stock on Nasdaq under the symbol “NXT.”

 

Risk factors

See the section entitled “Risk factors” and other information included in this prospectus for a discussion of factors you should carefully consider before deciding to invest in shares of our Class A common stock.

 

21


Summary historical and pro forma combined financial and other data

The following summary financial data reflects the combined assets and results of operations and other operating data of the operations that comprise the legacy solar tracker business of Flex, including the LLC (formerly known as NEXTracker Inc.) and its subsidiaries. We derived the summary historical and pro forma combined statement of operations and comprehensive income data for the six-month periods ended September 30, 2022 and October 1, 2021 and the years ended March 31, 2022, 2021 and 2020, and the combined balance sheet data as of September 30, 2022 and March 31, 2022 and 2021, from our historical unaudited condensed combined financial statements and our historical audited combined financial statements, which are included elsewhere in this prospectus, and from our unaudited combined pro forma financial statements included in the “Unaudited pro forma combined financial statements” section of this prospectus.

Throughout the period covered by the combined financial statements included elsewhere in this prospectus, we did not operate as a separate entity and stand-alone separate historical financial statements for us have not been prepared. These combined financial statements have been derived from Flex’s historical accounting records and are presented on a carve-out basis. All sales and costs as well as assets and liabilities directly associated with our business activity are included as a component of the combined financial statements. The combined financial statements also include allocations of certain general, administrative, sales and marketing expenses and cost of sales from Flex’s corporate office and allocations of related assets, liabilities, and Flex’s investment, as applicable. The allocations have been determined on a reasonable basis; however, the amounts are not necessarily representative of the amounts that would have been reflected in the combined financial statements had we been an entity that operated separately from Flex during the periods presented. In addition, the results for the six-month period ended September 30, 2022 should not be viewed as indicative of the results that may be expected for the fiscal year ending March 31, 2023. During the fourth quarter of fiscal year 2022, we entered into a transition services agreement with Flex, whereby Flex agreed to provide or cause to be provided certain services to us, which were previously included as part of the allocations from Flex. As consideration, we agreed to pay Flex the amount specified for each service as described in the transition service agreement. See the section entitled “Certain relationships and related party transactions—Agreements with Flex.” Related-party allocations, including the method for such allocations, are discussed further in “Relationship with parent and related parties” in Note 8 of the notes to the audited combined financial statements included elsewhere in this prospectus.

The summary unaudited pro forma combined financial data presented below has been prepared to reflect the Transactions. The summary unaudited pro forma combined financial data has been derived from our unaudited pro forma combined financial statements included elsewhere in this prospectus. The unaudited pro forma combined statement of operations and comprehensive income (loss) data presented reflects the financial results as if the Transactions, including this offering, occurred on April 1, 2021, which was the first day of fiscal year 2022. The unaudited pro forma combined balance sheet as of September 30, 2022 gives effect to the Transactions and this offering as if they had occurred on September 30, 2022. The unaudited pro forma combined financial statements consist of an unaudited pro forma combined balance sheet as of September 30, 2022 and unaudited pro forma combined statement of operations and comprehensive income (loss) for the six-month period ended September 30, 2022 and the year ended March 31, 2022, prepared in accordance with GAAP. The assumptions used and pro forma adjustments derived from such assumptions are based on currently available information.

The unaudited pro forma combined financial statements are not necessarily indicative of our results of operations or financial condition had the Transactions and our anticipated post-Transaction capital structure been completed on the dates assumed. Also, they may not reflect the results of operations or financial condition that would have resulted had we been operating as a separate, publicly-traded company during such periods. In addition, they are not necessarily indicative of our future results of operations or financial position.

 

22


The summary historical combined financial and other data of Nextracker Inc., the issuer of the Class A common stock being offered hereby, has not been presented because it is a newly incorporated entity, has had no business transactions or activities to date and had no assets or liabilities during the periods presented below.

This summary historical and pro forma combined financial and other data should be reviewed in combination with the sections entitled “Unaudited pro forma combined financial statements,” “Capitalization,” “Selected historical combined financial data,” “Management’s discussion and analysis of financial condition and results of operations” and the combined financial statements and accompanying notes included in this prospectus.

 

     
    Six-month periods ended     Fiscal year ended March 31,  
          Unaudited historical           Historical  
(In thousands, except share and
per share data)
 

Unaudited
pro forma

2022

   

September 30,
2022

    October 1,
2021
   

Unaudited
pro forma

2022

    2022     2021     2020  

Combined Statement of Operations and Comprehensive Income Data:

                              

Revenue

  $             $ 870,372     $ 680,172     $                   $ 1,457,592     $ 1,195,617     $ 1,171,287  

Cost of sales

      755,970       605,857         1,310,561       963,636       958,380  
 

 

 

   

 

 

 

Gross profit

      114,402       74,315         147,031       231,981       212,907  

Selling, general and administrative expenses

      36,862       26,140         66,948       60,442       55,361  

Research and development

      8,299       6,951         14,176       13,008       8,641  
 

 

 

   

 

 

 

Operating income

      69,241       41,224         65,907       158,531       148,905  

Interest and other, net

      1,248       280         799       502       (24
 

 

 

   

 

 

 

Income before income taxes

      67,993       40,944         65,108       158,029       148,929  

Provision for income taxes

      16,776       8,371         14,195       33,681       30,673  
 

 

 

   

 

 

 

Net income and comprehensive income

  $       $ 51,217     $ 32,573     $       $ 50,913     $ 124,348     $ 118,256  

Unaudited Pro Forma Earnings Per Share

             

Basic

  $       $     $     $       $     $     $  

Diluted

  $       $     $     $       $     $     $  

Number of shares used in calculating earnings per share

             

Basic

                                 

Diluted

                                 

 

 

 

     
     As of September 30, 2022      As of March 31,  
     Historical  
(In thousands)    Unaudited
pro forma
     Unaudited
historical
     2022     2021  

Combined Balance Sheet Data:

 

Working capital(1)

   $                    $ 333,700      $ 240,691     $ 191,902  

Total assets

        1,287,758        1,017,289       880,969  

Accumulated net parent investment

        86,400        (3,035     456,047  

 

 

 

23


(1)   Working capital is defined as current assets, less current liabilities.

 

     
     Six-month periods ended     Fiscal year ended March 31,  
(In thousands)    September 30, 2022     October 1, 2021     2022     2021     2020  
     (unaudited)                    

Combined Statements of Cash Flows Data:

          

Net cash provided by (used in) operating activities

   $ 52,461     $ (31,187   $ (147,113   $ 94,273     $ 240,999  

Net cash used in investing activities

     (1,311     (3,272     (5,750     (2,963     (1,655

Net cash provided by (used in) financing activities

     3,989       (26,422     (8,656     96,329       (250,765

 

 

 

     
     Six-month periods ended     Fiscal year ended March 31,  
(In thousands, except percentages)    September 30, 2022      October 1, 2021     2022     2021      2020  

Other Financial Information:

            

Non-GAAP gross profit(1)

   $ 115,282      $ 78,911     $ 152,599     $ 242,016      $ 222,503  

Non-GAAP operating income(1)

     73,614        49,987       90,363       177,850        168,025  

Non-GAAP net income(1)

     53,800        38,991       69,870       140,279        134,260  

Adjusted EBITDA(1)

     73,764        51,072       92,279       179,164        170,663  

Net income (% of revenue)

     5.9%        4.8%       3.5%       10.4%        10.1%  

Adjusted EBITDA (% of revenue)(1)

     8.5%        7.5%       6.3%       15.0%        14.6%  

Adjusted Free Cash Flow

   $ 51,150      $ (34,459   $ (152,863   $ 91,810      $ 239,344  

 

 

 

(1)   Non-GAAP gross profit, Non-GAAP operating income, Non-GAAP net income, Adjusted EBITDA, Adjusted EBITDA Margin and Adjusted Free Cash Flow are intended as supplemental measures of performance that are neither required by, nor presented in accordance with, GAAP. We present these non-GAAP financial measures because we believe they assist investors and analysts in comparing our performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance. In addition, we may use all or any combination of Non-GAAP gross profit, Non-GAAP operating income, Non-GAAP net income, Adjusted EBITDA, Adjusted EBITDA Margin and Adjusted Free Cash Flow as factors in evaluating management’s performance when determining incentive compensation and to evaluate the effectiveness of our business strategies.

Among other limitations, Non-GAAP gross profit, Non-GAAP operating income, Non-GAAP net income, Adjusted EBITDA, Adjusted EBITDA Margin and Adjusted Free Cash Flow do not reflect our cash expenditures or future capital expenditures or contractual commitments (including under the Tax Receivable Agreement), do not reflect the impact of certain cash or non-cash charges resulting from matters we consider not to be indicative of our ongoing operations and do not reflect the associated income tax expense or benefit related to those charges. In addition, other companies in our industry may calculate Non-GAAP gross profit, Non-GAAP operating income, Non-GAAP net income, Adjusted EBITDA, Adjusted EBITDA Margin differently and Adjusted Free Cash Flow from us, which further limits their usefulness as comparative measures.

Because of these limitations, Non-GAAP gross profit, Non-GAAP operating income, Non-GAAP net income, Adjusted EBITDA, Adjusted EBITDA Margin and Adjusted Free Cash Flow should not be considered in isolation or as substitutes for performance measures calculated in accordance with GAAP. We compensate for these limitations by relying primarily on our GAAP results and using Non-GAAP gross profit, Non-GAAP operating income, Non-GAAP net income, Adjusted EBITDA, Adjusted EBITDA Margin and Adjusted Free

 

24


Cash Flow on a supplemental basis. You should review the reconciliation to the most directly comparable GAAP measure of Non-GAAP gross profit, Non-GAAP operating income, Non-GAAP net income, Adjusted EBITDA, Adjusted EBITDA Margin and Adjusted Free Cash Flow below and not rely on any single financial measure to evaluate our business.

 

     
     Six-month periods ended     Fiscal year ended March 31,  
(In thousands, except percentages)    September 30, 2022     October 1, 2021     2022     2021     2020  
     (unaudited)                    

Reconciliation of GAAP to Non-GAAP Financial Measures:

          

GAAP gross profit

   $ 114,402     $ 74,315     $ 147,031     $ 231,981     $ 212,907  

Stock-based compensation expense

     755       679       1,526       1,953       1,643  

Intangible amortization

     125       3,917       4,042       8,082       7,953  
  

 

 

   

 

 

 

Non-GAAP gross profit

   $ 115,282     $ 78,911     $ 152,599     $ 242,016     $ 222,503  
  

 

 

   

 

 

 

GAAP operating income

   $ 69,241     $ 41,224     $ 65,907     $ 158,531     $ 148,905  

Stock-based compensation expense

     1,850       1,380       3,048       4,306       4,236  

Intangible amortization

     1,082       7,383       8,465       15,013       14,884  

Legal costs(1)

     1,528       —         12,943       —         —    

Other

     (87     —         —         —         —    
  

 

 

   

 

 

 

Non-GAAP operating income

   $ 73,614     $ 49,987     $ 90,363     $ 177,850     $ 168,025  
  

 

 

   

 

 

 

GAAP net income

   $ 51,217     $ 32,573     $ 50,913     $ 124,348     $ 118,256  

Stock-based compensation expense

     1,850       1,380       3,048       4,306       4,236  

Intangible amortization

     1,082       7,383       8,465       15,013       14,884  

Adjustment for taxes

     (1,790     (2,345     (5,499     (3,388     (3,116

Legal costs(1)

     1,528       —         12,943       —         —    

Other

     (87     —         —         —         —    
  

 

 

   

 

 

 

Non-GAAP net income

   $ 53,800     $ 38,991     $ 69,870     $ 140,279     $ 134,260  
  

 

 

   

 

 

 

Net income

   $ 51,217     $ 32,573     $ 50,913     $ 124,348     $ 118,256  

Interest, net

     (165     34       34       20       (144

Provision for income taxes

     16,776       8,371       14,195       33,681       30,673  

Depreciation expense

     1,563       1,331       2,681       1,796       2,758  

Intangible amortization

     1,082       7,383       8,465       15,013       14,884  

Stock-based compensation expense

     1,850       1,380       3,048       4,306       4,236  

Legal costs(1)

     1,528       —         12,943       —         —    

Other

     (87     —         —         —         —    
  

 

 

   

 

 

 

Adjusted EBITDA

   $ 73,764     $ 51,072     $ 92,279     $ 179,164     $ 170,663  
  

 

 

   

 

 

 

Net income (% of revenue)

     5.9%       4.8%       3.5%       10.4%       10.1%  

Adjusted EBITDA (% of revenue)

     8.5%       7.5%       6.3%       15.0%       14.6%  

Net cash provided by (used in) operating activities

   $ 52,461     $ (31,187   $ (147,113   $ 94,273     $ 240,999  

Purchase of property and equipment

     (1,335     (3,439     (5,917     (2,463     (1,655

Proceeds from disposition of property and equipment

     24       167       167       —          
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted Free Cash Flow

   $ 51,150     $ (34,459   $ (152,863   $ 91,810     $ 239,344  

 

 
(1)   Represents additional charges incurred in relation to the litigation with Array Technologies, Inc (“ATI”), as further described in Note 9, “Commitments and contingencies” to the combined financial statements. The estimated net settlement and direct legal costs in the aggregate are excluded from the Company’s Non-GAAP income. Based on historical experience, we do not believe that the settlement and associated charges are normal, recurring operating expenses indicative of our core operating performance, nor were these charges taken into account as factors in evaluating management’s performance when determining incentive compensation or to evaluate the effectiveness of the Company’s business strategies.

 

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Risk factors

Investing in our Class A common stock involves a high degree of risk. You should carefully consider these risk factors, together with all of the other information included in this prospectus, before you decide to purchase shares of our Class A common stock. If any of the following risks occur, it could have a material adverse effect on our business, financial condition, results of operations or prospects. Risks that are not presently known to us or that we do not currently consider material could also have a material adverse effect on our business, financial condition, results of operations or prospects. If any of these or the following risks occur, the trading price of our Class A common stock could decline, and you could lose part or all of your investment. Some statements in this prospectus, including statements in the following risk factors, constitute forward-looking statements. See the section entitled “Special note regarding forward-looking statements.”

Risks related to our business and our industry

The demand for solar energy and, in turn, our products are impacted by many factors outside of our control, and if such demand does not continue to grow or grows at a slower rate than we anticipate, our business and prospects will suffer.

Our future success depends on continued demand for utility-scale solar energy. Solar energy is a rapidly evolving and competitive market that has experienced substantial changes in recent years, and we cannot be certain that EPCs, developers and owners and operators of solar projects will remain active in the market or that new potential customers will pursue solar energy as an energy source at levels sufficient to grow our business. The demand for solar energy, and in turn, our products, may be affected by many factors outside of our control, including:

 

 

availability, scale and scope of government subsidies, government incentives and financing sources to support the development and commercialization of solar energy solutions;

 

levels of investment by project developers and owners of solar energy products, which tend to decrease when economic growth slows;

 

the emergence, continuance or success of, or increased government support for, other alternative energy generation technologies and products;

 

the cost and availability of raw materials and components necessary to produce solar energy, including steel and polysilicon; and

 

regional, national or global macroeconomic trends, which could affect the demand for new energy resources.

If demand for solar energy fails to continue to grow, demand for our products will plateau or decrease, which would have an adverse impact on our ability to increase our revenue and grow our business. If we are not able to mitigate these risks and overcome these difficulties successfully, our business and prospects will be materially and adversely affected.

Competitive pressures within our industry may harm our business, result of operations, financial condition and prospects.

We face intense competition from a large number of solar tracker companies in nearly all of the markets in which we compete. The solar tracker industry is currently fragmented. This may result in price competition being greater than expected, which would affect our margins.

Some of our competitors are developing or are currently manufacturing products based on different solar power technologies that may ultimately have costs similar to or lower than our projected costs. In addition, some of our competitors have longer operating histories, lower costs of goods sold, lower operating costs,

 

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greater name and brand recognition in specific markets in which we compete or intend to sell our products, greater market shares, access to larger customer bases, greater resources and significantly greater economies of scale than we do. Additionally, new competitors may decide to enter our market as a result of, among other factors, lower barriers to entry and lower research and development costs in comparison with the average costs in research and development in other energy industries. We may also face adverse effects from increased competition in the solar EPC market by EPCs subjecting their subcontractors, such as us, to flow-down contractual clauses which provide that a subcontractor’s obligations to an EPC are identical to the obligations the EPC has to the EPC’s end customer. This may result in higher contractual risk to us, such as “pay if paid” clauses that requires EPCs to pay us only when the EPC’s end customer pays the EPC, higher liquidated damages amounts, increased contractual liabilities above 100% of the contract value and more limited force majeure clauses, among others. As the solar energy market continues to grow, EPCs are also expected to increasingly seek second sources for their suppliers. Any of these factors may materially and adversely affect our business, result of operations, financial condition and prospects.

We face competition from conventional and renewable energy sources that may offer products and solutions that are less expensive or otherwise perceived to be more advantageous than solar energy solutions, which could materially and adversely affect the demand for and the average selling price of our products and services.

We face significant competition from providers of conventional and renewable energy alternatives such as coal, nuclear, natural gas and wind to the extent they are able to offer energy solutions that are less expensive than solar energy and our products. We compete with conventional energy sources primarily based on price, predictability of price and energy availability and the ease with which customers can use electricity generated by solar energy projects. If solar energy systems cannot offer a compelling value to customers based on these factors, then our business growth may be impaired.

Conventional energy sources generally have substantially greater financial, technical, operational and other resources than solar energy sources, and as a result may be able to devote more resources to the research, development, promotion and product sales or respond more quickly to evolving industry standards and changes in market conditions than solar energy systems. Conventional and other renewable energy sources may be better suited than solar for certain locations or customer requirements, and may also offer other value-added products or services that could help them compete with solar energy sources, even if the cost of electricity they offer is higher than solar energy sources. In addition, the source of a majority of conventional energy electricity is non-renewable, which may in certain markets allow them to sell electricity more cheaply than electricity generated by solar generation facilities. Non-renewable generation is typically available for dispatch at any time, as it is not dependent on the availability of intermittent resources such as sunlight.

The cost-effectiveness, performance and reliability of solar energy products and services, compared to conventional and renewable energy sources, could materially and adversely affect the demand for and the average selling price of our products and services.

Our results of operations may fluctuate from quarter to quarter, which could make our future performance difficult to predict and could cause our results of operations for a particular period to fall below expectations.

Our quarterly results of operations are difficult to predict and may fluctuate significantly in the future. Because we recognize revenue on projects as legal title to equipment is transferred from us to the customer, any delays in large projects from one quarter to another for any reason may cause our results of operations for a particular period to fall below expectations. We have experienced seasonal and quarterly fluctuations in the past as a result of fluctuations in our customers’ businesses as well as seasonal weather-related disruptions. For example, our customers’ ability to install solar energy systems is affected by weather, such as during the

 

27


winter months. Inclement weather may also affect our logistics and operations by causing delays in the shipping and delivery of our materials, components and products which may, in turn, cause delays in our customers’ solar projects.

Further, given that we operate in a rapidly growing industry, the true extent of these fluctuations may have been masked by our recent growth rates and consequently may not be readily apparent from our historical results of operations and may be difficult to predict. Our financial performance, sales, working capital requirements and cash flow may fluctuate, and our past quarterly results of operations may not be good indicators of future performance or prospects. Any substantial fluctuation in revenues could have an adverse effect on our financial condition, results of operations, cash flows and stock price for any given period.

The reduction, elimination or expiration of government incentives for, or regulations mandating the use of, renewable energy and solar energy specifically could reduce demand for solar energy systems and harm our business.

Federal, state, local and foreign government bodies provide incentives to owners, end users, distributors and manufacturers of solar energy systems to promote solar electricity in the form of tax credits, rebates and other financial incentives. See the section entitled “Business—Government incentives.” The range and duration of these incentives varies widely by jurisdiction. Our customers typically use our systems for grid-connected applications wherein solar power is sold under a power purchase agreement or into an organized electric market. This segment of the solar industry has historically depended in large part on the availability and size of government incentives supporting the use of renewable energy. Consequently, the reduction, elimination or expiration of government incentives for grid-connected solar electricity may negatively affect the competitiveness of solar electricity relative to conventional and non-solar renewable sources of electricity, and could harm or halt the growth of the solar electricity industry and our business. These reductions, eliminations or expirations could occur without warning. Any changes to the existing framework of these incentives could cause fluctuation in our results of operations.

The recently-enacted Inflation Reduction Act of 2022 (the “IRA”) makes significant changes to the tax credit regime that applies to solar facilities. As a result of changes made by the IRA, United States taxpayers generally will be entitled to a 30% investment tax credit (“ITC”) for projects placed in service after 2021, increased to 40% if certain “domestic content” requirements are satisfied, subject, in each case, to an 80% reduction if certain wage and apprenticeship requirements are not satisfied or deemed satisfied (either because the project has a net output of less than 1 megawatt or because construction begins before January 29, 2023, the date that is 60 days after the IRS released guidance relating to the prevailing wage and apprenticeship requirements). Generally speaking, to meet the domestic content requirements a qualified facility must show that the project incorporates domestically sourced iron, steel, and manufactured products. In addition, certain other incremental credits are potentially available for facilities located in “energy communities” or “low income communities” or that are part of “low-income benefit projects” or “low-income residential building projects”.

As a result of changes made by the IRA, United States taxpayers will generally also be allowed to elect to receive a production tax credit (“PTC”) in lieu of the ITC for qualified solar facilities the construction of which begins before January 1, 2025 that are placed in service after 2021. The PTC is available for electricity produced and sold to unrelated persons in the ten years following a project’s placement in service and is equal to an inflation-adjusted amount (currently 2.6 cents per kilowatt hour, assuming the prevailing wage requirements described above are satisfied or deemed satisfied, reduced by 80% if those requirements are not satisfied) for every kilowatt-hour of electricity produced by a facility. The available credit amount is increased by 10% if the domestic content requirements described above are satisfied. Certain additional incremental PTCs are also available similar to the incremental ITCs described above.

In the case of projects placed in service after 2024, each of the ITC and PTC will be replaced by similar “technology neutral” tax credit incentives that mimic the ITC and PTC but also require that projects satisfy a

 

28


“zero greenhouse gas emissions” standard (which solar does) in order to qualify for the credits. This new credit regime will continue to apply to projects that begin construction prior to the end of 2033 (and possibly later), at which point the credits will become subject to a phase-out schedule.

While these changes are intended to encourage investments in new solar projects, the impact these changes will have on our results of operations is unclear. In particular, the tax credit regime in place prior to the IRA’s enactment provided annual reductions in the applicable credit amount at the beginning of 2023 and 2024 and therefore encouraged customers to acquire our products prior to calendar year-end dates in order to qualify for a higher tax credit available for projects that commenced construction (within the meaning of IRS guidance) prior to those dates. As a result of the changes made by the IRA, while there may continue to be an incentive for taxpayers to commence construction on facilities before certain dates, the tax credits will not experience annual reductions similar to those that would have occurred at the end of 2022 and 2023 for at least ten years and therefore customer sales may not be as high as they otherwise would have been through 2023 with the prior ITC step-down schedule. This change could have an adverse impact on our results of operations in the near term, as we anticipated an increase in demand for our products in calendar years 2022 and 2023 (and our fiscal years 2023 and 2024) related to the prior ITC step-down schedule.

In addition, if we are unable to meet the domestic content requirements necessary for customers using our tracker products to qualify for the incremental domestic content bonus credit and our competitors are able to do so, we might experience a decline in sales for U.S. projects. The timing and nature of implementing regulations clarifying the domestic content requirements as applied to our products remain uncertain. Depending on the criteria set forth in those regulations, we may not have an adequate supply of tracker products satisfying the requirements. In addition, compliance with this requirement may increase our production costs. As a result of these risks, the domestic content requirement may have a material adverse impact on our U.S. sales, business and results of operations.

Finally, if our customers are unable to satisfy the prevailing wage and apprenticeship requirements described above, the credits available to them will be lower than the credits available to them under prior law. Satisfaction of these requirements is outside of our control. If a significant portion of our customers is unable to satisfy these requirements, demand for our tracker products may be adversely impacted by the reduced credits available relative to current law.

Federal, state, local and foreign government bodies have implemented additional policies that are intended to promote or mandate renewable electricity generally or solar electricity in particular. For example, many U.S. states have adopted procurement requirements for renewable energy production and/or a renewable portfolio standard (“RPS”) that requires regulated utilities to procure a specified percentage of total electricity delivered to customers in the state from eligible renewable energy sources, including utility-scale solar power generation facilities, by a specified date. While the recent trend has been for jurisdictions with RPSs to maintain or expand them, there have been certain exceptions and there can be no assurances that RPSs or other policies supporting renewable energy will continue. Proposals to extend compliance deadlines, reduce renewable requirements or solar set-asides, or entirely repeal RPSs emerge from time to time in various jurisdictions. Reduction or elimination of RPSs, as well as changes to other renewable-energy and solar-energy policies, could reduce the potential growth of the solar energy industry and materially and adversely affect our business.

Moreover, policies of recent U.S. presidential administrations have created regulatory uncertainty in the renewable energy industry, including the solar energy industry, and adversely affect our business. For example, in the span of less than six years, the United States joined, withdrew from, and then rejoined the 2015 Paris Agreement on climate change mitigation following changes in administration from former U.S. Presidents Obama and Trump to current U.S. President Biden. President Biden has not yet proposed a rule to regulate greenhouse gas emissions, and it is uncertain whether new regulations would promote solar energy development. In addition, the U.S. Supreme Court’s decision on June 30, 2022 in West Virginia v. EPA, holding

 

29


that the U.S. Environmental Protection Agency (“EPA”) exceeded its authority in enacting a subsequently repealed rule that would have allowed electric utility generation facility owners to reduce emissions with “outside the fence measures” may limit EPA’s ability to address greenhouse gas emissions comprehensively without specific authorization from Congress.

The international markets in which we operate or may operate in the future may have or may put in place policies to promote renewable energy, including solar. These incentives and mechanisms vary from country to country. In seeking to achieve growth internationally, we may make investments that, to some extent, rely on governmental incentives and support in a new market.

There is no assurance that these governments will continue to provide sufficient incentives and support to the solar industry and that the industry in any particular country will not suffer significant downturns in the future as the result of changes in public policies or government interest in renewable energy, any of which would adversely affect demand for our solar products.

Furthermore, corporate social responsibility efforts, such as net zero emission pledges, have fostered private sector investment in solar energy systems in recent years. To the extent that these corporate policies are redirected away from renewable energy in general or solar energy in particular, the demand for our solar products would be adversely affected.

Finally, the solar industry has in past years experienced periodic downturns due to, among other things, changes in subsidies and incentives, as well as other policies and regulations, which, as noted above, may affect the demand for our products. Although the solar industry has recovered from these downturns in the past, there is no assurance that the solar industry will not suffer significant downturns in the future, which would adversely affect demand for our solar products.

We rely heavily on our suppliers and our operations could be disrupted if we encounter problems with our suppliers or if there are disruptions in our supply chain.

We purchase our components through arrangements with various suppliers located across the globe. We depend on our suppliers to source materials and manufacture critical components for our products. Our reliance on these suppliers makes us vulnerable to possible capacity constraints and reduced control over component availability, delivery schedules and costs which could disrupt our ability to procure these components in a timely and cost-efficient manner. The suppliers rely on other suppliers to provide them with raw materials and sub-components that are critical to manufacturing the components of our tracker products. Any shortages of components and materials would affect our ability to timely deliver our products to our customers consistent with our contractual obligations, which may result in liquidated damages or contractual disputes with our customers, harm our reputation and lead to a decrease in demand for our products.

Our ability to deliver our products in a cost efficient manner have in recent years and could continue to be adversely impacted by other factors not within our control, including, but not limited to, shortages in available cargo capacity, changes by carriers and transportation companies in policies and practices such as scheduling, pricing, payment terms and frequency of service, increases in the cost of fuel, sanctions and labor availability and cost.

Further, our products are manufactured from steel and, as a result, our business is significantly affected by the price of steel. When steel prices are higher, the prices that we charge customers for our products may increase, which may decrease demand for our products. If we do not increase our prices due to an increase in the price of steel, we will experience lower profitability on our products. Conversely, if steel prices decline, customers may demand lower prices and our and our competitors’ responses to those demands could result in lower sale prices, lower volume, and consequently, negatively affect our profitability. A significant portion of our steel is derived directly or indirectly from steel mills located in China. At times, pricing and availability of steel can be volatile due to numerous factors beyond

 

30


our control, including general domestic and international economic conditions, global capacity, import levels, fluctuations in the costs of raw materials necessary to produce steel, sales levels, competition, consolidation of steel producers, labor costs, import duties and tariffs and foreign currency exchange rates. This volatility can significantly affect the availability and cost of steel which may impact our profitability and results of operations.

In addition, as noted above, the recently-enacted IRA provides incremental tax credits for U.S. solar projects satisfying domestic content requirements. While the impact of these requirements on us will remain unclear pending the release of implementing regulations, if we are unable to provide our tracker products in a manner that satisfies applicable domestic content requirements and our competitors are able to do so, we might experience a decline in sales for U.S. projects. In addition, compliance with these requirements may increase our production costs. In light of the foregoing, our U.S. sales, profitability and results of operations in the United States may be adversely affected by the applicable domestic content requirements which must be satisfied in order for solar projects to be eligible for these incremental credits.

Other events that could also cause disruptions to our supply chain include:

 

 

the imposition of additional duties, tariffs and other charges or quotas on imports and exports, or other trade law provisions or regulations, and our inability to pass along such charges to our customers;

 

 

continued or renewed instability in the global supply of semiconductors, which has and could continue to impact the timely receipt of our self-powered controller;

 

 

foreign currency fluctuations;

 

 

inflationary pressure and its impact on labor, commodities and fuel prices;

 

 

natural disasters, severe weather, political instability, war, terrorist attacks, social unrest and economic instability in the regions in which our suppliers are located, or through which our components and materials travel;

 

 

public health issues and epidemic diseases, such as the COVID-19 pandemic, and their effects (including measures taken by governmental authorities in response to their effects);

 

 

theft or other loss;

 

 

restrictions on the transfer of funds;

 

 

the financial instability or bankruptcy of suppliers; and

 

 

significant labor disputes, strikes, work stoppages or boycotts.

Any significant disruption to our ability to procure our products, and our suppliers’ ability to procure materials to manufacture our products and components for our products could increase the cost or reduce or delay the supply of components and materials available to us and adversely affect our business, financial condition, results of operations and profitability. Further, if any of our suppliers were unable or unwilling to manufacture the components that we require for our products in sufficient volumes and at high quality levels or renew existing terms under supply agreements, we would need to identify, qualify and select acceptable alternative suppliers. An alternative supplier may not be available to us when needed or may not be in a position to satisfy our quality or production requirements on commercially reasonable terms, including price. Any significant interruption in manufacturing by our suppliers would require us to reduce our supply of products to our customers or increase our shipping costs to make up for such delays, which in turn could reduce our revenues and margins, harm our relationships with our customers,

 

31


damage our reputation with other stakeholders involved with solar projects and cause us to forego potential revenue opportunities.

Economic, political and market conditions can adversely affect our business, results of operations and financial condition, including our revenue growth and profitability, which in turn could adversely affect our stock price.

Macroeconomic developments such as the global or regional economic effects resulting from the current Russia-Ukraine conflict, increasing inflation rates and related economic curtailment initiatives, the COVID-19 pandemic, evolving trade policies between the U.S. and international trade partners, or the occurrence of similar events in other countries that lead to uncertainty or instability in economic, political or market conditions could negatively affect our business, operating results, financial condition and outlook, which, in turn, could adversely affect our stock price. Political issues and conflicts could have a material adverse effect on our results of operations and financial condition if they escalate into geographies in which we do business or obtain our components. For example, the recent and continuing conflict arising from the invasion of Ukraine by Russia has reduced the availability of material that can be sourced in Europe and, as a result increased logistics costs for the procurement of certain inputs and materials used in our products. The conflict could also adversely impact macroeconomic conditions, give rise to regional instability and result in heightened economic tariffs, sanctions and import-export restrictions from the U.S. and the international community in a manner that adversely affects us, including to the extent that any such actions cause material business interruptions or restrict our ability in this region to conduct business with certain suppliers. Additionally, such conflict or sanctions may significantly devalue various global currencies and have a negative impact on economies in geographies in which we do business. Any general weakening of, and related declining corporate confidence in, the global economy could cause current or potential customers to reduce or eliminate their budgets and spending, which could cause customers to delay, decrease or cancel projects with us which would have a negative effect on our business, operating results and financial condition.

We are subject to governmental economic sanctions requirements and export controls that could impair our ability to compete in international markets or subject us to liability if we are not in compliance with applicable laws.

The export of our products and services is subject to U.S. export control laws and regulations, including the Export Administration Regulations, or EAR, and trade and economic sanctions maintained by the Office of Foreign Assets Control, or OFAC. As such, an export license may be required to export or reexport our products or services to certain countries and end-users for certain end-uses. If we were to fail to comply with such U.S. export controls laws and regulations, U.S. economic sanctions or other similar laws, we could be subject to both civil and criminal penalties, including substantial fines, possible incarceration for employees and managers for willful violations and the possible loss of our export or import privileges. Obtaining the necessary export license for a particular sale or transaction may not be possible and may be time-consuming and may result in the delay or loss of sales opportunities. Further, U.S. export control laws and economic sanctions in many cases prohibit the export of services to certain U.S. embargoed or sanctioned countries, governments and persons, as well as for prohibited end-uses. Even though we take precautions to ensure that we comply with all relevant export control laws and regulations, any failure to comply with such laws and regulations could have negative consequences for us, including reputational harm, government investigations and penalties.

Changes in the global trade environment, including the imposition of import tariffs, could adversely affect the amount or timing of our revenues, results of operations or cash flows.

Escalating trade tensions, particularly between the United States and China, have led to increased tariffs and trade restrictions, including tariffs applicable to certain materials and components for our products such as steel or for products used in solar energy projects more broadly, such as solar modules and solar cells. More specifically, in March 2018, the United States imposed a 25% tariff on steel imports and has imposed additional

 

32


tariffs and quotas on steel imports pursuant to Section 232 of the Trade Expansion Act of 1962. We have used and continue to use overseas suppliers of steel and these tariffs could result in interruptions in the supply chain and impact costs and our gross margins. Additionally, in January 2018, the United States adopted a safeguard tariff on imported solar modules and cells pursuant to Section 201 of the Trade Act of 1974. The tariff was initially set at 30%, with a gradual reduction over four years to 15%. On February 4, 2022, President Biden extended the safeguard tariff for an additional four years, starting at a rate of 14.75% and reducing that rate each year to 14% in 2026, and directed the United States Trade Representative to conclude agreements with Canada and Mexico on trade in solar products. On July 7, 2022, the United States and Canada entered into a non-binding memorandum of understanding in which the United States agreed to suspend application of the safeguard tariff to Canadian crystalline silicon photovoltaic cells imported as of February 1, 2022. While this tariff does not apply directly to the components we import, it may indirectly affect us by impacting the financial viability of solar energy projects, which could in turn reduce demand for our products. Furthermore, effective September 2018, the United States adopted a 10% tariff on an extensive list of products imported from China under Section 301 of the Trade Act of 1974, including inverters and power optimizers commonly used in solar projects. In June 2019, the U.S. Trade Representative increased the rate of such tariffs from 10% to 25%. While these tariffs are not directly applicable to our products, they could impact the solar energy projects in which our products are used, which could lead to decreased demand for our products.

On January 15, 2020, the United States and China entered into an initial trade deal that preserves the bulk of the tariffs placed in 2018 and maintains a threat of additional tariffs should China breach the terms of the deal. The Biden administration is expected to continue to modify its trade policies affecting materials and components for our products such as steel or for products used in solar energy projects more broadly, such as solar modules and solar cells. Consequently, trade policies implemented by the Biden administration could have an adverse effect on our business, financial condition and results of operations.

On April 1, 2022, the U.S. Department of Commerce (“Commerce”) initiated anti-circumvention inquiries of the U.S. antidumping and countervailing duty orders on PV solar cells and modules from China (“Solar 1 Orders”) covering merchandise from Vietnam, Malaysia, Thailand, and Cambodia pursuant to Section 781 of the Tariff Act of 1930. Commerce issued preliminary determinations in these inquiries on December 1, 2022, affirmatively finding that certain photovoltaic solar cells and modules produced in Vietnam, Malaysia, Thailand, and Cambodia using parts and components from China from certain producers/exporters, are circumventing the Solar 1 Orders and therefore should be subject to the antidumping and countervailing duty liabilities arising from those orders. Commerce is expected to issue final determinations in May 2023.

Duties arising from these affirmative determinations could result in cash deposit payments and eventual final duty payments that vary but may amount to over 250% of the entered value of the imported merchandise. However, on June 6, 2022, President Biden issued an emergency declaration delaying the imposition of any cash deposit or duty payment obligations on merchandise subject to these inquiries until the earlier of (i) the expiration of the order on June 6, 2024, or (ii) the President terminates the emergency declaration. Merchandise from the four subject countries covered under the scope of these inquiries should therefore not be subject to any antidumping or countervailing duty liabilities under the Solar 1 Orders until the termination of the emergency declaration as long as the importer(s) and exporter(s) follow proper certification procedures that will be implemented by Commerce. The affirmative determinations could have an adverse effect on the global solar energy marketplace, and as such, an adverse effect on our business, financial condition, and results of operations. While we do not sell solar modules, the degree of our exposure is dependent on, among other things, the impact of Commerce’s final determinations on the projects that are also intended to use our products. Such impacts are largely out of our control and may include project delays or cancellations. The ultimate severity or duration of the expected solar panel supply chain disruption or its effects on our clients’ solar project development and construction activities, and associated consequences on our business, is uncertain. More broadly, legislation has been proposed that would make it easier for domestic companies to obtain affirmative determinations in antidumping and countervailing duties investigations. The proposed USICA/America COMPETES Act, if enacted, could result in future successful petitions that limit imports from Asia and other regions.

 

33


Tariffs and the possibility of additional tariffs in the future have created uncertainty in the industry. If the price of solar systems increases, the use of solar systems could become less economically feasible and could reduce our gross margins or reduce the demand for solar systems, which in turn may decrease demand for our products. Additionally, existing or future tariffs may negatively affect key customers and suppliers, and other supply chain partners. Such outcomes could adversely affect the amount or timing of our revenues, results of operations or cash flows, and continuing uncertainty could cause sales volatility, price fluctuations or supply shortages or cause our customers to advance or delay their purchase of our products. It is difficult to predict what further trade-related actions governments may take, which may include additional or increased tariffs and trade restrictions, and we may be unable to quickly and effectively react to such actions. While we have taken actions with the intention of, among other things, mitigating the effect of steel tariffs on our business by reducing our reliance on sourcing material from China, we may not be able to do so on attractive terms.

Solar panel imports to the United States may also be impacted by the Uyghur Forced Labor Prevention Act (“UFLPA”) that was signed into law by President Biden on December 23, 2021. According to U.S. Customs and Border Protection, “it establishes a rebuttable presumption that the importation of any goods, wares, articles, and merchandise mined, produced, or manufactured wholly or in part in the Xinjiang Uyghur Autonomous Region of the People’s Republic of China, or produced by certain entities, is prohibited by Section 307 of the Tariff Act of 1930 and that such goods, wares, articles, and merchandise are not entitled to entry to the United States. The presumption applies unless the Commissioner of U.S. Customs and Border Protection determines that the importer of record has complied with specified conditions and, by clear and convincing evidence, that the goods, wares, articles, or merchandise were not produced using forced labor.” There continues to be uncertainty in the market around achieving full compliance with UFLPA, whether related to sufficient traceability of materials or other factors. This has created a significant compliance burden and constrained solar panel imports. We cannot currently predict what, if any, impact the UFLPA will have on the overall future supply of solar panels into the United States and the related timing and cost of our clients’ solar project, development and construction activities. While we do not import or sell solar panels, project delays caused by solar panel constraints may negatively impact our product delivery schedules and future sales, and therefore our business, financial condition, and results of operations.

We face risks related to the COVID-19 pandemic, which could have a material and adverse effect on our business, results of operations and financial condition.

The COVID-19 pandemic resulted in a widespread public health crisis and numerous disease control measures being taken to limit its spread, including travel bans and restrictions, quarantines, shutdowns, vaccine mandates and social distancing measures. These events and control measures impacted our operations and the operations of our customers and our suppliers. We experienced disruptions due to illness and the effect of governmental mandates and recommendations, as well as measures we took to mitigate the impact of COVID-19 at our offices around the world in an effort to protect the health and well-being of our employees, customers, suppliers and the communities in which we operate. Our operations were also affected by the disruptions experienced by our customers, suppliers, freight operators and trucking companies due to the COVID-19 pandemic and related events, including site closures, factory closures, labor shortages and wide-scale disruptions in the world-wide shipping infrastructure. Our management team continues to commit significant time, attention and resources to monitoring the COVID-19 pandemic and seeking to mitigate its effects on our business and workforce. Although the COVID-19 pandemic appears to have abated, its long-term effects on the global economy, including ongoing transportation and logistics issues and rapid inflation, continue to affect our business. Furthermore, should the COVID-19 pandemic become more virulent, or should another pandemic arise, this could further negatively affect our operations and financial results.

The impact of the pandemic on our business could in the future include:

 

 

disruptions to our suppliers’ manufacturing facilities;

 

 

disruptions to ports and other shipping infrastructure;

 

 

other disruptions to our supply chain generally;

 

 

disruptions caused by supplier, subcontractor and Nextracker labor availability, worker absenteeism and quarantines;

 

 

shortages of medical equipment (such as COVID-19 test kits and personal protection equipment for employees);

 

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other disruptions to our ground operations at project sites;

 

 

office, factory, warehouse and other location closures; and

 

 

other travel or health-related restrictions disrupting our ability to conduct our business or market our products.

If our ground operations at project sites and our suppliers are so affected, our supply chain, product shipments and project construction will be delayed, which could materially and adversely affect our business, results of operations, profitability and customer relationships.

As a result of sheltering-in-place and other disruptions caused by COVID-19, consumer and commercial demand for shipped goods has increased across multiple industries, which in turn has reduced the availability and capacity of shipping containers and available ships worldwide. This disruption has caused, and may continue to cause, increased logistics costs and shipment delays affecting the timing of our project deliveries, the timing of our recognition of revenue and our profitability.

The global spread of COVID-19 has created significant macroeconomic uncertainty, volatility and disruption, which may adversely affect our and our customers’ and suppliers’ liquidity and cost of capital. As a result, the continued impact of COVID-19 could cause further disruptions in our supply chain and customer demand, and could adversely affect the ability of our customers or other counterparties to perform, including in making timely payments or shipments to us, which could further adversely impact our business, financial condition and results of operations. Even after the COVID-19 pandemic has subsided, we may continue to experience adverse impacts to our business as a result of the pandemic’s continued global economic impact, including any economic recession or downturn, government spending cuts, tightening of credit markets or rises in unemployment, which could cause our customers and potential customers to postpone or reduce spending on our products and solutions.

The extent to which the COVID-19 pandemic will impact our business and results of operations in the future will be dependent on ongoing developments such as the length and severity of the crisis, the potential resurgence of COVID-19 and its variants, future government actions in response to the crisis, the availability, acceptance and effectiveness of the COVID-19 vaccines and the overall impact of the COVID-19 pandemic on the global economy and capital markets, among many other factors, all of which remain highly uncertain and unpredictable. We cannot at this time quantify or forecast the business impact of COVID-19, and there can be no assurance that the COVID-19 pandemic will not have a material and adverse effect on our business, results of operations and financial condition. In addition, the COVID-19 pandemic increases the likelihood and potential severity of other risks described in this “Risk factors” section.

A further increase in interest rates, or a reduction in the availability of tax equity or project debt financing, could make it difficult for project developers and owners to finance the cost of a solar energy system and could reduce the demand for our products.

Many solar project owners depend on financing to fund the initial capital expenditure required to construct a solar energy project. As a result, a further increase in interest rates, or a reduction in the supply of project debt or tax equity financing, could reduce the number of solar projects that receive financing or otherwise make it difficult for project owners to secure the financing necessary to construct a solar energy project on favorable terms, or at all, and thus lower demand for our products which could limit our growth or reduce our sales. In addition, we believe that a significant percentage of project owners construct solar energy projects as an investment, funding a significant portion of the initial capital expenditure with financing from third parties. A further increase in interest rates could lower an investor’s return on investment on a solar energy project, increase equity requirements or make alternative investments more attractive relative to solar energy projects, and, in each case, could cause these project owners to seek alternative investments.

 

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A loss of one or more of our significant customers, their inability to perform under their contracts, or their default in payment, could harm our business and negatively impact our revenue, results of operations and cash flows.

For the year ended March 31, 2022, SOLV Energy, our largest customer, constituted 13.5% of our total revenues. The loss of any one of the Company’s significant customers, their inability to perform under their contracts, or their default in payment, could have a substantial effect on our revenues and profits. Further, our trade accounts receivable and unbilled receivable (“contract assets”) are from companies within the solar industry, and, as such, we are exposed to normal industry credit risks. As of March 31, 2022, our largest customer constituted 13.0% of our total trade accounts receivable and contract assets balances. Accordingly, loss of a significant customer or a significant reduction in pricing or order volume from a significant customer could substantially reduce our revenue and operating results in any reporting period.

Defects or performance problems in our products could result in loss of customers, reputational damage and decreased revenue, and we may face warranty, indemnity and product liability claims arising from defective products.

Our products may contain undetected errors or defects, especially when first introduced or when new generations are released. Errors, defects or poor performance can arise due to design flaws, defects in raw materials or components or manufacturing difficulties, which can affect both the quality and the yield of the product. Any actual or perceived errors, defects or poor performance in our products could result in the replacement or recall of our products, shipment delays, rejection of our products, damage to our reputation, lost revenue, diversion of our engineering personnel from our product development efforts and increases in customer service and support costs, all of which could have a material adverse effect on our business, financial condition and results of operations.

Furthermore, defective components may give rise to warranty, indemnity or product liability claims against us that exceed any revenue or profit we receive from the affected products. Our limited warranties cover defects in materials and workmanship of our products under normal use and service conditions. As a result, we bear the risk of warranty claims long after we have sold products and recognized revenue. While we have accrued reserves for warranty claims, our estimated warranty costs for previously sold products may change to the extent the warranty claims profile of future products is not comparable with that of earlier generation products under warranty. Our warranty accruals are based on our assumptions and we do not have a long history of making such assumptions. As a result, these assumptions could prove to be materially different from the actual performance of our systems, causing us to incur substantial unanticipated expense to repair or replace defective products in the future or to compensate customers for defective products. Our failure to accurately predict future claims could result in unexpected volatility in, and have a material adverse effect on, our financial condition.

If one of our products were to cause injury to someone or cause property damage, including as a result of product malfunctions, defects or improper installation, then we could be exposed to product liability claims. We could incur significant costs and liabilities if we are sued and if damages are awarded against us. Further, any product liability claim we face could be expensive to defend and could divert management’s attention. The successful assertion of a product liability claim against us could result in potentially significant monetary damages, penalties or fines, subject us to adverse publicity, damage our reputation and competitive position and adversely affect sales of our products. In addition, product liability claims, injuries, defects or other problems experienced by other companies in the residential solar industry could lead to unfavorable market conditions for the industry as a whole, and may have an adverse effect on our ability to attract new customers, thus harming our growth and financial performance.

 

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We may experience delays, disruptions or quality control problems in our product development operations.

Our product development and testing processes are complex and require significant technological expertise. Such processes involve a number of precise steps from design to production. Any change in our processes could cause one or more production errors, requiring a temporary suspension or delay in our supplier’s production line until the errors can be researched, identified and properly addressed and rectified. This may occur particularly as we introduce new products, modify our engineering techniques and/or expand our capacity. The commercialization of any new products may also fail to achieve market adoption or may experience downward pricing pressure, which would have a material impact on our gross margins and results of operations. Further, the installation of our products involve various risks and complications which may increase as our products evolve and develop, and any such increase in risks and complications may have a negative effect on our gross margins. In addition, our failure to maintain appropriate quality assurance processes could result in increased product failures, loss of customers, increased warranty reserve, increased production and logistics costs and delays. Any of these developments could have a material adverse effect on our business, financial condition, and results of operations.

Our business is subject to the risks of severe weather events, natural disasters and other catastrophic events.

Our headquarters and testing facilities, which conduct functional and reliability testing for our components and products, are located in the Bay Area of Northern California and our solar projects are located in the U.S. and around the world. A severe weather event or other catastrophe impacting our headquarters or testing facilities could cause significant damage and disruption to our business operations. In addition, a severe weather event or other catastrophe could significantly impact our supply chain by causing delays in the shipping and delivery of our materials, components and products which may, in turn, cause delays in our customers’ solar projects. Our customers’ ability to install solar energy systems is also affected by weather, such as during the winter months.

Any damage and disruption in any locations in which we have offices or in which our customers have solar projects which are caused by severe weather events (such as extreme cold weather, hail, hurricanes, tornadoes and heavy snowfall), seismic activity, fires, floods and other natural disasters or catastrophic events could result in a delay or even a complete cessation of our worldwide or regional operations and could cause severe damage to our products and equipment used in our solar projects. Even if our tracker products are not damaged, severe weather, natural disasters and catastrophic events may cause damage to the solar panels that are mounted to our tracker products, which could result in decreased demand for our products, loss of customers and the withdrawal of coverage for solar panels and solar tracking systems by insurance companies. Any of these events would negatively impact our ability to deliver our products and services to our customers and could result in reduced demand for our products and services, and any damage to our products and equipment used for our solar projects could result in large warranty claims which could, individually or in the aggregate, exceed the amount of insurance available to us, all of which would have a material adverse effect on our financial condition and results of operations. These events may increase in frequency and severity due to the effects of climate change.

Our continued expansion into new markets could subject us to additional business, financial, regulatory and competitive risks.

Part of our strategy is to continue to grow our revenues from international markets, including entering new geographic markets to expand our current international presence. Our products and services to be offered in these regions may differ from our current products and services in several ways, such as the consumption and utilization of local raw materials, components and logistics, the re-engineering of select components to meet region-specific requirements and region-specific customer training, site commissioning, warranty remediation and other technical services. Any of these differences or required changes to our products and services to meet

 

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the requirements of local laws and regulations may increase the cost of our products, reduce demand and result in a decrease in our gross margins. We may also face competition from lower cost providers in any new markets we enter which could decrease the demand for our products or cause us to reduce the cost of our products in order to remain competitive.

Any new geographic market could have different characteristics from the markets in which we currently sell products, and our success in such markets will depend on our ability to adapt properly to these differences. These differences may include differing regulatory requirements, including local manufacturing content requirements, tax laws, trade laws, labor regulations, corporate formation laws and requirements, tariffs, export quotas, customs duties or other trade restrictions, limited or unfavorable intellectual property protection, international political or economic conditions, restrictions on the repatriation of earnings, longer sales cycles, warranty expectations, product return policies and cost, performance and compatibility requirements. In addition, expanding into new geographic markets will increase our exposure to presently existing risks, such as fluctuations in the value of foreign currencies and difficulties and increased expenses in complying with U.S. and foreign laws, regulations and trade standards, including the U.S. Foreign Corrupt Practices Act of 1977, as amended (the “FCPA”), as well as relevant anti-money laundering laws.

Failure to develop these new products successfully or to otherwise manage the risks and challenges associated with our continued expansion into new geographic markets could adversely affect our revenues and our ability to sustain profitability.

Electric utility industry policies and regulations may present technical, regulatory and economic barriers to the purchase and use of solar energy systems that could significantly reduce demand for our products or harm our ability to compete.

Federal, state, local and foreign government policies and regulations concerning the broader electric utility industry, as well as internal policies and regulations promulgated by electric utilities and organized electric markets with respect to fees, practices and rate design, heavily influence the market for electricity generation products and services. These policies and regulations often affect electricity pricing and the interconnection of generation facilities and can be subject to frequent modifications by governments, regulatory bodies, utilities and market operators. For example, changes in fee structures, electricity pricing structures and system permitting, regional market rules, interconnection and operating requirements can deter purchases of renewable energy products, including solar energy systems, by reducing anticipated revenues or increasing costs or regulatory burdens for would-be system purchasers. The resulting reductions in demand for solar energy systems could harm our business, prospects, financial condition and results of operations.

A significant development in renewable-energy pricing policies in the United States occurred when the Federal Energy Regulatory Commission (“FERC”) issued a final rule amending regulations that implement the Public Utility Regulatory Policies Act (“PURPA”) on July 16, 2020, which FERC upheld on rehearing on November 19, 2020. Among other requirements, PURPA mandates that electric utilities buy the output of certain renewable generators, including qualifying solar energy facilities, below established capacity thresholds. PURPA also requires that such sales occur at a utility’s “avoided cost” rate. FERC’s PURPA reforms include modifications (1) to how regulators and electric utilities may establish avoided cost rates for new contracts, (2) that reduce from 20 megawatts (“MW”) to 5 MW the capacity threshold above which a renewable-energy qualifying facility is rebuttably presumed to have non-discriminatory market access, thereby removing the requirement for utilities to purchase its output, (3) that require regulators to establish criteria for determining when an electric utility incurs a legally enforceable obligation to purchase from a PURPA facility and (4) that reduce barriers for third parties to challenge PURPA eligibility. These new regulations took effect on February 16, 2021, but the net effect of these changes is uncertain. Challenges to the final rule remain pending in the U.S. Court of Appeal for the Ninth and D.C. Circuits, and some changes will not become fully effective until states and other jurisdictions implement the new

 

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authorities provided by FERC. In general, however, FERC’s PURPA reforms have the potential to reduce prices for the output from certain new renewable generation projects while also narrowing the scope of PURPA eligibility for new projects. These effects could reduce opportunities and demand for PURPA-eligible solar energy systems and could harm our business, prospects, financial condition and results of operations.

FERC is also taking steps to encourage the integration of new forms of generation into the electric grid and remove barriers to grid access, which could have positive impacts on the solar energy industry. Specifically, in June 2022, FERC initiated a Notice of Proposed Rulemaking on Improvements to Generator Interconnection Procedures and Agreements, which would require every public utility transmission provider to revise their standard small generator interconnection procedures and agreements contained in their open access transmission tariffs. The outcome of these proposals and their timing for implementation remain uncertain.

Changes in other federal, state and local current laws or regulations applicable to us or the imposition of new laws, regulations or policies in the jurisdictions in which we do business could have a material adverse effect on our business, financial condition and results of operations. Any changes to government, utility or electric market regulations or policies that favor non-solar generation or other market participants, remove or reduce renewable procurement standards and goals or that make construction or operation of new solar generation facilities more expensive or difficult, could reduce the competitiveness of solar energy systems and cause a significant reduction in demand for our products and services and adversely impact our growth. Moreover, there may be changes in regulations that impact access to supply chains related to cybersecurity threats to the electric grid that could have a disproportionate impact on solar energy system components. In addition, changes in export and import laws and implementing regulations may create delays in the introduction of new products in international markets, prevent our customers from deploying our products internationally or, in some cases, prevent the export or import of our products to certain countries altogether. Any such event could have a material adverse effect on our business, financial condition and results of operations.

Developments in alternative technologies may have a material adverse effect on demand for our offerings.

Significant developments in alternative technologies, such as advances in other forms of solar tracking systems, may have a material adverse effect on our business and prospects. Additionally, the success of our business depends on the compatibility of our solar trackers and software with the broader solar panel market, and any developments, advancements or changes in current or future solar panel design may cause our products to be obsolete if we do not keep pace with such changes. Any failure by us to adopt new or enhanced technologies or processes, or to react to changes in existing technologies, could result in product obsolescence, the loss of competitiveness of our products, decreased revenue and a loss of market share to competitors.

A drop in the price of electricity sold may harm our business, financial condition and results of operations.

Decreases in the price of electricity, whether in organized electric markets or with contract counterparties, may negatively impact the owners of the solar energy projects, make the purchase of solar energy systems less economically attractive or make other non-solar sources of energy more attractive and would likely lower sales of our products. The price of electricity could decrease as a result of many factors, including but not limited to:

 

 

construction of a significant number of new, lower-cost power generation plants;

 

 

relief of transmission constraints that enable distant, lower-cost generation to transmit energy less expensively or in greater quantities;

 

 

reductions in the price of natural gas or other fuels;

 

 

utility rate adjustment and customer class cost reallocation;

 

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decreased electricity demand, including from energy conservation technologies, public initiatives to reduce electricity consumption or a reduction in economic activity due to a localized or macroeconomic downturn;

 

 

development of smart-grid technologies that lower the peak energy requirements;

 

 

development of new or lower-cost customer-sited energy storage technologies that have the ability to reduce a customer’s average cost of electricity by shifting load to off-peak times; and

 

 

development of new energy generation technologies that provide less expensive energy.

Moreover, technological developments in the solar components industry could allow our competitors and their customers to offer electricity at costs lower than those that can be achieved by us and our customers, which could result in reduced demand for our products.

If the cost of electricity generated by solar energy installations incorporating our systems is high relative to the cost of electricity from other sources, it could have a material adverse effect on our business, financial condition and results of operations.

If we fail to, or incur significant costs in order to, obtain, maintain, protect, defend or enforce, our intellectual property and other proprietary rights, our business and results of operations could be materially harmed.

Our success depends to a significant degree on our ability to protect our intellectual property and other proprietary rights. We rely on a combination of patent, trademark, copyright, trade secret and unfair competition laws, as well as confidentiality and license agreements and other contractual provisions, to establish and protect our intellectual property and other proprietary rights. Such means may afford only limited protection of our intellectual property and may not (i) prevent our competitors or manufacturing suppliers from duplicating our processes or technology; (ii) prevent our competitors or manufacturing suppliers from gaining access to our proprietary information and technology; or (iii) permit us to gain or maintain a competitive advantage.

We generally seek or apply for patent protection as and if we deem appropriate, based on then-current facts and circumstances. We have applied for patents in numerous countries across the world, including in the United States, Europe and China, and have received 70 patents in the United States and 197 foreign patents as of September 30, 2022. We cannot guarantee that any of our pending patent applications or other applications for intellectual property registrations will be issued or granted or that our existing and future intellectual property rights will be sufficiently broad to protect our proprietary technology. While a presumption of validity exists with respect to United States patents issued to us, there can be no assurance that any of our patents, patent applications or other intellectual property rights will not be, in whole or in part, opposed, contested, challenged, invalidated, circumvented, designed around or rendered unenforceable. If we fail to obtain issuance of patents or registration of other intellectual property, or our patent claims or other intellectual property rights are rendered invalid or unenforceable, or narrowed in scope, pursuant to, for example, judicial or administrative proceedings including re-examination, post-grant review, interference, opposition, or derivation proceedings, the coverage of patents and other intellectual property rights afforded our products could be impaired. Even if we are to obtain issuance of further patents or registration of other intellectual property, such intellectual property could be subject to attacks on ownership, validity, enforceability or other legal attacks. Any such impairment or other failure to obtain sufficient intellectual property protection could impede our ability to market our products, negatively affect our competitive position and harm our business and operating results, including forcing us to, among other things, rebrand or re-design our affected products. Moreover, our patents and patent applications may only cover particular aspects of our products, and competitors and other third parties may be able to circumvent or design around our patents. Competitors may develop and obtain patent protection for more effective technologies, designs or methods. There can be no assurance that third parties will not create new products or methods that achieve similar or better results without infringing upon

 

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patents we own. If these developments were to occur, it could have an adverse effect on our sales or market position.

In countries where we have not applied for patent protection or trademark or other intellectual property registration or where effective patent, trademark, trade secret, and other intellectual property laws and judicial systems may not be available to the same extent as in the United States, we may be at greater risk that our proprietary rights will be circumvented, misappropriated, infringed or otherwise violated. Filing, prosecuting, maintaining and defending our intellectual property in all countries throughout the world is prohibitively expensive, and we may choose to forego such activities in some applicable jurisdictions. The lack of adequate legal protections of intellectual property or failure of legal remedies or related actions in jurisdictions outside of the United States could have a material adverse effect on our business, financial condition, results of operations and prospects.

We have initiated, and may in the future need to initiate, infringement claims or litigation in order to try to protect or enforce our intellectual property rights. Litigation, whether we are a plaintiff or a defendant, can be expensive and time-consuming and may divert the efforts of our management and other personnel, which could harm our business, whether or not such litigation results in a determination favorable to us. Litigation also puts our patents or other intellectual property at risk of being invalidated or interpreted narrowly and our patent applications or applications for other intellectual property registrations at risk of not issuing. Additionally, any enforcement of our patents or other intellectual property may provoke third parties to assert counterclaims against us. Any of the foregoing could have a material adverse effect on our business, financial condition, results of operations and prospects.

If we are unable to protect the confidentiality of our trade secrets, our business and competitive position would be harmed.

We rely heavily on nondisclosure agreements to protect the unpatented know-how, technology, and other proprietary information on which we rely to maintain our competitive position. However, trade secrets and know-how can be difficult to protect. We cannot guarantee that we have entered into such agreements with each party that has or may have had access to our proprietary information, know-how, technology and trade secrets, including third-party manufacturers, other suppliers, customers, other stakeholders involved in solar projects, or other business partners or prospective partners. Moreover, no assurance can be given that these agreements will be effective in controlling access to, distribution, use, misuse, misappropriation or disclosure of our proprietary information, know-how and trade secrets. These agreements may be breached, and we may not have adequate remedies for any such breach. Further, these agreements may not prevent our competitors from independently developing technologies that are substantially equivalent or superior to ours. Any of the foregoing could have a material adverse effect on our business and competitive position.

We use “open source” software, and any failure to comply with the terms of one or more open source licenses could adversely affect our business.

Our products and services use certain software licensed by its authors or other third parties under so-called “open source” licenses. Some of these open source licenses may contain requirements that we make available source code for modifications or derivative works that we create based upon the open source software, and that we license such modifications or derivative works under the terms of a particular open source license or other license granting third parties rights with respect to such software. In certain circumstances, if we combine our proprietary software with certain open source software, we could be required to release the source code for such proprietary software. Additionally, to the extent that we do not comply with the terms of the open source licenses to which we are subject, or such terms are interpreted by a court in a manner different than our own interpretation of such terms, then we may be required to disclose certain of our proprietary software or take

 

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other actions that could adversely impact our business. Further, the use of open source software can lead to vulnerabilities that may make our software susceptible to attack, and open source licenses generally do not provide warranties or controls on the origin of the software. While we attempt to utilize open source software in a manner that helps alleviate these risks, our attempts may not be successful.

Cybersecurity or other data incidents, including unauthorized disclosure of personal or sensitive data or theft of confidential information could harm our business.

Cybersecurity attacks designed to gain access to personal, sensitive or confidential information data or disrupt operations are constantly evolving, and high profile cybersecurity breaches leading to unauthorized disclosure of confidential information, including trade secrets, as well as breaches of personal data, have occurred recently at a number of major U.S. companies, including in the energy, manufacturing and technology sectors. Our or our third party vendors’ computer systems are potentially vulnerable to cyber incidents and attacks, including malicious intrusion, ransomware attacks, and other system disruptions cause by unauthorized third parties. Attempts by computer hackers or other unauthorized third parties to penetrate or otherwise gain access to our computer systems or the systems of third parties with which we do business may result in the misappropriation, corruption, unavailability, or loss of data assets and business interruption. Hardware, software or applications we utilize may contain defects in design or manufacture or other problems that could unexpectedly compromise information security. In addition, our employees, contractors or third parties with which we do business or to which we outsource business operations may attempt to circumvent our security measures in order to misappropriate such information and data, and may purposefully or inadvertently cause a breach or other compromise involving such information and data. We increasingly rely on commercially available systems, software, sensors, tools (including encryption technology) and monitoring to provide security and oversight for processing, transmission, storage and protection of confidential information and personal data. Despite advances in security hardware, software and encryption technologies, and our own information security program and safeguards, there is no guarantee that our defenses and program will be adequate to safeguard against all data security breaches, cybersecurity attacks, misappropriation of confidential information or misuses of personal data. Moreover, because techniques used to obtain unauthorized access or sabotage systems change frequently and generally are not identified until they are launched against a target, we and our suppliers may be unable to anticipate these techniques or to implement adequate preventative or mitigation measures. We may also experience security breaches and other incidents that may remain undetected for an extended period and therefore may have a greater impact on our products and the networks and systems used in our business.

We regularly defend against and respond to data security incidents. We expect to incur significant costs in our efforts to detect and prevent security breaches and other security-related incidents, and we may face increased costs in the event of an actual or perceived security breach or other security-related incident. Despite our precautions, our facilities and systems, and those of third parties with which we do business, may be vulnerable to security breaches, acts of vandalism and theft, malicious code, such as computer viruses, malware, and ransomware, misplaced or lost data, programming and/or human errors or other similar events, and there is no guarantee that inadvertent or unauthorized use or disclosure will not occur or that third parties will not gain unauthorized access to this type of confidential information and personal data. A security breach or cyber incident in our systems (or in the systems of third parties with which we do business) could result in the unauthorized release of personally identifiable information regarding employees or other individuals or other sensitive data, serious disruption of our operations, financial losses from containment and remedial actions, loss of business or potential liability, including possible punitive damages. As a result of cybersecurity incidents, we could be subject to demands, claims and litigation by private parties, and investigations, related actions and penalties by regulatory authorities, along with potential costs of notification to impacted individuals. Finally, any perceived or actual unauthorized access to, or use or disclosure of, such information could harm our

 

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reputation, substantially impair our ability to attract and retain customers and have an adverse impact on our business, financial condition and results of operations.

In addition, as the regulatory environment relating to retailers and other companies’ obligation to protect such sensitive data becomes increasingly rigorous, with new and constantly changing requirements applicable to our business, compliance with those requirements could result in additional costs, and a material failure on our part to comply could subject us to fines or other regulatory sanctions and potentially to lawsuits.

Any of the foregoing could have a material adverse effect on our business, financial condition, results of operations and prospects.

Failure to comply with current or future federal, state and foreign laws and regulations and industry standards relating to privacy, data protection, cybersecurity and advertising could adversely affect our business, financial condition, results of operations and prospects.

Laws, regulations and industry standards relating to privacy, data protection, cybersecurity and advertising are evolving and subject to potentially differing interpretations. These requirements may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another or may conflict with other rules or our practices. As a result, our practices may not have complied or may not comply in the future with all such laws, regulations, standards, requirements and obligations. Any failure, or perceived failure, by us to comply with our posted privacy policies or with any federal or state privacy or consumer protection-related laws, regulations, industry self-regulatory principles, industry standards or codes of conduct, regulatory guidance, orders to which we may be subject or other legal obligations relating to privacy or information security could adversely affect our reputation, brand and business, and may result in claims, fines, penalties, investigations, proceedings or actions against us by governmental entities, customers, suppliers or others or other liabilities or may require us to change our operations and/or cease using certain data.

Any such claims, proceedings, investigations or actions could harm our reputation, brand and business, force us to incur significant expenses in defense of such claims, proceedings, investigations or actions, distract our management, increase our costs of doing business, result in a loss of customers or suppliers and result in the imposition of monetary penalties. We may also be contractually required to indemnify and hold harmless third parties from the costs and consequences of non-compliance with any laws, regulations or other legal obligations relating to privacy or consumer protection or any inadvertent or unauthorized use or disclosure of data that we store or handle as part of operating our business.

Federal, state and foreign governmental authorities continue to evaluate the privacy implications inherent in the use of third-party “cookies” and other methods of online tracking for behavioral advertising and other purposes. The EU has also proposed the draft ePrivacy Regulation, which will replace both the ePrivacy Directive and all the national laws implementing this Directive. The ePrivacy Regulation, as proposed, would impose strict opt-in marketing rules, change rules about cookies, web beacons and related technologies and significantly increase penalties for violations. It would also retain the additional consent conditions under the EU General Data Protection Regulation (2016/679) (“EU GDPR”). The regulation of the use of these cookies and other current online tracking and advertising practices or a loss in our ability to make effective use of services that employ such technologies could increase our costs of operations and limit our ability to acquire new customers on cost-effective terms and, consequently, materially and adversely affect our business, financial condition and results of operations.

We are subject to a variety of laws and regulations in the U.S. and abroad that involve matters central to our business, including privacy and data protection. Many of these laws and regulations are still evolving and being tested in courts and could be interpreted or applied in ways that could harm our business, particularly in the new and rapidly evolving industry in which we operate. For example, in June 2018, the State of California

 

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enacted the California Consumer Privacy Act of 2018 (the “CCPA”), which came into effect on January 1, 2020. The CCPA requires companies that process information relating to California residents to implement additional data security measures, to make new disclosures to consumers about their data collection, use and sharing practices, and allows consumers to opt out of certain data sharing with third parties. In addition, the CCPA provides for civil penalties and allows private lawsuits from California residents in the event of certain data breaches. Additionally, a new ballot initiative, the California Privacy Rights Act, was approved by popular referendum in 2020 to amend the CCPA and impose additional data protection obligations on companies doing business in California. The majority of the provisions are effective as of January 1, 2023, and additional compliance investment and potential business process changes may be required. Similar laws have passed in other states, including Connecticut, Colorado, Utah and Virginia, complicating the compliance landscape, and more privacy laws have been proposed in other states and at the federal level. If passed, such laws may have potentially conflicting requirements that would make compliance challenging.

The European Economic Area (comprised of the EU member states and Iceland, Liechtenstein and Norway) and the UK have imposed greater legal and regulatory obligations on companies regarding the processing of personal data. It is difficult to predict how existing laws and regulations will be applied to our business and the new laws and regulations to which we may become subject, and it is possible that they may be interpreted and applied in a manner that is inconsistent with our current operating practices. For example, in July 2020, the Court of Justice of the E.U. invalidated the EU-U.S. Privacy Shield Framework, and created additional considerations and complexities for the use of several other lawful transfer methods. Existing and proposed laws and regulations can be costly to comply with and can delay or impede the development of new products and services, significantly increase our operating costs, require significant time and attention of management and technical personnel and subject us to inquiries or investigations, claims or other remedies, including fines or demands that we modify or cease existing business practices. For example, administrative fines of up to the greater of 20 million and 4% of our global turnover can be imposed for breaches of the EU GDPR.

Each of these privacy, security and data protection laws and regulations, and any other such changes or new laws or regulations, could impose significant limitations, require changes to our business, or restrict our use or storage of certain data, which may increase our compliance expenses and make our business more costly or less efficient to conduct. In addition, any such changes could compromise our ability to develop an adequate marketing strategy and pursue our growth strategy effectively.

Any failure to comply with applicable laws or other obligations or any security incident or breach involving the misappropriation, unavailability, corruption, or loss or other unauthorized processing, use or disclosure of sensitive or confidential consumer or other personal information, whether by us, one of our third-party service providers or vendors or another third party, could have adverse effects, including, but not limited to, investigation costs; material fines and penalties; compensatory, special, punitive and statutory damages; litigation; consent orders regarding our privacy, data protection, and security practices; requirements that we provide notices, credit monitoring services and/or credit restoration services or other relevant services to impacted individuals; reputational damage; and injunctive relief. We cannot assure you that our vendors or other third-party service providers with access to our or our customers’ or employees’ personally identifiable and other sensitive or confidential information in relation to which we are responsible will not breach contractual obligations imposed by us, or that they will not experience data security breaches, which could have a corresponding effect on our business, including putting us in breach of our obligations under privacy laws and regulations and/or which could in turn adversely affect our business, results of operations and financial condition. We also cannot assure you that our contractual measures and our own privacy, data protection, and security-related safeguards will protect us from the risks associated with the third-party

 

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processing, use, storage and transmission of such information. Any of the foregoing could have a material adverse effect on our business, financial condition, results of operations and prospects.

We invest significant time, resources and management attention to identifying and developing project leads that are subject to our sales and marketing focus and if we are unsuccessful in converting such project leads into binding purchase orders, our business or results of operations could be materially adversely affected.

The commercial contracting and bidding process for solar project development is long and has multiple steps and uncertainties. We closely monitor the development of potential sales leads through this process. Project leads may fail to be converted into binding purchase orders at any stage of the bidding process because either (i) a competitors’ product is selected to fulfill some or all of the order due to price, functionality or other reasons or (ii) the project does not progress to the stage involving the purchase of tracker systems. In addition, there is also a risk that a project that we have been awarded will not be converted into a binding purchase order. If we fail to convert a significant number of project leads that are subject to our sales and marketing focus into binding purchase orders, our business or results of operations could be materially adversely affected.

Our growth depends in part on the success of our strategic relationships with third parties who provide us with valuable customer feedback that helps guide our innovation.

In order to continue to win business, we must maintain and enhance our long-term strategic relationships with leading EPCs, developers and owners and operators of solar projects. These relationships enable us to serve as strategic advisors to each of these stakeholders in a solar project and provide us with valuable customer feedback that allows us to innovate on our products to meet the demands of our customers. Any loss of these relationships could result in the potential loss of new projects which could have a material adverse effect on our financial condition and results of operations.

We may need to defend ourselves against third-party claims that we are infringing, misappropriating or otherwise violating others’ intellectual property rights, which could divert management’s attention, cause us to incur significant costs, and prevent us from selling or using the technology to which such rights relate.

Our competitors and other third parties hold numerous patents related to technology used in our industry, and may hold or obtain patents, copyrights, trademarks or other intellectual property rights that could prevent, limit, or interfere with our ability to make, use, develop, sell or market our products and services, which could make it more difficult for us to operate our business. From time to time we may be subject to claims of infringement, misappropriation or other violation of patents or other intellectual property rights and related litigation. Regardless of their merit, responding to such claims can be time consuming, can divert management’s attention and resources, and may cause us to incur significant expenses in litigation or settlement, and we cannot be certain that we would be successful in defending against any such claims in litigation or other proceedings. If we do not successfully defend or settle an intellectual property claim, we could be liable for significant monetary damages and could be prohibited from continuing to use certain technology, business methods, content or brands, and from making, selling or incorporating certain components or intellectual property into the products and services we offer. As a result, we could be forced to redesign our products and services, and/or to establish and maintain alternative branding for our products and services. To avoid litigation or being prohibited from marketing or selling the relevant products or services, we could seek a license from the applicable third party, which could require us to pay significant royalties, licensing fees, or other payments, increasing our operating expenses. If a license is not available at all or not available on reasonable terms, we may be required to develop or license a non-violating alternative, either of which could be infeasible or require significant effort and expense. If we cannot license or develop a non-violating alternative, we would be forced to limit or stop sales of our offerings and may be unable to effectively compete. Moreover, there could be public announcements of the results of hearings, motions or other interim proceedings or

 

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developments and if securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the price of our common stock. Any of these results could materially and adversely affect our business, financial condition, results of operations and prospects. Finally, any litigation or claims, whether or not valid, could result in substantial costs, negative publicity and diversion of resources and management attention, any of which could have a material adverse effect on our business, financial condition, results of operations and prospects.

We may be subject to claims that our employees, consultants, or advisors have wrongfully used or disclosed alleged trade secrets of their current or former employers or claims asserting ownership of what we regard as our own intellectual property.

Many of our employees and consultants are currently or were previously employed at other companies in our field, including our competitors or potential competitors. Although we try to ensure that our employees and consultants do not use the proprietary information or know-how of others in their work for us, we may be subject to claims that we or these individuals have used or disclosed intellectual property, including trade secrets or other proprietary information, of any such individual’s current or former employer. Litigation may be necessary to defend against these claims. If we fail to successfully defend any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel. Even if we are successful in defending against such claims, litigation would result in substantial costs and be a distraction to management.

In addition, while it is our policy to require our employees and contractors who may be involved in the conception or development of intellectual property to execute agreements assigning such intellectual property to us, we may be unsuccessful in executing such an agreement with each party who, in fact, conceives or develops intellectual property that we regard as our own. The assignment of intellectual property rights may not be self-executing, or the assignment agreements may be breached, and we may be forced to bring claims against third parties or defend claims that they may bring against us to determine the ownership of what we regard as our intellectual property. Any of the foregoing could have a material adverse effect on our business, financial condition, results of operations and prospects.

Inadequacy of our insurance coverage could have a material and adverse effect on our business, financial condition and results of operations.

We maintain third party insurance coverage against various liability risks and risks of loss, including general liability, auto liability, property, cargo, errors and omissions, data security breach, crime and directors’ and officers’ liability. Potential liabilities or other loss associated with these risks or other events could exceed the coverage provided by such arrangements resulting in significant uninsured liabilities or other loss, which could have a material adverse effect on our business, financial condition and results of operations.

Failure by our manufacturers or our component or raw material suppliers to use ethical business practices and comply with applicable laws and regulations may adversely affect our business.

We do not control our manufacturers or suppliers or their business practices. Accordingly, we cannot guarantee that they follow ethical business practices such as fair wage practices and compliance with environmental, safety, labor and other laws. A lack of demonstrated compliance could lead us to seek alternative manufacturers or suppliers, which could increase our costs and result in delayed delivery of our products, product shortages or other disruptions of our operations. Violation of labor or other laws by our manufacturers or suppliers or the divergence of their labor or other practices from those generally accepted as ethical could also attract negative publicity for us and harm our reputation and business.

We could be adversely affected by any violations of the FCPA and other foreign anti-bribery laws.

The FCPA generally prohibits companies and their intermediaries from making, promising, authorizing or offering improper payments or other things of value to foreign government officials for the purpose of

 

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obtaining or retaining business. The FCPA also requires that we keep accurate books and records and maintain internal controls and compliance procedures designed to prevent any such actions. Other countries in which we operate also have anti-bribery laws, some of which prohibit improper payments to government and non-government persons and entities. Our policies mandate compliance with these anti-bribery laws. However, we currently operate in and intend to further expand into many parts of the world that have experienced governmental corruption to some degree and, in certain circumstances, strict compliance with anti-bribery laws may conflict with local customs and practices. It is possible that our third party manufacturers, other suppliers, employees, subcontractors, agents or partners may take actions in violation of our policies or applicable anti-bribery laws. Any such violation, even if unauthorized and prohibited by our policies, could subject us to investigations, settlements, criminal or civil penalties or other sanctions, or negative media coverage, which could have a material adverse effect on our business, financial condition, cash flows and reputation.

We may incur obligations, liabilities or costs under environmental, health and safety laws, which could have an adverse impact on our business, financial condition and results of operations.

Our suppliers’ operations involve the use, handling, generation, storage, discharge and disposal of hazardous substances, chemicals and wastes. As a result, our suppliers are required to comply with national, state and local laws and regulations regarding the protection of the environment and health and safety. We are also required to comply with general national, state, local and foreign health and safety laws and regulations in every location that we have operations, employees and workers. Adoption of more stringent laws and regulations in the future, including restriction or prohibition on the use of raw materials currently utilized by our suppliers to manufacture products, could cause our suppliers to incur additional costs, which could increase the cost we pay for their products. Moreover, new environmental laws requiring changes to our suppliers’ use of raw materials could adversely impact the quality or performance of products we currently purchase. In addition, violations of, or liabilities under, these laws and regulations by our suppliers could result in our being subject to adverse publicity, reputational damage, substantial fines, penalties, criminal proceedings, third-party property damage or personal injury claims, cleanup costs or other costs. Further, the facilities of our suppliers, including suppliers who manufacture our products, components and materials, are located on properties with a history of use involving hazardous materials, chemicals and wastes and may be contaminated. We may become liable under certain environmental laws and regulations for costs to investigate or remediate contamination at such properties and under common law for bodily injury or property damage claims arising from the alleged impact of such contamination. Liability under environmental laws and regulations for investigating and remediating contamination can be imposed on a joint and several basis and without regard to fault or the legality of the activities giving rise to the contamination conditions. In addition, future developments such as more aggressive enforcement policies from the Biden administration, relevant foreign authorities or the discovery of presently unknown environmental conditions may require expenditures that could have an adverse effect on our business, financial condition and results of operations.

Failure to effectively utilize information technology systems or implement new technologies could disrupt our business or reduce our sales or profitability.

We rely extensively on various information technology systems, including data centers, hardware, software, sensors and applications to manage many aspects of our business, including to operate and provide our products and services, to process and record transactions, to enable effective communication systems, to track inventory flow, to manage logistics and to generate performance and financial reports. We are dependent on the integrity, security and consistent operations of these systems and related back-up systems. Our computer and information technology systems and the third-party systems we rely upon are also subject to damage or interruption from a number of causes, including power outages; computer and telecommunications failures; malicious code such as computer viruses, malware, and ransomware; phishing or distributed denial-of-service

 

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attacks; security breaches; cyber-attacks; catastrophic events such as fires, floods, earthquakes, tornadoes, hurricanes; acts of war or terrorism and design or usage errors by our employees or contractors.

Compromises, interruptions or shutdowns of our systems, including those managed by third parties, whether intentional or inadvertent, could lead to delays in our business operations and, if significant or extreme, affect our results of operations.

From time to time, our systems require modifications and updates, including by adding new hardware, software, sensors and applications; maintaining, updating or replacing legacy programs; and integrating new service providers, and adding enhanced or new functionality. Although we are actively selecting systems and vendors and implementing procedures to enable us to maintain the integrity of our systems when we modify them, there are inherent risks associated with modifying or replacing systems, and with new or changed relationships, including accurately capturing and maintaining data, realizing the expected benefit of the change and managing the potential disruption of the operation of the systems as the changes are implemented. Potential issues associated with implementation of these technology initiatives could reduce the efficiency of our operations in the short term. In addition, any interruption in the operation of our websites or systems could cause us to suffer reputational harm or to lose sales if customers are unable to access our site or purchase merchandise from us during such interruption. The efficient operation and successful growth of our business depends upon our information technology systems. The failure of our information technology systems and the third party systems we rely on to perform as designed, or our failure to implement and operate them effectively, could disrupt our business or subject us to liability and thereby have a material adverse effect on our business, financial condition, results of operations and prospects.

Fluctuations in foreign currency exchange rates could increase our operating costs and impact our business.

The majority of our sales and cash are denominated in U.S. dollars. Fluctuations in exchange rates, particularly between the U.S. dollar and the Brazilian real, Mexican peso, Australian dollar, Chilean peso and Euro, may result in foreign exchange gains or losses. We, directly or through third parties, service certain customer contracts located in various parts of the world, including Brazil, Mexico, Australia, Chile and Europe, that may have a portion of our costs denominated in currencies other than the U.S. dollar. As a result, we are exposed to fluctuations in these currencies impacting our operating results.

Currency exchange rates fluctuate daily as a result of a number of factors, including changes in a country’s political and economic policies. The primary impact of currency exchange fluctuations is on cash, payables and expenses related to transactions in currencies denominated in other than the U.S. dollar. As part of our currency hedging strategy, we may use financial instruments such as forward exchange, swap contracts and options to hedge our foreign currency exposure in order to reduce the short-term impact of foreign currency rate fluctuations on our operating results. If our hedging activities are not successful or if we change or reduce these hedging activities in the future, we may experience unexpected fluctuations in our operating results as a result of changes in exchange rates.

Furthermore, volatility in foreign exchange rates affects our ability to plan our pricing strategy. To the extent that we are unable to pass along increased costs and other financial effects resulting from exchange rate fluctuations to our customers, our profitability may be adversely impacted. Additionally, the COVID-19 pandemic could contribute to foreign currency volatility. As a result, fluctuations in non-U.S. dollar currencies and the U.S. dollar could have a material adverse effect on our business, financial condition and results of operations.

 

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Risks related to the Transactions and our relationship with Flex

We have no history of operating as a separate, publicly-traded company, and our historical and pro forma financial information is not necessarily representative of the results that we would have achieved as a separate, publicly-traded company and may not be a reliable indicator of our future results.

Our historical and pro forma financial information included in this prospectus is derived from the consolidated financial statements and accounting records of Flex. Accordingly, the historical and pro forma financial information included in this prospectus does not necessarily reflect the financial condition, results of operations or cash flows that we would have achieved as a separate, publicly-traded company during the periods presented or those that we will achieve in the future primarily as a result of the factors described below:

 

 

Prior to the Transactions, our businesses have been operated by Flex as part of its broader corporate organization, rather than as a separate, publicly-traded company. Flex or one of its affiliates performed various business functions for us such as legal, finance, treasury, accounting, auditing, tax, human resources, investor relations, corporate affairs, compliance support, logistics and bonding support, procurement and planning services, as well as the provision of leased facilities and business software and IT systems. Our historical and pro forma financial results reflect allocations of corporate expenses from Flex or autonomous entity adjustments for such functions and may be different than the expenses we would have incurred had we operated as a separate publicly-traded company. Following the Transactions, our cost related to such functions may therefore increase.

 

 

Currently, certain aspects of our businesses are integrated with the other businesses of Flex. Historically, we have shared economies of scope and scale in costs, employees and vendor relationships. Although we will enter into transition agreements with Flex, these arrangements may not fully capture the benefits that we have enjoyed as a result of being integrated with Flex and may result in us paying higher charges than in the past for these services. This could have an adverse effect on our results of operations and financial condition following the completion of the Transactions. In addition, we currently operate, and plan to continue to operate, our business in Brazil indirectly through Flex or its subsidiaries. Those Flex entities are the direct contracting parties with respect to our business in Brazil and we receive the benefits of those arrangements from the relevant Flex entity. If we are unable to continue to operate our business in Brazil through Flex and its subsidiaries, we would need to establish alternative arrangements, and any such alternative arrangements, if available, may cause us to incur additional costs relating to that business.

 

 

Generally, our working capital requirements and capital for our general corporate purposes, including acquisitions and capital expenditures, have historically been satisfied as part of the corporate-wide cash management policies of Flex. In connection with the Transactions, we expect to incur a substantial amount of indebtedness in the form of senior credit facilities comprised of (i) a term loan in an aggregate principal amount of $150.0 million, and (ii) a revolving credit facility in an aggregate principal amount of $500.0 million (the “2023 Credit Agreement”). See “Description of indebtedness” elsewhere in this prospectus. In addition, we may need to obtain additional financing from banks, through public offerings or private placements of debt or equity securities, strategic relationships or other arrangements.

 

 

After the completion of the Transactions, including this offering, the cost of capital for our businesses may be higher than Flex’s cost of capital prior to the Transactions.

Other significant changes may occur in our cost structure, management, financing and business operations as a result of operating as a company separate from Flex. For additional information about the past financial performance of our businesses and the basis of presentation of the historical combined financial statements and the unaudited pro forma combined financial statements of our businesses, refer to the sections entitled “Unaudited pro forma combined financial statements,” “Selected historical combined financial data,”

 

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“Management’s discussion and analysis of financial condition and results of operations” and the unaudited condensed combined financial statements and audited combined financial statements and accompanying notes included elsewhere in this prospectus.

As a separate, publicly-traded company, we may not enjoy the same benefits that we did as a part of Flex.

There is a risk that, by separating from Flex, we may become more susceptible to market fluctuations and other adverse events than we would have been if we were still a part of the current Flex organizational structure. As part of Flex, we have been able to enjoy certain benefits from Flex’s creditworthiness, purchasing power and operating diversity, such as our business in Brazil that we operate indirectly through Flex or its subsidiaries. As a separate, publicly-traded company, we generally will not have similar benefits provided by Flex. Additionally, as part of Flex, we have been able to leverage the Flex historical market reputation and performance and brand identity to recruit and retain key personnel to run our business. As a separate, publicly-traded company, we will not have the same historical market reputation and performance or brand identity as Flex and it may be more difficult for us to recruit or retain such key personnel.

Our customers, prospective customers, suppliers or other companies with whom we conduct business may conclude that our financial stability as a separate, publicly-traded company is insufficient to satisfy their requirements for doing or continuing to do business with them.

We have historically operated as a wholly-owned subsidiary of Flex. Following the Transactions, some of our customers, prospective customers, suppliers or other companies with whom we conduct business may conclude that our financial stability as a separate, publicly-traded company is insufficient to satisfy their requirements for doing or continuing to do business with them, or may require us to provide additional credit support, such as letters of credit or other financial guarantees. Any failure of parties to be satisfied with our financial stability could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Following the Transactions, including this offering, Flex will continue to control the direction of our business, and the concentrated ownership of our common stock may prevent you and other stockholders from influencing significant decisions.

Immediately following the completion of this offering, Flex, directly or indirectly through Yuma and Yuma Sub, will own                shares of our Class B common stock, representing approximately                % of the total outstanding shares of our common stock (or                shares of Class B common stock, representing approximately                % of the total outstanding shares of our common stock if the underwriters exercise in full their option to purchase additional shares of Class A common stock). As long as Flex beneficially owns a majority of the total outstanding shares of our common stock, it will generally be able to determine the outcome of all corporate actions requiring stockholder approval, including the election and removal of directors. If Flex does not sell or otherwise dispose of its shares of our common stock, it would remain our controlling stockholder indefinitely.

Moreover, pursuant to the separation agreement, for so long as Flex beneficially owns a majority of the total voting power of our outstanding shares with respect to the election of directors, Flex has the right, but not the obligation, to designate for nomination a majority of the directors (including the chairman of our board of directors) and a majority of the members of any committee of the board. In addition, Flex has the right, but not the obligation, to nominate (i) 40% of our directors, as long as it beneficially owns 40% or more, but less than 50% of the combined voting power of our outstanding common stock, (ii) 40% of our directors, as long as it beneficially owns 30% or more, but less than 40% of the combined voting power of our outstanding common stock, (iii) 30% of our directors, as long as it beneficially owns 20% or more, but less than 30% of the combined voting power of our outstanding common stock, and (iv) 20% of our directors, as long as it beneficially owns 10% or more, but less than 20% of the combined voting power of our outstanding common stock. For so long as Flex beneficially owns

 

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less than a majority but at least 5% of the total voting power of our outstanding common stock with respect to the election of directors, Flex is entitled to include at least one of its designees on each committee of the board.

Flex’s interests may not be the same as, or may conflict with, the interests of our other stockholders. Investors in this offering will not be able to affect the outcome of any stockholder vote while Flex controls the majority of the total outstanding shares of our common stock. As a result, Flex will be able to control, directly or indirectly and subject to applicable law, all matters affecting us, including, but not limited to, the following:

 

 

any determination with respect to our business direction and policies, including the appointment and removal of officers and directors;

 

 

any determinations with respect to mergers, business combinations or disposition of assets;

 

 

our financing and dividend policy;

 

 

compensation and benefit programs and other human resources policy decisions;

 

 

termination of, changes to or determinations under our agreements with Flex relating to the Transactions;

 

 

changes to any other agreements that may adversely affect us;

 

 

the payment of dividends on our Class A common stock; and

 

 

determinations with respect to our tax returns.

Because Flex’s interests may differ from ours or from those of our other stockholders, actions that Flex takes with respect to us, as our controlling stockholder, may not be favorable to us or our other stockholders.

If Flex sells its retained beneficial interest in the LLC to a third party in a private transaction, you may not realize any change-of-control premium on shares of our Class A common stock and we may become subject to the control of a presently unknown third party.

Following the completion of this offering, Flex will continue to own a controlling equity interest in our Company via its retained majority beneficial interest in the LLC and ownership of our Class B common stock. Flex will have the ability, should it choose to do so, to sell some or all of its retained beneficial interest in a privately negotiated transaction, which, if sufficient in size, could result in a change of control of our Company.

The ability of Flex to privately sell its retained beneficial interest, with no requirement for a concurrent offer to be made to acquire all of the shares of our Class A common stock that will be publicly traded hereafter, could prevent you from realizing any change-of-control premium on your shares of our Class A common stock that may otherwise accrue to Flex on its private sale of its retained beneficial interest in the LLC. Additionally, if Flex privately sells its controlling interest in our Company, we may become subject to the control of a presently unknown third party. Such third party may have conflicts of interest with those of other stockholders. In addition, if Flex sells a controlling interest in our Company to a third party, our future indebtedness may be subject to acceleration, Flex may terminate the transitional arrangements, and our other commercial agreements and relationships could be impacted, all of which may adversely affect our ability to run our business as described herein and may have an adverse effect on our operating results and financial condition.

The continued concentrated ownership of our common stock could depress our Class A common stock price.

Immediately following the completion of this offering, Flex, directly or indirectly through Yuma and Yuma Sub, will own                shares of our Class B common stock, representing approximately                % of the total outstanding shares of our common stock (or                shares of Class B common stock, representing approximately                % of the total

 

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outstanding shares of our common stock if the underwriters exercise in full their option to purchase additional shares of Class A common stock). The liquidity of shares of our Class A common stock in the market may be constrained for as long as Flex continues to hold a significant position in our common stock. A lack of liquidity in our Class A common stock could depress the price of our Class A common stock.

We will be a “controlled company” within the meaning of the rules of Nasdaq and, as a result, will qualify for, and intend to rely on, exemptions from certain corporate governance requirements. You will not have the same protections afforded to stockholders of companies that are subject to such requirements.

Upon completion of this offering, Flex will indirectly hold         % of the total outstanding shares of our common stock (or                shares of common stock, representing approximately                % of the total outstanding shares of our common stock if the underwriters exercise in full their option to purchase additional shares of Class A common stock). As a result, we will be a “controlled company” within the meaning of the corporate governance standards of Nasdaq. Under these rules, a listed company of which more than 50% of the total voting power is held by an individual, group or another company is a “controlled company” and may elect not to comply with certain corporate governance requirements, including:

 

 

the requirement that a majority of our board of directors consist of independent directors;

 

 

the requirement that our nominating and corporate governance committee be composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities, or if no such committee exists, that our director nominees be selected or recommended by independent directors constituting a majority of the board’s independent directors in a vote in which only independent directors participate;

 

 

the requirement that our compensation committee be composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities; and

 

 

the requirement for an annual performance evaluation of our nominating and corporate governance and compensation committees.

Following this offering, we intend to utilize certain of these exemptions. As a result, we do not expect that a majority of the directors on our board will be independent upon completion of this offering. In addition, we do not expect that the nominating and corporate governance committee or the compensation committee (or, until required by the applicable requirements of Nasdaq, the audit committee) will consist entirely of independent directors. Accordingly, you will not have the same protections afforded to stockholders of companies that are subject to all of the corporate governance requirements of Nasdaq.

We expect that Flex and its directors and officers will have limited liability to us or you for breach of fiduciary duty.

Our amended and restated certificate of incorporation will provide that, subject to any contractual provision to the contrary, Flex and its directors and officers will have no obligation to refrain from engaging in the same or similar business activities or lines of business as we do or doing business with any of our clients, customers or vendors. As such, neither Flex nor any officer or director of Flex will be liable to us or to our stockholders for breach of any fiduciary duty by reason of any of these activities.

Potential indemnification liabilities to Flex pursuant to the separation agreement could materially and adversely affect our businesses, financial condition, results of operations and cash flows.

The separation agreement, among other things, provides for indemnification obligations (for uncapped amounts) designed to make us financially responsible for substantially all liabilities that may exist relating to

 

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our business activities, whether incurred prior to or after the separation. If we are required to indemnify Flex under the circumstances set forth in the separation agreement, we may be subject to substantial liabilities. For additional information, refer to the section entitled “Certain relationships and related party transactions—Agreements with Flex—The separation agreement—Release of claims and indemnification.”

In connection with our separation from Flex, Flex will indemnify us for certain liabilities. However, there can be no assurance that the indemnity will be sufficient to insure us against the full amount of such liabilities, or that Flex’s ability to satisfy its indemnification obligation will not be impaired in the future.

Pursuant to the separation agreement and certain other agreements with Flex, Flex has agreed to indemnify us for certain liabilities as discussed further in the section entitled “Certain relationships and related party transactions.” However, third parties could also seek to hold us responsible for any of the liabilities that Flex has agreed to retain, and there can be no assurance that the indemnity from Flex will be sufficient to protect us against the full amount of such liabilities, or that Flex will be able to fully satisfy its indemnification obligations. In addition, Flex’s insurance will not necessarily be available to us for liabilities associated with occurrences of indemnified liabilities prior to the separation, and in any event Flex’s insurers may deny coverage to us for liabilities associated with certain occurrences of indemnified liabilities prior to the separation. Moreover, even if we ultimately succeed in recovering from Flex or such insurance providers any amounts for which we are held liable, we may be temporarily required to bear these losses. Each of these risks could have a material adverse effect on our businesses, financial position, results of operations and cash flows.

Certain of our executive officers and directors may have actual or potential conflicts of interest because of their equity interest in Flex. Also, certain of Flex’s current officers also serve as our directors, which may create conflicts of interest or the appearance of conflicts of interest.

Because of their current or former positions with Flex, certain of our executive officers and directors own equity interests in Flex. Continuing ownership of Flex ordinary shares and equity awards could create, or appear to create, potential conflicts of interest if we and Flex face decisions that could have implications for both Flex and us. In addition, certain of Flex’s current directors and officers also serve as our directors, and this could create, or appear to create, potential conflicts of interest when we and Flex encounter opportunities or face decisions that could have implications for both companies in connection with the allocation of such directors’ time between Flex and us.

Flex may compete with us.

Notwithstanding Flex’s continued ownership and control of the Company, Flex will not be restricted from competing with us. If Flex in the future decides to engage in the type of business we conduct, it may have a competitive advantage over us, which may cause our business, financial condition and results of operations to be materially adversely affected.

We may not achieve some or all of the expected benefits of being a separate, publicly-traded company.

We may not be able to achieve the full strategic and financial benefits expected to result from being a separate, publicly-traded company, or such benefits may be delayed or not occur at all. Being a separate, publicly-traded company is expected to provide the following benefits, among others:

 

 

Allows investors to separately value Flex and us based on their distinct investment identities. Our business fundamentally differs from Flex’s other businesses in several respects, as Flex’s primary focus is contract manufacturing for multiple industries in contrast to our focus on selling proprietary products for utility-scale solar power plants. Being a separate, publicly-traded company enables investors to evaluate the merits, performance and future prospects of each company’s respective businesses and to invest in each company separately based on their distinct characteristics.

 

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Allows us and Flex to more effectively pursue our and Flex’s distinct operating priorities and strategies and enable management of both companies to focus on unique opportunities for long-term growth and profitability. For example, while our management will be enabled to focus exclusively on our businesses, the management of Flex will be able to grow its businesses. Our and Flex’s separate management teams will also be able to focus on executing the companies’ differing strategic plans without diverting attention from the other businesses.

 

 

Permits each company to concentrate its financial resources solely on its own operations without having to compete with each other for investment capital, providing each company with greater flexibility to invest capital in its businesses in a time and manner appropriate for its distinct strategy and business needs.

 

 

Creates an independent equity structure that will afford us direct access to the capital markets and facilitate our ability to capitalize on our unique growth opportunities.

 

We may not achieve these and other anticipated benefits for a variety of reasons, including, among others:

 

 

As previously part of Flex, our businesses benefited from Flex’s size and purchasing power in procuring certain goods and services. As a separate, publicly-traded company, we may be unable to obtain these goods, services and technologies at prices or on terms as favorable as those Flex obtained prior to the separation. We may also incur costs for certain business functions previously performed by Flex that are higher than the amounts reflected in our historical financial statements, which could cause our profitability to decrease.

 

 

The actions required to separate our and Flex’s respective businesses will require significant amounts of our management’s time and effort, which could disrupt our operations.

 

 

Certain costs and liabilities that were otherwise less significant to Flex as a whole are more significant for us and Flex as separate companies.

 

 

We have incurred costs in connection with the transition to being a separate, publicly-traded company that include additional personnel costs, corporate governance costs (including director and officer insurance costs) and audit, consulting, legal and other professional services fees.

 

 

As a separate, publicly-traded company, we may be more susceptible to market fluctuations and other adverse events than if we were still fully integrated with Flex.

 

 

Our businesses are less diversified than Flex’s combined businesses prior to the separation.

If we fail to achieve some or all of the benefits expected to result from being a publicly-traded company, or if such benefits are delayed, our businesses, operating results and financial condition could be materially and adversely affected.

We may have received better terms from unaffiliated third parties than the terms we will receive in our agreements with Flex.

The agreements we have entered into or will enter into with Flex and certain of its subsidiaries in connection with the separation, including the separation agreement, transition services agreement, employee matters agreement, merger agreement, tax matters agreement, Tax Receivable Agreement, registration rights agreement and certain commercial agreements were prepared in the context of our separation from Flex while we were still a subsidiary of Flex.

Accordingly, during the period in which the terms of those agreements were prepared, we did not have a separate or independent board of directors or a management team that was separate from or independent of Flex. As a result, the terms of those agreements may not reflect terms that would have resulted from

 

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arm’s-length negotiations between unaffiliated third parties. Arm’s-length negotiations between Flex and an unaffiliated third party in another form of transaction, such as a buyer in a sale of a business transaction, may have resulted in more favorable terms to the unaffiliated third party. For additional information, refer to the section entitled “Certain relationships and related party transactions.”

We may be required to effect the Merger and the other transactions contemplated by the merger agreement or certain distributions or other dispositions under the separation agreement following this offering, and our stockholders following this offering will have no right to approve or disapprove of the Merger or such other transactions, including the issuance of shares of our Class A common stock to the holders of Yuma common stock in connection with the Merger or such other transactions.

Prior to this offering, we and each of Flex, Yuma and Merger Sub, and our stockholders and the stockholders of each of Yuma and Merger Sub, have approved the merger agreement and the transactions contemplated by the merger agreement, including the Merger and the issuance of our Class A common stock to the holders of Yuma common stock in connection with the Merger. As a result, our stockholders following this offering will have no right to approve or disapprove of the Merger or the other transactions contemplated by the merger agreement or the issuance of shares of our Class A common stock to the holders of Yuma common stock in connection with the Merger. Further, our stockholders following this offering will have no right to appraisal under Section 262 of the DGCL or otherwise in connection with the Merger or the other transactions contemplated by the merger agreement.

We have also committed to take various other actions following this offering pursuant to the merger agreement (which actions are subject to Flex exercising its option, in its sole discretion, to effect the Merger and the other transactions contemplated by the merger agreement), including the registration under the Securities Act of the shares of our Class A common stock issuable to the holders of Yuma common stock in connection with the Merger.

Further, pursuant to the separation agreement, we and the LLC have also committed to take various other actions following this offering with respect to a Distribution or Other Distribution (which actions are subject to Flex exercising its option, in its sole discretion, to effect such Distribution or Other Distribution contemplated by the separation agreement), including the registration under the Securities Act of the shares of our Class A common stock issuable to the holders of Yuma common stock in connection with such Distribution or Other Distribution.

Flex has no obligation (pursuant to the merger agreement or otherwise) to pursue or consummate any further distribution or disposition of its retained beneficial interest in the LLC, including by means of a Distribution or Other Disposition or the Merger Distribution and the Merger, by any specified date or at all. As a result, the timing of the Merger and the other transactions contemplated by the merger agreement is uncertain, and subject to Flex’s sole discretion. Accordingly, we have no certainty when such transactions (and the effectiveness of our related obligations under the separation agreement and the merger agreement) will occur following this offering or if they will occur at all.

In the event that Flex determines to effect all or part of a tax-free or other distribution or disposition of its retained beneficial interest in the LLC (including by means of a Distribution or Other Disposition or the Merger Distribution and the Merger), Flex may no longer own more than 50% of the combined voting power of our outstanding common stock and we may no longer be a “controlled company” within the meaning of the rules of Nasdaq.

Upon completion of this offering we will be a “controlled company” within the meaning of the rules of Nasdaq and, as a result, will qualify for, and intend to rely on, exemptions from certain corporate governance requirements. See the section entitled “Management—Controlled company exemption.”

 

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Further, we have entered into the separation agreement with Flex, which gives Flex the right to nominate a majority of our directors and a majority of the members of our board committees after the consummation of this offering as long as our controlling stockholder beneficially owns 50% or more of the total voting power of our outstanding common stock and specifies how our controlling stockholder’s nomination rights shall decrease as our controlling stockholder’s beneficial ownership of our common stock also decreases. See the section entitled “Certain relationships and related party transactions—Separation agreement—Board and committee representation.”

In the event that Flex determines to proceed with all or part of a tax-free or other distribution or disposition of its retained beneficial interest in the LLC (including a Distribution or Other Disposition or the Merger Distribution and the Merger), Flex may no longer own more than 50% of the combined voting power of our outstanding common stock. As a result, among other matters, Flex may no longer hold the right as our controlling stockholder to nominate a majority of our directors and a majority of the members of our board committees and we may no longer be a “controlled company” within the meaning of the rules of Nasdaq and permitted to rely on exemptions from certain corporate governance requirements.

Flex has no obligation (pursuant to the merger agreement or otherwise) to pursue or consummate any further distribution or disposition of its retained beneficial interest in the LLC, including by means of a Distribution or Other Disposition or the Merger Distribution and the Merger, by any specified date or at all. Accordingly, Flex’s status as our controlling stockholder (and its associated rights with respect thereto) and our status as a “controlled company” is uncertain and subject to change at Flex’s sole discretion, including as a result of the exercise of Flex’s rights under the separation agreement or the merger agreement.

We or Flex may fail to perform under various transaction agreements that have been or will be executed as part of the Transactions or we may fail to have necessary systems and services in place when certain of the transaction agreements expire.

The separation agreement and other agreements that have been or will be entered into in connection with the Transactions determine the allocation of assets and liabilities between the companies following the separation for those respective areas and include related indemnifications related to liabilities and obligations. The transition services agreement we entered into with Flex provides for the performance of certain services by each company for the benefit of the other for a period of time after the separation. We have relied and will continue to rely on Flex to satisfy its performance and payment obligations under these agreements. If Flex is unable to satisfy its obligations under these agreements, including its indemnification obligations, we could incur operational difficulties or losses. If we do not have in place our own systems and services, or if we do not have agreements with other providers of these services once certain transaction agreements expire, we may not be able to operate our businesses effectively and our profitability may decline. We are in the process of creating our own, or engaging third parties to provide, systems and services to replace many of the systems and services that Flex currently provides to us. However, we may not be successful in implementing these systems and services or in transitioning data from Flex’s systems to us.

In addition, we expect this process to be complex, time-consuming and costly. We are also establishing or expanding our own corporate and business functions to be separate from Flex. We expect to incur one-time costs to replicate, or outsource from other providers, these corporate functions to replace the corporate services that Flex historically provided us prior to the separation. Any failure or significant downtime in our own financial, administrative or other support systems or in the Flex financial, administrative or other support systems during the transitional period when Flex provides us with support could negatively impact our results of operations or prevent us from paying our suppliers and employees, executing business combinations and foreign currency transactions or performing administrative or other services on a timely basis, which could negatively affect our results of operations.

 

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In particular, our day-to-day business operations rely on our information technology systems. A significant portion of the communications among our personnel, customers and suppliers take place on our information technology platforms. We expect the transfer of information technology systems from Flex to us to be complex, time consuming and costly. There is also a risk of data loss in the process of transferring information technology. As a result of our reliance on information technology systems, the cost of such information technology integration and transfer and any such loss of key data could have an adverse effect on our business, financial condition and results of operations.

We may continue to be dependent on Flex for certain components for our products.

Our self-powered controller (“SPC”) and network control unit (“NCU”) used in our tracker products are predominately manufactured by Flex. We have an agreement with Flex for the manufacturing of these components, but we operate on a purchase order basis for pricing. The processes to manufacture these SPCs and NCUs are highly complex, specialized and proprietary. Although we have recently added two suppliers who manufacture our SPCs, if Flex is unable or unwilling to manufacture controllers for us, or increases its pricing substantially, a substantial portion of our supply of these critical components would be interrupted or delayed and we may not be able to source substitute parts easily. We would incur increased expenses in establishing new relationships with alternative manufacturers at market prices. We may not be able to source alternative components on term acceptable to us or in a timely and cost-effective manner which may materially and adversely affect our business, financial condition, results of operation and profitability.

We are a holding company and our principal asset after completion of this offering will be our LLC Units in the LLC, and accordingly we will be dependent upon distributions from the LLC to pay taxes and other expenses.

We are a holding company and, upon completion of the Transactions, including this offering, our principal asset will be our ownership of the LLC. See the section entitled “Our organizational structure.” We had no operations prior to this offering and have no independent means of generating revenue. As the managing member of the LLC, we intend to cause the LLC to make distributions to us in amounts sufficient to cover the taxes on our allocable share of the taxable income of the LLC, all applicable taxes payable by us, any payments we are obligated to make under the Tax Receivable Agreement and other costs or expenses. Distributions will generally be made on a pro rata basis among us, Yuma, Yuma Sub and TPG. However, certain laws and regulations may result in restrictions on the LLC’s ability to make distributions to us or the ability of the LLC’s subsidiaries to make distributions to it.

To the extent that we need funds and the LLC or its subsidiaries are restricted from making such distributions, we may not be able to obtain such funds on terms acceptable to us or at all and as a result could suffer an adverse effect on our liquidity and financial condition.

Tax authorities could challenge our historical and future tax positions.

We expect our taxable income to primarily be from the allocation of taxable income from the LLC. We are subject to federal and state income taxes in the United States on the taxable income allocated to us from the LLC. In addition, while the majority of the LLC’s income will be from United States sources and will not be subject to LLC level income tax, the LLC will have taxable income in some foreign subsidiaries that will be subject to foreign tax at the level of the LLC. We may be entitled to foreign tax credits in the United States for our share of the foreign tax paid by the LLC. As the LLC operates in a number of countries and relies on intercompany transfer pricing, judgment is required in determining our provision for income taxes. In the ordinary course of the LLC’s business, there may be transactions or intercompany transfer prices where the ultimate tax determination is uncertain. Additionally, calculations of income taxes payable currently and on a deferred basis are based on our interpretations of applicable tax laws in the jurisdictions in which we and the LLC are required to file tax returns.

 

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In certain circumstances, the LLC will be required to make distributions to us, Yuma, Yuma Sub and TPG, and the distributions that the LLC will be required to make may be substantial and in excess of our tax liabilities and obligations under the Tax Receivable Agreement.

The LLC will be treated as a partnership for U.S. federal income tax purposes and, as such, will not be subject to U.S. federal income tax. Instead, taxable income will be allocated to holders of its LLC Units, including us. We anticipate that, pursuant to the tax rules under the Code and the regulations thereunder, in many instances these allocations of taxable income will not be made on a pro rata basis. Notwithstanding that, pursuant to the LLC Agreement, the LLC generally is required from time to time to make pro rata cash distributions, or tax distributions, to the holders of LLC Units to help each of the holders of the LLC Units to pay taxes on such holder’s allocable share of taxable income of the LLC. As a result of potential non pro rata allocations of net taxable income allocable to us, Yuma, Yuma Sub and TPG, and the favorable tax benefits that we anticipate receiving from this offering and certain related transactions, we expect that these tax distributions will be in amounts that exceed our tax liabilities and obligations to make payments under the Tax Receivable Agreement. To the extent, as currently expected, we do not distribute such cash balances as dividends on our Class A common stock and instead, for example, hold such cash balances or lend them to the LLC, the existing owners of the LLC would benefit from any value attributable to such accumulated cash balances as a result of an exchange of their LLC Common Units and corresponding shares of Class B common stock under the Exchange Agreement.

If Flex distributes its retained beneficial interest in the LLC on a tax-free basis, we may be required to indemnify Flex for certain tax liabilities and may be prevented from pursuing opportunities to engage in desirable strategic or capital-raising transactions.

Flex may, in the future, undertake a Distribution or other Disposition, whether directly or through a distribution or disposition of the stock of Yuma, which holds Flex’s retained beneficial interest in the LLC. Among other possible transactions, Flex may distribute all of the outstanding stock of Yuma to Flex’s shareholders in the Merger Distribution contemplated by the merger agreement and then cause Yuma to merge with a wholly-owned subsidiary of Nextracker Inc. to effect the Merger contemplated by the merger agreement. If Flex undertakes a spin-off transaction (including the Merger Distribution and the Merger contemplated by the merger agreement), Flex, Yuma and Nextracker Inc. will enter into a tax matters agreement which will govern the rights, responsibilities and obligations of Flex, Yuma and Nextracker Inc. with respect to taxes (including taxes arising in the ordinary course of business and taxes incurred as a result of the spin-off transaction), tax attributes, tax returns, tax contests and certain other tax matters. You will not have the right to approve the structure pursuant to which Flex may undertake any ultimate distribution of its retained beneficial interest in the LLC or the terms of the tax matters agreement between Flex, Yuma and Nextracker Inc. See the section entitled “Certain relationships and related party transactions—The separation agreement—Subsequent distribution or dispositions.”

If Flex undertakes the Merger Distribution, the merger agreement provides that we will enter into a tax matters agreement with Flex and Yuma as of immediately prior to the Merger Distribution, substantially in the form attached as Exhibit C to the merger agreement, which will govern the rights, responsibilities and obligations of Flex, Yuma and us with respect to taxes (including taxes arising in the ordinary course of business and taxes incurred as a result of the Merger Distribution and the Merger), tax attributes, tax returns, tax contests and certain other tax matters. Under the tax matters agreement, Yuma will be liable for any taxes that are reportable on returns that include only Yuma and/or its subsidiaries (but not Flex or any of its subsidiaries) for all tax periods whether before or after the completion of this offering. Yuma will also be liable for any taxes that are attributable to the Nextracker business, as reasonably determined by Flex, that are reportable on returns that include Yuma and/or its subsidiaries, on the one hand, and Flex and/or its subsidiaries, on the other hand, for any taxable period (or portion thereof) beginning after the date of the spin-off transaction. Notwithstanding the foregoing, Yuma and Flex will each be liable for 50% of certain transfer taxes attributable to the spin-off transaction (including the Merger Distribution and the Merger).

 

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Yuma generally will be responsible for specified taxes and related amounts imposed on Flex or Yuma (or their respective subsidiaries) that arise from the failure of the spin-off transaction (including the Merger Distribution and the Merger) to qualify for tax-free treatment under Section 368(a) or Section 355 of the Code. Such taxes and related amounts could be material and the tax matters agreement will generally require Yuma (on behalf of itself or Nextracker Inc., as applicable) to bear such taxes and related amounts to the extent that the failure to so qualify is attributable to, among other things, (i) a breach of the relevant representations and covenants made by Yuma or Nextracker Inc. in the tax matters agreement or any representation letter provided in support of any tax opinion or ruling obtained by Flex with respect to the U.S. federal income tax treatment of such spin-off or (ii) certain actions or failures to act by Yuma or Nextracker Inc. (or their respective subsidiaries) that result in the spin-off transaction failing to qualify for tax-free treatment under Section 368(a) or Section 355 of the Code. Because Yuma would merge with a wholly-owned subsidiary of Nextracker Inc., among other possible transactions, the obligations of Yuma under the tax matters agreement will become direct or indirect obligations of Nextracker Inc. and this may adversely affect our business, result of operations, financial condition and prospects.

Flex and Yuma will also agree to make a protective election under Section 336(e) of the Code with respect to the spin-off transaction and take necessary actions to effect such election, unless such election results in a material adverse tax consequence to Flex or its subsidiaries (compared to the consequences that would have resulted if no such election was made) in which case the election would only be made as directed by Flex in its sole discretion. If an election under Section 336(e) is made, the spin-off transaction fails to qualify for tax-free treatment, and the resulting taxes are considered liabilities of Flex, then Flex will be entitled to periodic payments from Yuma equal to 85% of the tax savings arising from the step-up in tax basis resulting from the election. The parties to the tax matters agreement will negotiate in good faith the terms of a tax receivable agreement that are substantially similar to the Tax Receivable Agreement to govern the calculation and making of such payments, provided that any such tax savings resulting from the election under Section 336(e) of the Code will be treated as the last items claimed for the taxable year.

To preserve the tax-free treatment of any such spin-off by Flex, the tax matters agreement would, among other restrictions, restrict Yuma and Nextracker Inc. (and their respective subsidiaries), for the two-year period following the spin-off, except in specific circumstances, from: (i) entering into any transaction pursuant to which Yuma or Nextracker Inc. stock would be acquired (with certain exceptions), (ii) merging, consolidating or liquidating either Yuma or Nextracker Inc., other than through the Merger, (iii) selling or transferring assets above certain thresholds, (iv) redeeming or repurchasing stock (with certain exceptions), (v) altering the voting rights of Yuma or Nextracker Inc. stock, (vi) taking or failing to take any other action that would reasonably be expected to result in the spin-off transaction failing to qualify for tax-free treatment under Section 368(a) or Section 355 of the Code, (vii) ceasing to engage in any active trade or business as defined in the Code, or (viii) facilitating or otherwise participating in any acquisition of Nextracker Inc. stock that would result in a shareholder owning directly or indirectly 5% or more of outstanding Nextracker Inc. stock. These restrictions may limit our ability to pursue certain strategic transactions or other transactions that we may believe to be in the best interests of our stockholders or that might increase the value of our business.

We will be required to pay Yuma and Yuma Sub, both of which are subsidiaries of Flex, TPG, and the TPG Affiliates (or certain permitted transferees thereof) for certain tax benefits that we are deemed to realize arising in connection with this offering and related transactions, and the amounts we may pay could be significant.

We expect that this offering and certain related transactions (including the Transactions) will produce tax benefits for us. We intend to use all of the net proceeds from this offering to purchase LLC Common Units from Yuma as described in the section entitled “Use of proceeds.” Additionally, we may be required from time to time to acquire LLC Common Units together with a corresponding number of shares of our Class B common stock in exchange for our Class A common stock (or cash) pursuant to the Exchange Agreement. See the section

 

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entitled “Certain relationships and related party transactions—Exchange agreement.” We expect that basis adjustments resulting from these transactions, if they occur, among other tax benefits resulting from the Transactions, will reduce the amount of income tax we would otherwise be required to pay in the future.

We will enter into a Tax Receivable Agreement with the LLC, Yuma, Yuma Sub, TPG and the TPG Affiliates. The Tax Receivable Agreement will provide for the payment by us to Yuma, Yuma Sub, TPG and the TPG Affiliates (or certain permitted transferees thereof) of 85% of the tax benefits, if any, that we are deemed to realize under certain circumstances as a result of (i) our allocable share of existing tax basis in tangible and intangible assets resulting from exchanges or acquisitions of the LLC Units, including as part of the Transactions or under the Exchange Agreement, (ii) increases in tax basis resulting from exchanges or acquisitions of outstanding LLC Units and shares of Class B common stock (including as part of the Transactions or under the Exchange Agreement), (iii) certain pre-existing tax attributes of certain blocker corporations affiliated with TPG that will merge with a separate direct, wholly-owned subsidiary of us, as part of the Transactions, and (iv) certain other tax benefits related to our entering into the Tax Receivable Agreement, including tax benefits attributable to payments under the Tax Receivable Agreement. See the section entitled “Certain relationships and related party transactions—Tax receivable agreement.” Assuming no material changes in the relevant tax law and that we earn sufficient taxable income to realize all tax benefits that are subject to the Tax Receivable Agreement, we expect that the tax savings we will be deemed to realize associated with the tax benefits described above would aggregate approximately $                million over 20 years from the date of this offering based on the initial public offering price of $                per share of our Class A common stock (which is the midpoint of the estimated initial public offering price range set forth on the cover page of this prospectus), and assuming all future exchanges of LLC Units occur at the time of this offering. Under such scenario we would be required to pay the owners of LLC Units approximately 85% of such amount, or $                million, over the 20 year period from the date of this offering, and the yearly payments over that time would range between approximately $                 million to $                 million per year. Such payments will reduce the cash provided by the tax savings described above. As a result, investors purchasing shares in this offering or in the public market following this offering will not be entitled to the economic benefit of the tax benefits subject to the Tax Receivable Agreement that would have been available if the Tax Receivable Agreement were not in effect (except to the extent of our continuing 15% interest in the tax benefits subject to the Tax Receivable Agreement). The actual amounts may materially differ from these hypothetical amounts, as potential future tax savings we will be deemed to realize, and Tax Receivable Agreement payments by us, will be calculated based in part on the market value of our Class A common stock at the time of purchase or exchange and the prevailing federal tax rates applicable to us over the life of the Tax Receivable Agreement (as well as the assumed combined state and local tax rate), and will generally be dependent on us generating sufficient future taxable income to realize the benefit. The payments under the Tax Receivable Agreement are not conditioned upon the ownership of us by Yuma, Yuma Sub, TPG or the TPG Affiliates (or certain permitted transferees thereof). See the section entitled “Certain relationships and related party transactions—Tax receivable agreement.”

There may be a material negative effect on our liquidity if, as a result of timing discrepancies or otherwise, the payments under the Tax Receivable Agreement exceed the actual benefits we realize in respect of the tax attributes subject to the Tax Receivable Agreement or distributions to us by the LLC are not sufficient to permit us to make payments under the Tax Receivable Agreement after we have paid taxes. Furthermore, our obligations to make payments under the Tax Receivable Agreement could make us a less attractive target for an acquisition, particularly in the case of an acquirer that cannot use some or all of the tax benefits that are deemed realized under the Tax Receivable Agreement.

 

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In certain cases, payments under the Tax Receivable Agreement to Yuma, Yuma Sub, TPG and the TPG Affiliates (or certain permitted transferees thereof) may be accelerated and/or significantly exceed the actual benefits we realize in respect of the tax attributes subject to the Tax Receivable Agreement.

The Tax Receivable Agreement provides that upon certain circumstances we will be required to make an immediate payment equal to the present value of the anticipated future tax benefits, including upon certain mergers, asset sales, other forms of business combinations or other changes of control (with certain exceptions, such as the Merger Distribution and the Merger), if we materially breach any of our material obligations under the Tax Receivable Agreement, or if, at any time, we elect an early termination of the Tax Receivable Agreement. The amount of any such payment would be based on certain assumptions, including that we (or our successor) would have sufficient taxable income to fully utilize the deductions arising from the increased tax deductions and tax basis and other benefits related to entering into the Tax Receivable Agreement. As a result, we could be required to make payments under the Tax Receivable Agreement that are greater than or less than the percentage specified in the Tax Receivable Agreement of the actual benefits that we realize in respect of the tax attributes that are subject to the Tax Receivable Agreement and the upfront payment may be made years in advance of the actual realization of such future benefits (if any). If we were to elect to terminate the Tax Receivable Agreement immediately after this offering, based on the initial public offering price of $             per share of our Class A common stock (the midpoint of the estimated initial public offering price range set forth on the cover page of this prospectus), and a discount rate equal to SOFR plus 100 basis points, we estimate that we would be required to pay $             million in the aggregate under the Tax Receivable Agreement. In these situations, our obligations under the Tax Receivable Agreement could have a substantial negative impact on our liquidity, as well as our attractiveness as a target for an acquisition. In addition, we may not be able to finance our obligations under the Tax Receivable Agreement.

Additionally, if Flex undertakes a tax-free distribution of Yuma (or a corporation to which Yuma is contributed), and then causes Yuma (or such corporation) to merge or consolidate with us or with a wholly-owned subsidiary of ours in a tax-free transaction, our obligations under the Tax Receivable Agreement will not accelerate but Yuma can elect in its discretion to assign its rights under the Tax Receivable Agreement to another entity (including an affiliate of Flex) prior to such distribution. If Yuma (or a corporation to which Yuma is contributed) makes this election and assigns its rights under the Tax Receivable Agreement to another entity, we would not be entitled to any payments under the Tax Receivable Agreement nor would this eliminate any of our obligations under the Tax Receivable Agreement, even though Yuma (or such corporation) would be merged with us or with a wholly-owned subsidiary of ours.

Payments under the Tax Receivable Agreement will generally be based on the tax reporting positions that we determine except with respect to the agreed tax treatment provided for in the Tax Receivable Agreement. The Tax Receivable Agreement and the TRA Side Letter (as defined below, treated as part of the Tax Receivable Agreement) provide that the parties will treat payments under the Tax Receivable Agreement and TRA Side Letter that are attributable to certain tax benefits from exchanges of LLC Units under the Exchange Agreement and from the purchase of LLC Units from Yuma (with the net proceeds of this offering) as upward purchase price adjustments to the extent permitted by law and other than amounts treated as interest under the Code. We will not be reimbursed for any payments previously made under the Tax Receivable Agreement, even if the tax benefits underlying such payment are disallowed (although future amounts otherwise payable under the Tax Receivable Agreement may be reduced as a result thereof). In addition, the actual state or local tax savings we realize may be different than the amount of such tax savings we are deemed to realize under the Tax Receivable Agreement, which will be based on an assumed combined state and local tax rate applied to our reduction in taxable income as determined for U.S. federal income tax purposes as a result of the Tax Receivable Agreement. As a result, in certain circumstances, payments could be made under the Tax Receivable Agreement in excess of the benefits that we actually realize in respect of the tax attributes subject to the Tax Receivable Agreement.

 

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Risks Related to Our Indebtedness and Financing

Our indebtedness could adversely affect our financial flexibility, financial condition and our competitive position.

In connection with the Transactions, we expect to incur substantial indebtedness under the 2023 Credit Agreement. The borrower will be the LLC and the obligations of the borrower under the 2023 Credit Agreement will be jointly and severally guaranteed by us and certain of the LLC’s existing and future direct and indirect wholly-owned domestic subsidiaries, subject to certain exceptions. Our level of indebtedness increases the risk that we may be unable to generate cash sufficient to pay amounts due in respect of our indebtedness. Our indebtedness could have other important consequences to you and significant effects on our business. For example, it could:

 

 

increase our vulnerability to adverse changes in general economic, industry and competitive conditions;

 

 

require us to dedicate a substantial portion of our cash flow from operations to make payments on our indebtedness, thereby reducing the availability of our cash flow to fund working capital, capital expenditures and other general corporate purposes;

 

 

limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate;

 

 

restrict us from exploiting business opportunities;

 

 

make it more difficult to satisfy our financial obligations, including payments on our indebtedness;

 

 

place us at a disadvantage compared to our competitors that have less debt; and

 

 

limit our ability to borrow additional funds for working capital, capital expenditures, acquisitions, debt service requirements, execution of our business strategy or other general corporate purposes.

In addition, the agreement governing the 2023 Credit Agreement contains, and the agreements evidencing or governing any other future indebtedness may contain, restrictive covenants that will limit our ability to engage in activities that may be in our long-term best interests. Our failure to comply with those covenants could result in an event of default which, if not cured or waived, could result in the acceleration of all of our indebtedness. In addition, a default by us under the agreement governing the 2023 Credit Agreement or an agreement governing any other future indebtedness may trigger cross-defaults under any other future agreements governing our indebtedness. Upon the occurrence of an event of default or cross-default under any of the present or future agreements governing our indebtedness, the lenders could elect to declare all amounts outstanding to be due and payable and exercise other remedies as set forth in the agreements. If any of our indebtedness were to be accelerated, there can be no assurance that our assets would be sufficient to repay this indebtedness in full, which could have a material adverse effect on our ability to continue to operate as a going concern.

The agreement governing the 2023 Credit Agreement contains, and the agreements evidencing or governing any other future indebtedness may contain, financial restrictions on us and our subsidiaries, including restrictions on our or our subsidiaries’ ability to, among other things:

 

 

place liens on our or our subsidiaries’ assets;

 

 

incur additional indebtedness;

 

 

change the nature of our business; and

 

 

change our or our subsidiaries’ fiscal year or organizational documents.

 

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Our substantial indebtedness could adversely affect our financial condition.

Our indebtedness could limit our ability to obtain additional financing for working capital, capital expenditures, acquisitions, debt service requirements, stock repurchases or other purposes. It may also increase our vulnerability to adverse economic, market and industry conditions, limit our flexibility in planning for, or reacting to, changes in our business operations or to our industry overall, and place us at a disadvantage in relation to our competitors that have lower debt levels. Any or all of the above events and/or factors could have an adverse effect on our results of operations and financial condition.

Servicing our debt requires a significant amount of cash, and we may not have sufficient cash flow from our business to pay our substantial debt.

The LLC’s ability to make scheduled payments of the principal of, to pay interest on or to refinance our indebtedness, depends on our future performance, which is subject to economic, financial, competitive and other factors beyond our control. Our business may not continue to generate cash flow from operations in the future sufficient to service our debt and make necessary capital expenditures. If we are unable to generate such cash flow, we may be required to adopt one or more alternatives, such as selling assets, restructuring debt or obtaining additional equity capital on terms that may be onerous or highly dilutive. Our ability to refinance our indebtedness will depend on the capital markets and our financial condition at such time. We may not be able to engage in any of these activities or engage in these activities on desirable terms, which could result in a default on our debt obligations.

We may still incur substantially more debt or take other actions which would intensify the risks discussed above.

We and our subsidiaries may be able to incur substantial additional debt in the future, subject to the restrictions contained in our debt instruments, some of which may be secured debt. Our 2023 Credit Agreement restricts our ability to incur additional indebtedness, including secured indebtedness, but if the facility matures or is repaid, we may not be subject to such restrictions under the terms of any subsequent indebtedness.

Risks related to our Class A common stock and this offering

There has been no prior public market for our Class A common stock and an active trading market may not develop.

Prior to this offering, there has been no public market for our Class A common stock. An active trading market may not develop following completion of this offering or, if developed, may not be sustained. The lack of an active trading market may impair the value of your shares and your ability to sell your shares at the time you wish to sell them. An inactive trading market may also impair our ability to both raise capital by selling shares of Class A common stock and acquire other complementary technologies or businesses by using our shares of Class A common stock as consideration.

Upon closing of this offering, we expect that our Class A common stock will be listed on Nasdaq. If we fail to satisfy the continued listing standards of Nasdaq, however, we could be de-listed, which would negatively impact the trading price and liquidity of our Class A common stock.

We expect that the price of our Class A common stock will fluctuate substantially and you may not be able to sell the shares you purchase in this offering at or above the offering price.

The initial public offering price for the shares of our Class A common stock sold in this offering is determined by negotiation between the representatives of the underwriters, Flex, TPG and us. This price may not reflect the

 

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market price of our Class A common stock following this offering. In addition, the market price of our Class A common stock is likely to be highly volatile and may fluctuate substantially due to many factors, including:

 

 

volume and customer mix for our products;

 

 

the introduction of new products by us or others in our industry;

 

 

disputes or other developments with respect to our or others’ intellectual property rights;

 

 

product liability claims or other litigation;

 

 

quarterly variations in our results of operations or those of others in our industry;

 

 

media exposure of our products or of those of others in our industry;

 

 

changes in governmental regulations or in the status of our regulatory approvals or applications;

 

 

changes in earnings estimates or recommendations by securities analysts;

 

 

general market conditions and other factors, including factors unrelated to our operating performance or the operating performance of our competitors;

 

 

changes in our capital structure or dividend policy, including as a result of future issuances of securities, sales of large blocks of Class A common stock by our stockholders, including Flex and our employees, or our incurrence of debt; and

 

 

announcements or actions taken by Flex as our controlling stockholder.

In recent years, the stock markets generally have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of those companies. Broad market and industry factors may significantly affect the market price of our Class A common stock, regardless of our actual operating performance. These fluctuations may be even more pronounced in the trading market for our Class A common stock shortly following this offering. If the market price of shares of our Class A common stock after this offering does not ever exceed the initial public offering price, you may not realize any return on your investment in us and may lose some or all of your investment.

In addition, in the past, class action litigation has often been instituted against companies whose securities have experienced periods of volatility in market price. Securities litigation brought against us following volatility in our stock price, regardless of the merit or ultimate results of such litigation, could result in substantial costs, which would harm our financial condition and operating results and divert management’s attention and resources from our business.

We cannot predict the effect our multi-class share structure may have on the market price of our Class A common stock.

We cannot predict whether our multi-class share structure will result in a lower or more volatile market price of our Class A common stock, adverse publicity or other adverse consequences. For example, certain index providers have announced restrictions on including companies with multi-class share structures in certain of their indices. Affected indices include the S&P 500, S&P MidCap 400, and S&P SmallCap 600, which together make up the S&P Composite 1500. Under such policies, the multi-class structure of our common stock would make us ineligible for inclusion in certain indices and, as a result, mutual funds, exchange-traded funds, and other investment vehicles that attempt to track those indices would not invest in our Class A common stock. It is unclear what effect, if any, these policies will have on the valuations of publicly-traded companies excluded

 

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from such indices, but it is possible that they may depress valuations, as compared to similar companies that are included. Given the sustained flow of investment funds into passive strategies that seek to track certain indices, exclusion from certain stock indices would likely preclude investment by many of these funds and could make our Class A common stock less attractive to other investors. In addition, several stockholder advisory firms and large institutional investors oppose the use of multi-class share structures. As a result, our multi-class share structure may cause stockholder advisory firms to publish negative commentary about our corporate governance practices or otherwise seek to cause us to change our capital structure, and may result in large institutional investors not purchasing shares of our Class A common stock. As a result of the foregoing factors, the market price and trading volume of our Class A common stock could be adversely affected.

Securities analysts may not publish favorable research or reports about our business or may publish no information at all, which could cause our stock price or trading volume to decline.

If a trading market for our Class A common stock develops, it will be influenced to some extent by the research and reports that industry or financial analysts publish about us and our business. We do not control these analysts. As a newly public company, we may be slow to attract research coverage and the analysts who publish information about our Class A common stock will have had relatively little experience with us, which could affect their ability to accurately forecast our results and could make it more likely that we fail to meet their estimates. In the event we obtain securities or industry analyst coverage, if any of the analysts who cover us provide inaccurate or unfavorable research or issue an adverse opinion regarding our stock price, our stock price could decline. If one or more of these analysts cease coverage of us or fail to publish reports covering us regularly, we could lose visibility in the market, which in turn could cause our stock price or trading volume to decline.

The unaudited pro forma combined financial statements included in this prospectus are presented for informational purposes only and may not be an indication of our financial condition or results of operations in the future.

The unaudited pro forma combined financial statements included in this prospectus are presented for informational purposes only and are not necessarily indicative of what our actual financial condition or results of operations would have been had the separation been completed on the date indicated. The assumptions used in preparing the pro forma financial information may not prove to be accurate and other factors may affect our financial condition or results of operations. Accordingly, our financial condition and results of operations in the future may not be evident from or consistent with such pro forma financial information.

If our estimates or judgments relating to our critical accounting policies are based on assumptions that change or prove to be incorrect, our operating results could fall below the expectations of securities analysts and investors, resulting in a decline in the market price of our Class A common stock.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in our financial statements and accompanying notes. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets, liabilities, equity, revenue and expenses that are not readily apparent from other sources. It is possible that interpretation, industry practice and guidance may evolve over time. If our assumptions change or if actual circumstances differ from our assumptions, our operating results may be adversely affected and could fall below the expectations of securities analysts and investors, resulting in a decline in the market price of our Class A common stock.

If you purchase our Class A common stock in this offering, you will incur immediate and substantial dilution in the book value of your shares.

Investors purchasing Class A common stock in this offering will pay a price per share that substantially exceeds the pro forma as adjusted net tangible book value per share. As a result, investors purchasing Class A common

 

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stock in this offering will incur immediate dilution of $        per share, at the initial public offering price of $                per share, which is the midpoint of the estimated initial public offering price range set forth on the cover page of this prospectus, and our pro forma as adjusted net tangible book value per share as of September 30, 2022. For additional information on the dilution you may suffer as a result of investing in this offering, see the section entitled “Dilution.”

This dilution is due to the substantially lower price paid by Flex and TPG for their shares of our Class B common stock purchased prior to this offering as compared to the price offered to the public in this offering for our Class A common stock.

A significant portion of our total outstanding shares are restricted from immediate resale but may be sold into the market in the near future. Future sales or other distributions of shares of our Class A common stock could cause the market price of our Class A common stock to drop significantly, even if our business is doing well.

Sales of a substantial number of shares of our Class A common stock in the public market could occur at any time. These sales, or the perception in the market that the holders of a large number of shares intend to sell their shares, could result in a decrease in the market price of our Class A common stock. Immediately after this offering, we will have                 outstanding shares of Class A common stock. This includes the shares that we are selling in this offering, which may be resold in the public market immediately without restriction, unless purchased by our affiliates. Of the remaining shares,                 shares are currently restricted as a result of securities laws or 180-day lock-up agreements but will be able to be sold after the offering as described in the section entitled “Shares available for future sale.”

Subject to the restrictions described in the paragraph below, future sales of shares of our Class A common stock in the public market by Flex and TPG will be subject to the volume and other restrictions of Rule 144 under the Securities Act of 1933, as amended (the “Securities Act”), for so long as Flex or TPG, respectively, is deemed to be our affiliate, unless the shares to be sold are registered with the Securities and Exchange Commission (the “SEC”). After this offering, certain affiliates of Flex and TPG have rights, subject to some conditions, to require us to file registration statements covering its shares or to include its shares in registration statements that we may file for ourselves or other stockholders as described in the section entitled “Certain relationships and related party transactions—Registration rights agreement.” We are unable to predict whether or when Flex or TPG will sell or otherwise dispose of shares of our Class A or Class B common stock. The sale or other disposition by Flex or TPG of a substantial number of shares after this offering, or a perception that such sales or other dispositions could occur, could significantly reduce the market price of our Class A common stock.

In addition, we, certain of our officers and directors, Flex and TPG have agreed with the underwriters that, without the prior written consent of J.P. Morgan Securities LLC, we and they will not, subject to certain exceptions and extensions, during the period ending 180 days after the date of this prospectus, offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase or otherwise transfer or dispose of, directly or indirectly, or enter into any swap or other agreement that transfers to another, in whole or in part, any of the economic consequences of ownership of shares of our common stock or any securities convertible into or exercisable or exchangeable for shares of our common stock or publicly disclose the intention to make any such offer, sale, pledge or disposition. J.P. Morgan Securities LLC may, in its sole discretion and at any time without notice, release all or any portion of the shares of our common stock subject to the lock-up.

In connection with this offering, we are filing a registration statement on Form S-8 registering under the Securities Act the shares of our Class A common stock reserved for issuance under our Equity Incentive Plan. Once we register these shares, they can be freely sold in the public market, subject to volume limitations applicable to affiliates and the lock-up agreements described above.

 

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We expect to incur significant additional costs as a result of being a public company, which may adversely affect our business, financial condition and results of operations.

Upon completion of this offering, we expect to incur costs associated with corporate governance requirements that will become applicable to us as a public company, including rules and regulations of the SEC, under the Sarbanes-Oxley Act of 2002, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, and the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as well as the rules of Nasdaq. These rules and regulations are expected to significantly increase our accounting, legal and financial compliance costs and make some activities more time-consuming. We also expect these rules and regulations to make it more expensive for us to maintain directors’ and officers’ liability insurance. As a result, it may be more difficult for us to attract and retain qualified persons to serve on our board of directors or as executive officers. Accordingly, increases in costs incurred as a result of becoming a publicly traded company may adversely affect our business, financial condition and results of operations.

If we experience material weaknesses in the future or otherwise fail to maintain an effective system of internal controls in the future, we may not be able to accurately report our financial condition or results of operations, which may adversely affect investor confidence in us and, as a result, the value of our Class A common stock.

As a result of becoming a public company, we will be required, under Section 404 of the Sarbanes-Oxley Act of 2002, to furnish a report by management on, among other things, the effectiveness of our internal control over financial reporting beginning with our Annual Report on Form 10-K for the year ending March 31, 2024. This assessment will need to include disclosure of any material weaknesses identified by our management in our internal control over financial reporting. A material weakness is a deficiency or combination of deficiencies in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of a company’s annual and interim financial statements will not be detected or prevented on a timely basis.

We are further enhancing internal controls, processes and related documentation necessary to perform the evaluation needed to comply with Section 404. We may not be able to complete our evaluation, testing and any required remediation in a timely fashion. During the evaluation and testing process, if we identify one or more material weaknesses in our internal control over financial reporting, we will be unable to assert that our internal controls are effective. The effectiveness of our controls and procedures may be limited by a variety of factors, including:

 

 

faulty human judgment and simple errors, omissions or mistakes;

 

 

fraudulent action of an individual or collusion of two or more people;

 

 

inappropriate management override of procedures; and

 

 

the possibility that any enhancements to controls and procedures may still not be adequate to assure timely and accurate financial control.

Our auditors will be required to express an opinion on the effectiveness of our internal controls. If we are unable to confirm that our internal control over financial reporting is effective, or if our independent registered public accounting firm is unable to express an opinion on the effectiveness of our internal controls, we could lose investor confidence in the accuracy and completeness of our financial reports, which could cause the price of our Class A common stock to decline.

Our disclosure controls and procedures may not prevent or detect all errors or acts of fraud.

Upon the closing of this offering, we will become subject to the periodic reporting requirements of the Exchange Act. We designed our disclosure controls and procedures to provide reasonable assurance that information we

 

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must disclose in reports we file or submit under the Exchange Act is accumulated and communicated to management, and recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. We believe that any disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by an unauthorized override of the controls. Accordingly, because of the inherent limitations in our control system, misstatements due to error or fraud may occur and not be detected.

Provisions in our corporate charter documents and under Delaware law and certain contractual rights granted to Flex could make an acquisition of us more difficult and may prevent attempts by our stockholders to replace or remove our current management.

Provisions in our amended and restated certificate of incorporation and our amended and restated bylaws that will become effective upon the closing of this offering and certain contractual rights that have been granted to Flex under the separation agreement may discourage, delay or prevent a merger, acquisition or other change in control of us that stockholders may consider favorable, including transactions in which stockholders might otherwise receive a premium for their shares. These provisions could also limit the price that investors might be willing to pay in the future for shares of our Class A common stock, thereby depressing the market price of our Class A common stock. In addition, these provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors. Because our board of directors is responsible for appointing the members of our management team, these provisions could in turn affect any attempt by our stockholders to replace current members of our management team.

Moreover, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which prohibits a person who owns in excess of 15% of our outstanding voting stock from merging or combining with us for a period of three years after the date of the transaction in which the person acquired in excess of 15% of our outstanding voting stock, unless the merger or combination is approved in a prescribed manner.

Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware will be the sole and exclusive forum for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.

Our amended and restated certificate of incorporation that will become effective upon the closing of this offering specifies that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware (or, if the Court of Chancery does not have jurisdiction, another state court in Delaware or the federal district court for the District of Delaware) will be the sole and exclusive forum for most legal actions involving actions brought against us by stockholders. Notwithstanding the foregoing, the exclusive forum provision will not apply to any claim to enforce any liability or duty created by the Exchange Act or any other claim for which the U.S. federal courts have exclusive jurisdiction. Our amended and restated certificate of incorporation will further provide that the federal district courts of the United States of America will be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act. We believe this exclusive forum provisions benefits us by providing increased consistency in the application of Delaware law by chancellors particularly experienced in resolving corporate disputes, efficient administration of cases on a more expedited schedule relative to other forums and protection against the burdens of multi-forum litigation. However, such provisions may have the effect of discouraging lawsuits against our directors

 

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and officers. The enforceability of similar choice of forum provisions in other companies’ certificates of incorporation has been challenged in legal proceedings, and it is possible that, in connection with any applicable action brought against us, a court could find the choice of forum provisions contained in our amended and restated certificate of incorporation to be inapplicable or unenforceable in such action.

Claims for indemnification by our directors and officers may reduce our available funds to satisfy successful third-party claims against us and may reduce the amount of money available to us.

Our amended and restated certificate of incorporation that will be in effect at the closing of this offering provides that we will indemnify our directors and officers to the fullest extent permitted by Section 145 of the Delaware General Corporate Law.

In addition, as permitted by the Delaware General Corporate Law, our amended and restated certificate of incorporation and our indemnification agreements that we have entered into with our directors and officers provide that:

 

 

we will indemnify our directors and officers for serving us in those capacities or for serving other business enterprises at our request, to the fullest extent permitted by applicable law. Such law provides that a corporation may indemnify such person if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to our best interests and, with respect to any criminal proceeding, had no reasonable cause to believe such person’s conduct was unlawful;

 

 

we may, in our discretion, indemnify employees and agents in those circumstances where indemnification is permitted by applicable law;

 

 

we are required to advance expenses, as incurred, to our directors and officers in connection with defending a proceeding, except that such directors or officers shall undertake to repay such advances if it is ultimately determined that such person is not entitled to indemnification;

 

 

the rights conferred in our amended and restated certificate of incorporation are not exclusive, and we are authorized to enter into indemnification agreements with our directors, officers, employees and agents and to obtain insurance to indemnify such persons; and

 

 

we may not retroactively amend our amended and restated certificate of incorporation provisions to reduce our indemnification obligations to directors, officers, employees and agent.

General risk factors

If we fail to manage our future growth effectively, we may be unable to execute our business plan, maintain high levels of customer service or adequately address competitive challenges.

We have experienced significant growth in recent periods. We intend to continue to expand our business significantly within existing and new markets. This growth has placed, and any future growth may place, a significant strain on our management, operational and financial infrastructure. In particular, we will be required to expand, train and manage our growing employee base and scale and improve our IT infrastructure in tandem with that headcount growth. Our management will also be required to maintain and expand our relationships with customers, suppliers and other third parties and attract new customers and suppliers, as well as manage multiple geographic locations.

Our current and planned operations, personnel, IT and other systems and procedures might be inadequate to support our future growth and may require us to make additional unanticipated investment in our infrastructure. Our success and ability to further scale our business will depend, in part, on our ability to

 

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manage these changes in a cost-effective and efficient manner. If we cannot manage our growth effectively, we may be unable to take advantage of market opportunities, execute our business strategies or respond to competitive pressures. This could also result in declines in quality or customer satisfaction, increased costs, difficulties in introducing new offerings or other operational difficulties. Any failure to effectively manage growth could adversely impact our business and reputation.

If we fail to retain our key personnel or if we fail to attract additional qualified personnel, we may not be able to achieve our anticipated level of growth and our business could suffer.

Our future success and ability to implement our business strategy depends, in part, on our ability to attract and retain key personnel, and on the continued contributions of members of our senior management team and key technical personnel, each of whom would be difficult to replace. All of our employees, including our senior management, are free to terminate their employment relationships with us at any time. Competition for highly skilled individuals with technical expertise is extremely intense, and we face challenges identifying, hiring and retaining qualified personnel in many areas of our business. Integrating new employees into our team could prove disruptive to our operations, require substantial resources and management attention and ultimately prove unsuccessful. An inability to retain our senior management and other key personnel or to attract additional qualified personnel could limit or delay our strategic efforts, which could have a significant and adverse effect on our business, financial condition, results of operations and prospects.

 

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Special note regarding forward-looking statements

Certain statements included in this prospectus are “forward-looking statements” within the meaning of the United States federal securities laws. All statements other than historical factual information are forward-looking statements, including without limitation statements regarding: our future financial performance, cash flows, liquidity position or other results; our management’s plans and strategies for future operations, including statements relating to anticipated operating performance, cost reductions, restructuring activities, new product and service developments, competitive strengths or market position, acquisitions and the integration thereof, divestitures, spin-offs, split-offs or other distributions, strategic opportunities, securities offerings, stock repurchases, dividends and executive compensation; the effects of the Transactions on our business; expected payments under the Tax Receivable Agreement; growth, declines and other trends in markets we sell into; new or modified laws, regulations and accounting pronouncements; future regulatory approvals and the timing thereof; outstanding claims, legal proceedings, tax audits and assessments and other contingent liabilities; future tax rates, tax credits and other tax provisions; future foreign currency exchange rates and fluctuations in those rates; general economic and capital markets conditions; the anticipated timing of any of the foregoing; assumptions underlying any of the foregoing; and any other statements that address events or developments that we intend or believe will or may occur in the future. Terminology such as “will,” “may,” “should,” “could,” “would,” “believe,” “anticipate,” “intend,” “plan,” “expect,” “estimate,” “project,” “target,” “possible,” “potential,” “forecast” and “positioned” and similar references to future periods are intended to identify forward-looking statements, although not all forward-looking statements are accompanied by such words. Forward-looking statements are based on assumptions and assessments made by our management in light of their experience and perceptions of historical trends, current conditions, expected future developments and other factors they believe to be appropriate, and speak only as of the date of this prospectus.

Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or other events to be materially different from any future results, performance or other events expressed or implied by the forward-looking statements. Given these uncertainties, you should not place undue reliance on forward-looking statements. You should read this prospectus and the documents that we have filed as exhibits to the registration statement, of which this prospectus is a part, completely and with the understanding that our actual future results, performance or other events may be materially different from what we expect.

Important factors that could cause actual results, performance or other events to differ materially from our expectations include:

 

 

the demand for solar energy and, in turn, our products;

 

 

competitive pressures within the solar tracker industry;

 

 

competition from conventional and other renewable energy sources;

 

 

variability in our results of operations, including as a result of fluctuations in our customers’ businesses as well as seasonal weather-related disruptions;

 

 

the reduction, elimination or expiration of government incentives for, or regulations mandating the use of, renewable energy and solar energy;

 

 

our reliance on our suppliers and any problems with our suppliers or disruptions in our supply chain;

 

 

our ability to establish U.S. or foreign supplier manufacturing rapidly in response to business conditions or criteria for government incentives;

 

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changes in the global trade environment, including the imposition of import tariffs or bans;

 

 

the impact of the COVID-19 pandemic on our business, results of operations and financial condition;

 

 

a further increase in interest rates, or a reduction in the availability of tax equity or project debt financing, impacting the ability of project developers and owners to finance the cost of a solar energy system;

 

 

a loss of one or more of our significant customers, their inability to perform under their contracts, or their default in payment to us;

 

 

defects or performance problems in our products;

 

 

delays, disruptions or quality control problems in our product development operations;

 

 

global disruption caused by the Russian invasion of Ukraine;

 

 

pressure on margins or the availability of solar project financing due to inflation;

 

 

severe weather events, natural disasters and other catastrophic events;

 

 

our continued expansion into new markets;

 

 

our indebtedness;

 

 

electric utility industry policies and regulations;

 

 

decreases in the price of electricity;

 

 

our failure to protect our intellectual property and trade secrets or to successfully defend against third-party claims of infringement;

 

 

cybersecurity or other data incidents; and

 

 

the other risks and uncertainties set forth in the section entitled “Risk factors.”

Except as required by law, we assume no obligation to update these forward-looking statements, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future.

 

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Market and industry data

We use market data and industry forecasts and projections throughout this prospectus, and in particular in the sections entitled “Prospectus summary” and “Business.” We have obtained the market data from certain third-party sources of information, including publicly available industry publications and subscription-based publications, including the following:

 

 

International Energy Agency, Renewables 2022, December 2022, all rights reserved

 

 

International Renewable Energy Agency, Battery Storage Paves Way for a Renewable-powered Future, March 2020

 

 

Joule, a Cell Press Journal, Global Techno-Economic Performance of Bifacial and Tracking Photovoltaic Systems, July 2020

 

 

Lazard Ltd., Levelized Cost of Energy version 15.0, October 2021

 

 

Renewables Now, Renewables 2020 Global Status Report, 2020

 

 

U.S. Energy Information Administration, Electric Power Monthly with Data for May 2022, July 2022

 

 

U.S. Energy Information Administration, Coal will account for 85% of U.S. electric generating capacity retirements in 2022, January 2022

 

 

Wood Mackenzie Ltd., Global solar PV market outlook update: Q4 2022, December 2022

 

 

Wood Mackenzie Ltd., Global solar PV system price: country breakdowns and forecasts, April 2022

 

 

Wood Mackenzie Ltd., Global Solar PV Tracker Landscape 2022 and Associated Data, December 2022

 

 

Wood Mackenzie Ltd., Global solar PV tracker market share 2022, June 2022

Industry forecasts are based on surveys and the preparer’s expertise and there can be no assurance that any of the industry forecasts will be achieved. We believe these data are reliable, but we have not independently verified the accuracy of this information nor have we ascertained the underlying economic assumptions relied thereon. Any industry forecasts are based on data (including third-party data), models and experience of various professionals and are based on various assumptions, all of which are subject to change without notice. While we are not aware of any misstatements regarding the market data presented herein, industry forecasts and projections involve risks and uncertainties and are subject to change based on various factors, including those discussed under “Risk factors.”

 

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Use of proceeds

We expect to receive net proceeds from this offering of approximately $    million (or approximately $                million if the underwriters exercise in full their option to purchase additional shares of Class A common stock), based upon an initial public offering price of $             per share, which is the midpoint of the estimated initial public offering price range set forth on the cover page of this prospectus, after deducting the estimated underwriting discount and estimated offering expenses payable by us.

We will use all of the net proceeds from this offering to purchase                 LLC Common Units from Yuma (or                LLC Common Units if the underwriters exercise in full their option to purchase additional shares of Class A common stock) at a price per unit equal to the initial public offering price per share of Class A common stock in this offering less the underwriting discount. We will not retain any of the net proceeds of this offering.

 

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Our organizational structure

Incorporation of Nextracker Inc.

Nextracker Inc., a Delaware corporation, was formed on December 19, 2022 and is the issuer of the Class A common stock offered by this prospectus. Prior to this offering and the Transactions, all of our business operations have been conducted through the LLC (formerly known as NEXTracker Inc.) and its direct and indirect subsidiaries. Nextracker Inc. has not engaged in any material business or other activities except in connection with its formation and the Transactions.

The TPG investment

On February 1, 2022, Flex sold the LLC Preferred Units representing a 16.7% limited liability company interest of the LLC to TPG resulting in TPG holding all of the outstanding LLC Preferred Units and subsidiaries of Flex holding all of the outstanding LLC Common Units. Immediately prior to this offering, as a result of accrued distributions paid in kind in respect of TPG’s outstanding LLC Preferred Units, TPG owned, through one or more subsidiaries, a             % limited liability company interest in the LLC.

The Transactions

We will complete the following organizational and other transactions in connection with this offering:

 

 

We will amend and restate Nextracker Inc.’s certificate of incorporation to, among other things, provide for Class A common stock and Class B common stock, with each share entitling its holder to one vote on all matters presented to our stockholders generally, and provide that shares of Class B common stock may only be held by Yuma, Yuma Sub, TPG and each of their permitted transferees;

 

 

We will issue                shares of our Class A common stock to the purchasers in this offering (or                shares if the underwriters exercise in full their option to purchase additional shares of Class A common stock) in exchange for net proceeds therefrom of approximately $                million (or approximately $                million if the underwriters exercise in full their option to purchase additional shares of Class A common stock), based upon an assumed initial public offering price of $                per share (which is the midpoint of the estimated initial public offering price range set forth on the cover page of this prospectus), less the underwriting discount and estimated offering expenses payable by us;

 

 

We will issue                shares of our Class B common stock to Yuma, Yuma Sub and TPG in exchange for cash consideration, which number of shares shall be equal to the number of LLC Common Units held directly or indirectly by Yuma, Yuma Sub and TPG immediately following the Transactions, and we will repurchase all of the shares of our common stock previously issued to Yuma for cash consideration;

 

 

In connection with this offering, the LLC Preferred Units held by TPG will be automatically converted into a certain number of LLC Common Units which are exchangeable, together with a corresponding number of shares of Class B common stock, for shares of our Class A common stock (or cash). Notwithstanding the foregoing, as permitted under and in accordance with the Prior LLC Agreement, TPG has exercised its right to have certain blocker corporations affiliated with TPG each merge with a separate direct, wholly-owned subsidiary of Nextracker Inc., with the blocker corporations surviving each such merger, in a transaction intended to qualify as a tax-free transaction, with the investors in each such blocker corporation being entitled to a number of shares of Nextracker Inc. Class A common stock with a value based on the LLC Preferred Units held by such blocker corporation;

 

 

We will use all of the net proceeds from this offering as consideration for Yuma’s transfer to us of                LLC Common Units (or                LLC Common Units if the underwriters exercise in full their option

 

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to purchase additional shares of Class A common stock) at a price per unit equal to the initial public offering price per share of Class A common stock in this offering less the underwriting discount;

 

 

We will be appointed as the managing member of the LLC;

 

 

We, the LLC, Yuma, Yuma Sub and TPG will enter into the Exchange Agreement under which Yuma, Yuma Sub and TPG (or certain permitted transferees thereof) will have the right, subject to the terms of the Exchange Agreement, to require the LLC to exchange LLC Common Units (together with a corresponding number of shares of Class B common stock) for newly-issued shares of Class A common stock on a one-for-one basis, or, in the alternative, we may elect to exchange such LLC Common Units (together with a corresponding number of shares of Class B common stock) for cash equal to the product of (i) the number of LLC Common Units (together with a corresponding number of shares of Class B common stock) being exchanged, (ii) the then-applicable exchange rate under the Exchange Agreement (which will initially be one and is subject to adjustment) and (iii) the Class A common stock value (based on the market price of our Class A common stock), subject to customary conversion rate adjustments for stock splits, stock dividends, reclassifications and other similar transactions; provided further, that in the event of an exchange request by an exchanging holder, Nextracker Inc. may at its option effect a direct exchange of shares of Class A common stock for LLC Common Units and shares of Class B common stock in lieu of such exchange or make a cash payment to such exchanging holder, in each case pursuant to the same economic terms applicable to an exchange between the exchanging holder and the LLC;

 

 

We, the LLC, Yuma, Yuma Sub, TPG and the TPG Affiliates will enter into the Tax Receivable Agreement that will provide for the payment by us to Yuma, Yuma Sub, TPG and the TPG Affiliates (or certain permitted transferees thereof) of 85% of the tax benefits, if any, that we are deemed to realize under certain circumstances as a result of (i) our allocable share of existing tax basis in tangible and intangible assets resulting from exchanges or acquisitions of the LLC Units, including as part of the Transactions or under the Exchange Agreement, (ii) increases in tax basis resulting from exchanges or acquisitions of the LLC Units and shares of Class B common stock (including as part of the Transactions or under the Exchange Agreement), (iii) certain pre-existing tax attributes of certain blocker corporations affiliated with TPG that will each merge with a separate direct, wholly-owned subsidiary of us, or contributed to us, as part of the Transactions, and (iv) certain other tax benefits related to our entering into the Tax Receivable Agreement, including tax benefits attributable to payments under the Tax Receivable Agreement

 

 

We, Yuma, Yuma Sub and TPG will enter into a registration rights agreement pursuant to which we will grant such parties (and their transferees, if any) certain registration rights with respect to any of our Class A common stock owned by them (including upon exchange of LLC Common Units and shares of Class B common stock held by them). See the section entitled “Certain relationships and related party transactions—Agreements with Flex—Registration rights agreement.”

We collectively refer to the foregoing organizational and other transactions, including the 2023 Credit Agreement, the Distribution and this offering as the “Transactions.”

Immediately following the completion of the Transactions (including this offering):

 

 

Nextracker Inc. will be a holding company and its principal asset will be the LLC Units it purchases from Yuma;

 

 

Nextracker Inc. will be the managing member of the LLC and will control the business and affairs of the LLC and its subsidiaries;

 

 

Nextracker Inc. will own                LLC Common Units, representing approximately    % of the economic interest in the business of the LLC (or                LLC Common Units, representing approximately    % of the

 

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economic interest in the business of the LLC, if the underwriters exercise in full their option to purchase additional shares of Class A common stock);

 

 

The purchasers in this offering will own (i)                shares of Class A common stock of Nextracker Inc., representing approximately    % of the total outstanding shares of Nextracker Inc.’s common stock (or                shares of Class A common stock, representing approximately                % of the total outstanding shares of Nextracker Inc.’s common stock, if the underwriters exercise in full their option to purchase additional shares of Class A common stock) and (ii) indirectly through Nextracker Inc.’s ownership of LLC Units, approximately                % of the economic interest in the business of the LLC (or approximately                % of the economic interest in the business of the LLC if the underwriters exercise in full their option to purchase additional shares of Class A common stock);

 

 

Flex (i) through Yuma and Yuma Sub, will own                shares of Class B common stock of Nextracker Inc., representing approximately                % of the total outstanding shares of Nextracker Inc.’s common stock (or                shares of Class B common stock, representing approximately                % of the total outstanding shares of Nextracker Inc.’s common stock, if the underwriters exercise in full their option to purchase additional shares of Class A common stock) and (ii) through Yuma and Yuma Sub, will own                LLC Common Units, representing approximately                % of the economic interest in the business of the LLC (or    LLC Common Units, representing approximately                % of the economic interest in the business of the LLC, if the underwriters exercise in full their option to purchase additional shares of Class A common stock); and

 

 

TPG will own (i)                shares of Class A common stock of Nextracker Inc., representing approximately    % of the total outstanding shares of Nextracker Inc.’s common stock (or                shares of Class A common stock, representing approximately                % of the total outstanding shares of Nextracker Inc.’s common stock, if the underwriters exercise in full their option to purchase additional shares of Class A common stock), (ii)                  shares of Class B common stock of Nextracker Inc., representing approximately     % of the total outstanding shares of Nextracker’s common stock (or                  shares of Class B common stock, representing approximately     % of the total outstanding shares of Nextracker Inc.’s outstanding common stock, if the underwriters exercise in full their option to purchase additional shares of Class A common stock), and (iii)                LLC Common Units representing approximately                % of the economic interest in the business of the LLC (or                LLC Common Units, representing approximately                 % of the economic interest in the business of the LLC, if the underwriters exercise in full their option to purchase additional shares of Class A common stock).

As the managing member of the LLC, we will operate and control all of the business and affairs of the LLC and, through the LLC and its direct and indirect subsidiaries, conduct our business. Immediately following the Transactions, including this offering, we will have the majority economic interest in the LLC and will control the management of the LLC as its managing member. As a result, we will consolidate the LLC and record a significant non-controlling interest in a consolidated entity in our consolidated financial statements for the economic interest in the LLC held directly or indirectly by Flex and TPG.

Subsequent distribution or dispositions

Distribution or Other Dispositions

The separation agreement provides that Flex may, in its sole discretion, determine: (i) whether to proceed with all or part of Distribution or Other Disposition, whether directly or through a distribution or disposition of the stock of Yuma, which directly or indirectly holds Flex’s beneficial interest in the LLC; and (ii) all terms of the Distribution or Other Disposition, as applicable, including the form, structure and terms of any transaction(s)

 

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and/or offering(s) to effect the Distribution or Other Disposition and the timing of and conditions to the consummation of the Distribution or Other Disposition. In addition, the separation agreement provides that in the event that Flex determines to proceed with any Distribution or Other Disposition, Flex may at any time and from time to time until the completion of such Distribution or Other Disposition abandon, modify or change any or all of the terms of such Distribution or Other Disposition, including by accelerating or delaying the timing of the consummation of all or part of such Distribution or Other Disposition. The separation agreement also provides that upon Flex’s request, we and the LLC will cooperate with Flex in all respects to accomplish the Distribution or Other Disposition and will, at Flex’s direction, promptly take any and all actions necessary or desirable to effect the Distribution or Other Disposition, including the registration under the Securities Act of the offering of our Class A common stock on an appropriate registration form or forms to be designated by Flex and the filing of any necessary documents pursuant to the Exchange Act.

Merger Agreement

In addition to our obligations with respect to any Distribution or Other Disposition, the separation agreement provides Flex with the right, exercisable at any time following this offering, to require us, following any dividend or distribution of the equity of Yuma to the holders of ordinary Flex shares, to, at Flex’s option, effect a merger of Yuma with a wholly-owned subsidiary of ours, with Yuma surviving as a wholly owned subsidiary of ours in a tax-free transaction under Section 368(a) of the Code. We have further agreed under the separation agreement to, at Flex’s request, at any time whether before or after this offering, fully cooperate with the Flex to submit an agreement and plan of merger to effect such merger for approval by our board of directors and stockholders and the board of directors and stockholders of such subsidiary, to the extent required under Delaware law, and cause such agreement and plan of merger to be executed and delivered by our authorized officers and the authorized officers of such subsidiary, and take all other actions reasonably necessary to adopt and approve such agreement and plan of merger, to be operative when and if Flex so elects to effect such merger following this offering.

As a result, prior to this offering, we, Flex, Yuma and Merger Sub, have entered into the merger agreement, pursuant to which, among other matters, Flex will have the right but not the obligation, to effect the Merger. The Merger would, on the terms and subject to the conditions set forth in the merger agreement, be effected immediately following the Merger Distribution, with such stock of Yuma being exchanged for shares of our Class A common stock in the Merger. The number of shares of our Class A common stock that would be issued to Yuma stockholders in the Merger would equal the number of shares of Class A common stock then held directly or indirectly by Yuma and its subsidiaries (assuming for such purposes that all LLC Units and shares of Class B common stock held directly or indirectly by Yuma and its subsidiaries have been exchanged for shares of Class A common stock as of immediately prior to the Merger pursuant to and in accordance with the Exchange Agreement).

Prior to this offering, we and each of Flex, Yuma and Merger Sub, and our stockholders and the stockholders of each of Yuma and Merger Sub, have approved the merger agreement and the transactions contemplated by the merger agreement, including the Merger. As a result, our stockholders following this offering will have no right to approve or disapprove of the Merger or the other transactions contemplated by the merger agreement or the issuance of shares of our Class A common stock to the holders of Yuma common stock in connection with the Merger. Further, our stockholders following this offering will have no right to appraisal under Section 262 of the DGCL or otherwise in connection with the Merger or the other transactions contemplated by the merger agreement.

 

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General

Flex has no obligation (pursuant to the merger agreement or otherwise) to pursue or consummate any further distribution or disposition of its retained beneficial interest in the LLC, including by means of a Distribution or Other Disposition or the Merger Distribution and the Merger, by any specified date or at all. If pursued, any such distribution or disposition would be subject to various conditions, including receipt of any necessary regulatory or other approvals, the existence of satisfactory market conditions and, if pursued, the Merger would be subject to the conditions set forth in the merger agreement (see the section entitled “Certain relationships and related party transactions—merger agreement” for additional detail regarding the conditions to the closing of the Merger set forth in the merger agreement).

The conditions to any such distribution or disposition, including by means of a Distribution or Other Disposition or the Merger Distribution and the Merger, may not be satisfied. Flex may decide not to consummate any distribution or disposition, including by means of a Distribution or Other Disposition or the Merger Distribution and the Merger, even if the conditions thereto are satisfied or Flex may decide to waive one or more of these conditions and consummate such a distribution or disposition, even if all of the conditions thereto are not satisfied.

Accordingly, we have no certainty when such transactions (and the effectiveness of our related obligations under the separation agreement and the merger agreement) will occur following this offering or if they will occur at all.

The following diagram sets forth a simplified view of our corporate structure after giving effect to the completion of the Transactions, including this offering. This chart is for illustrative purposes only and does not represent all legal entities affiliated with the entities depicted.

 

LOGO

 

Note:   For the purposes of this diagram only, shares of Class A common stock not outstanding and subject to options, warrants or other rights that will be outstanding upon completion of the Transactions are deemed outstanding for purposes of calculating the percentage total outstanding common stock and economic interest of the various entities depicted in the diagram.

 

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The separation agreements

We and the LLC entered into a separation agreement with Flex. The separation agreement sets forth our agreements with Flex regarding the principal actions to be taken in connection with the separation. It also sets forth other agreements that govern certain aspects of our relationship with Flex following the separation. The following are the principal steps of the separation:

 

 

Transfer of Assets and Liabilities—Pursuant to the separation agreement, Flex will transfer to us substantially all of the assets and liabilities comprising the legacy Nextracker business.

 

 

Transition Services Agreement—We and the LLC entered into a transition services agreement with Flextronics International USA, Inc. (“FIUI”), pursuant to which FIUI and its subsidiaries have agreed to provide us and our subsidiaries with various services.

 

 

Employee Matters Agreement—We and the LLC entered into an employee matters agreement with Flex that governs our and Flex’s compensation and employee benefit obligations with respect to the employees and other service providers of each company, and generally allocates liabilities and responsibilities relating to employment matters and employee compensation and benefit plans and programs.

 

 

Registration Rights Agreement—We, Yuma, Yuma Sub and TPG will enter into a registration rights agreement pursuant to which we will grant such parties (and their transferees, if any) certain registration rights with respect to any of our Class A common stock owned by them (including upon exchange of LLC Common Units and shares of Class B common stock held by them). See the section entitled “Certain relationships and related party transactions—Agreements with Flex—Registration rights agreement.”

 

 

Tax Receivable Agreement—We, the LLC, affiliates of Flex, TPG and the TPG Affiliates will enter into the Tax Receivable Agreement that will provide for the payment by us to Yuma, Yuma Sub, TPG and the TPG Affiliates (or certain permitted transferees thereof) of 85% of the tax benefits, if any, that we are deemed to realize under certain circumstances. See the section entitled “Certain relationships and related party transactions—other related party agreements—Tax receivable agreement.”

 

 

Merger Agreement—We, Flex, Yuma and Merger Sub entered into a merger agreement, pursuant to which, among other matters, Flex will have the right but not the obligation, to effect the Merger. See the section entitled “Certain relationships and related party transactions—other related party agreements—Merger agreement.”

 

 

Tax Matters Agreement—If Flex undertakes a spin-off transaction (including the Merger Distribution contemplated by the merger agreement), Flex, Yuma and we will enter into a tax matters agreement which will govern the rights, responsibilities and obligations of such parties with respect to taxes (including taxes arising in the ordinary course of business and taxes incurred as a result of the spin-off transaction), tax attributes, tax returns, tax contests and certain other matters.

 

For additional information regarding the separation agreement and such other agreements, refer to the sections entitled “Risk factors—Risks related to the Transactions and our relationship with Flex” and “Certain relationships and related party transactions—Agreements with Flex.”

 

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Dividend policy

Immediately prior to the consummation of this Offering, the LLC will make the Distribution in respect of the LLC Units in an aggregate amount of $175.0 million. With respect to such Distribution, $125.0 million shall be distributed to TPG, Yuma and Yuma Sub in accordance with their pro rata LLC Units and $50.0 million to Flex. The Distribution will be financed, in part, with net proceeds from a $150.0 million term loan under the 2023 Credit Agreement entered into by the LLC which will be guaranteed by Nextracker Inc., and various lenders party thereto. See the section entitled “Description of indebtedness.” We currently do not anticipate paying any cash distributions or dividends on our Class A common stock after this offering and for the foreseeable future. Holders of our Class B common stock are not entitled to participate in any dividends declared by our board of directors. The payment of any dividends on our Class A common stock in the future, and the timing and amount thereof, is within the discretion of our board of directors. The board’s decisions regarding the payment of dividends will depend on many factors, such as our financial condition, earnings, capital requirements, debt service obligations, restrictive covenants in our debt facilities, industry practice, legal requirements and other factors that our board deems relevant. Our ability to pay dividends will depend on our ongoing ability to generate cash from operations, the ability of the LLC to make distributions to us, and on our access to the capital markets for liquidity. We cannot guarantee that we will pay a dividend in the future or continue to pay any dividends if we commence paying dividends. See “Risk Factors—Risks Related to Our Business and Industry—In certain circumstances, the LLC will be required to make distributions to us, Yuma, Yuma Sub and TPG, and the distributions that the LLC will be required to make may be substantial and in excess of our tax liabilities and obligations under the Tax Receivables Agreement.” Under the LLC Agreement, the LLC generally is required from time to time to make pro rata cash distributions, or tax distributions, to the holders of LLC Units to help each of the holders of the LLC Units to pay taxes on such holder’s allocable share of taxable income of the LLC. Investors in our Class A common stock will not be entitled to receive any such distributions. Investors should not purchase our Class A common stock with the expectation of receiving cash dividends.

Subject to having available cash and subject to the limitations imposed by applicable law and contractual restrictions, the LLC Agreement requires the LLC to make certain distributions to each member of the LLC on a pro rata basis, including us, to facilitate their payment of taxes with respect to the income of the LLC that is allocated to them. See the section entitled “Certain relationships and related party transactions—Nextracker LLC agreement.” To the extent that the tax distributions we receive exceed the amount that we are actually required to pay for taxes, payments under the Tax Receivable Agreement and other expenses, we will not be required to distribute such excess cash. See the section entitled “Certain relationships and related party transactions—Other related party agreements—Tax receivable agreement.” Our board of directors may, in its sole discretion, choose to use such excess cash for any purpose depending upon the facts and circumstances at the time of determination.

 

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Capitalization

The following table sets forth our cash and cash equivalents and capitalization as of September 30, 2022:

 

 

on a historical basis;

 

 

on a pro forma basis giving effect to the separation (but prior to giving effect to the Transactions and this offering); and

 

 

on a pro forma as adjusted basis to give effect to the Transactions, including the incurrence of $150.0 million in proceeds under the 2023 Credit Facility to, in part, make the Distribution of $175.0 million in respect of the LLC Units, the sale by us of shares of Class A common stock in this offering and the application of the proceeds from this offering as described in the section entitled “Use of proceeds,” based on the initial public offering price of $             per share, which is the midpoint of the estimated initial public offering price range set forth on the cover page of this prospectus, and after deducting the underwriting discount.

The information below is not necessarily indicative of what our cash and cash equivalents and capitalization would have been had the Transactions been completed as of September 30, 2022. In addition, it is not indicative of our future cash and cash equivalents and capitalization. This table should be read in conjunction with the sections entitled “Unaudited pro forma combined financial statements,” “Selected historical combined financial data,” “Use of proceeds,” “Management’s discussion and analysis of financial condition and results of operations” and our unaudited condensed combined financial statements and notes thereto included elsewhere in this prospectus.

 

   
     As of September 30, 2022  

(Unaudited)

(In thousands, except share amounts)

   Historical      Pro
forma
     Pro
forma as
adjusted
 

Cash

   $ 84,209      $                    $                
  

 

 

 

Capitalization:

        

Long term debt

   $                    $                    $                

Redeemable preferred units, $0.001 par value, 50,000,000 units

     516,668        

Equity:

        

Common stock, $0.01 par value,                 shares authorized,                 shares issued and outstanding, historical and pro forma as adjusted

        

Class A common stock, $0.0001 par value,                 shares authorized,                 shares issued and outstanding, pro forma as adjusted

        

Class B common stock, $0.0001 par value,                 shares authorized,                 shares issued and outstanding, pro forma as adjusted

        

Additional paid-in capital

        

Parent company net investment

     86,400        
  

 

 

 

Total equity

   $ 86,400      $        $    
  

 

 

 

Total capitalization

   $ 603,068      $        $    

 

 

 

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Dilution

Flex, indirectly through Yuma and Yuma Sub, will own                LLC Common Units and                 shares of Class B common stock after the Transactions. Because Flex does not, directly or indirectly, own any Class A common stock or have any right to receive distributions from Nextracker Inc., we have presented dilution in pro forma net tangible book value per share both before and after this offering assuming that all of the holders of LLC Common Units (other than Nextracker Inc.) had their LLC Common Units, together with a corresponding number of shares of Class B common stock, exchanged for newly-issued shares of Class A common stock on a one-for-one basis and the transfer to the Company and cancellation for no consideration of all of their shares of Class B common stock (which are not entitled to receive distributions or dividends, whether cash or stock, from Nextracker Inc.) in order to more meaningfully present the dilutive impact on the investors in this offering. We refer to the assumed exchange of all LLC Common Units, together with a corresponding number of shares of Class B common stock, for shares of Class A common stock as described in the previous sentence as the “Assumed Exchange.”

TPG has exercised its right to have certain blocker corporations affiliated with TPG each merge with a separate direct, wholly-owned subsidiary of Nextracker Inc., with the blocker corporations surviving each such merger, in a transaction intended to qualify as a tax-free transaction, with the investors in each such blocker corporation being entitled to a number of shares of Nextracker Inc. Class A common stock with a value based on the LLC Preferred Units held by such blocker corporation. We refer to this election by TPG as the “TPG Election.” Dilution is the amount by which the offering price paid by the purchasers of the Class A common stock in this offering exceeds the pro forma net tangible book value per share of Class A common stock after the offering. Nextracker Inc.’s pro forma net tangible book value as of September 30, 2022 prior to this offering and after giving effect to the other Transactions and the Assumed Exchange was $                . Pro forma net tangible book value per share prior to this offering is determined by subtracting our total liabilities from the total book value of our tangible assets and dividing the difference by the number of shares of Class A common stock deemed to be outstanding after giving effect to the Assumed Exchange.

If you invest in our Class A common stock in this offering, your ownership interest will be immediately diluted to the extent of the difference between the initial public offering price per share and the pro forma net tangible book value per share of our Class A common stock after this offering.

After giving effect to (i) the Transactions, including the sale of                shares of Class A common stock sold by us in this offering at an assumed initial public offering price of $                per share of Class A common stock, which is the midpoint of the estimated initial public offering price range set forth on the cover page of this prospectus, after deducting the underwriting discount in connection with this offering and estimated offering expenses payable by us and the application of the net proceeds therefrom as described in the section entitled “Use of proceeds,” (ii) the incurrence of $150.0 million in proceeds under the 2023 Credit Facility to make the Distribution, (iii) the Assumed Exchange and (iv) the TPG Election, our pro forma as adjusted net tangible book value as of September 30, 2022 would have been $                million, or $                per share of Class A common stock. This represents no change in pro forma as adjusted net tangible book value per share of Class A common stock and an immediate dilution in pro forma as adjusted net tangible book value of $                per share of Class A common stock to new investors who purchase Class A common stock in this offering. The following table illustrates this dilution to new investors on a per share basis:

 

Assumed initial public offering price per share of Class A common stock

            $                    

Pro forma net tangible book value per share as of September 30, 2022

   $                       

Decrease in pro forma net tangible book value per share of common stock attributable to new investors in this offering

   $       
  

 

 

    

Pro forma net tangible book value per share of Class A common stock, after giving effect to this offering

      $    
     

 

 

 

Dilution per share of Class A common stock to new investors in this offering

      $    

 

 

 

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A $1.00 increase or decrease in the assumed initial public offering price of $                per share of Class A common stock, which is the midpoint of the estimated initial public offering price range set forth on the cover page of this prospectus, would have no effect on pro forma net tangible book value per share and would increase or decrease dilution to new investors by $1.00 per share of Class A common stock, assuming that the number of shares of Class A common stock offered by us set forth on the front cover of this prospectus remains the same, and after deducting the underwriting discount in connection with this offering and estimated offering expenses payable by us.

If the underwriters’ option to purchase additional shares is exercised in full, the pro forma net tangible book value per share of Class A common stock, as adjusted to give effect to this offering, would be $                 per share, and the dilution per share of Class A common stock to new investors in this offering would be $                 per share.

The following table summarizes, as of September 30, 2022, on the as adjusted basis described above (including the Assumed Exchange and the TPG Election), the total number of shares of Class A common stock purchased from us, the total consideration paid to us and the average price paid per share by the existing stockholders and by new investors purchasing shares from us in this offering, based on an assumed initial public offering price of $                per share of Class A common stock, which is the midpoint of the estimated initial public offering price range set forth on the cover page of this prospectus, after deducting the underwriting discount in connection with this offering and estimated offering expenses payable by us:

 

       
     Shares of Class A
common stock
purchased
     Total consideration      Average price
per share
 
      Number      Percent      $ In millions      Percent  

Existing Stockholders(1)

        %      $                          %      $                    

New Investors

              
  

 

 

 

Total

        100.0%      $          100.0%      $    

 

 

 

(1)    Total consideration represents the pro forma book value of the net assets being contributed to us by Flex and its affiliates in connection with the Transactions.

A $1.00 increase or decrease in the assumed initial public offering price of $                per share of Class A common stock, the midpoint of the estimated initial public offering price range set forth on the cover page of this prospectus, would increase or decrease total consideration paid by new investors in the Class A common stock and total consideration paid by all holders of Class A common stock by $                million, assuming that the number of shares of Class A common stock offered by us set forth on the cover page of this prospectus remains the same, and after deducting the underwriting discount in connection with this offering and estimated offering expenses payable by us.

An increase or decrease of 1,000,000 shares in the number of shares of Class A common stock offered by us would increase or decrease the total consideration paid to us by new investors in the Class A common stock and total consideration paid to us by all holders of Class A common stock by $                million, based on an assumed initial public offering price of $                per share, which is the midpoint of the estimated initial public offering price range set forth on the cover page of this prospectus, and after deducting the underwriting discount in connection with this offering and estimated offering expenses payable by us.

Except as otherwise indicated, the above discussion and table assume no exercise of the underwriters’ option to purchase additional shares. If the underwriters’ option to purchase additional shares is exercised in full, as of September 30, 2022, on the as adjusted basis described above (including the Assumed Exchange and the TPG Election), our existing stockholder would own         % and our new investors would own         % of the total number of shares of our Class A common stock outstanding upon completion of this offering.

 

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Selected historical combined financial data

The following selected historical combined financial data reflects the combined assets and results of operations of the operations that comprise the legacy solar tracker business of Flex, including the LLC (formerly known as NEXTracker Inc.) and its subsidiaries. We derived the combined statement of operations and comprehensive income data for the years ended March 31, 2022, 2021 and 2020, and the combined balance sheet data as of March 31, 2022 and 2021, from our historical audited combined financial statements, which are included elsewhere in this prospectus. We derived the condensed combined statement of operations and comprehensive income data for the six-month periods ended September 30, 2022 and October 1, 2021, and the condensed combined balance sheet data as of September 30, 2022, from our historical unaudited condensed combined financial statements, which are included elsewhere in this prospectus.

Throughout the period covered by the combined financial statements, we did not operate as a separate entity and stand-alone separate historical financial statements for us have not been prepared. These combined financial statements have been derived from Flex’s historical accounting records and are presented on a carve-out basis. All sales and costs as well as assets and liabilities directly associated with our business activity are included as a component of the combined financial statements. The combined financial statements also include allocations of certain general, administrative, sales and marketing expenses and cost of sales from Flex’s corporate office and allocations of related assets, liabilities, and Flex’s investment, as applicable. The allocations have been determined on a reasonable basis; however, the amounts are not necessarily representative of the amounts that would have been reflected in the combined financial statements had we been an entity that operated separately from Flex during the periods presented. In addition, the results for the six-month period ended September 30, 2022 should not be viewed as indicative of the results that may be expected for the fiscal year ending March 31, 2023. Per share data has not been presented since our business was wholly owned by Flex during the periods presented. During the fourth quarter of fiscal year 2022, we entered into a transition services agreement with Flex, whereby Flex agreed to provide or cause to be provided certain services to us, which were previously included as part of the allocations from Flex. As consideration, we agreed to pay Flex the amount specified for each service as described in the transition service agreement. See the section entitled “Certain relationships and related party transactions—Agreements with Flex.” Related-party allocations, including the method for such allocations, are discussed further in “Relationship with parent and related parties” in Note 8 of the notes to the audited combined financial statements.

 

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This selected historical combined financial data should be reviewed in combination with the sections entitled “Unaudited pro forma combined financial statements,” “Capitalization,” “Management’s discussion and analysis of financial condition and results of operations” and the combined financial statements and accompanying notes included in this prospectus.

 

     
     Six-month periods ended      Fiscal year ended March 31,  
(In thousands)    September 30, 2022      October 1, 2021      2022      2021      2020  
     (unaudited)                       

Combined Statement of Operations and Comprehensive Income Data:

              

Revenue

   $ 870,372      $ 680,172      $ 1,457,592      $ 1,195,617      $ 1,171,287  

Cost of sales

     755,970        605,857        1,310,561        963,636        958,380  
  

 

 

 

Gross profit

     114,402        74,315        147,031        231,981        212,907  

Selling, general and administrative expenses

     36,862        26,140        66,948        60,442        55,361  

Research and development

     8,299        6,951        14,176        13,008        8,641  
  

 

 

 

Operating income

     69,241        41,224        65,907        158,531        148,905  

Interest and other, net

     1,248        280        799        502        (24
  

 

 

 

Income before income taxes

     67,993        40,944        65,108        158,029        148,929  

Provision for income taxes

     16,776        8,371        14,195        33,681        30,673  
  

 

 

 

Net income and comprehensive income

   $ 51,217      $ 32,573      $ 50,913      $ 124,348      $ 118,256  

 

 

 

     
     As of September 30,      As of March 31,  
(In thousands)    2022      2022     2021  
     (unaudited)               

Combined Balance Sheet Data:

       

Working capital(1)

   $ 333,700      $ 240,691     $ 191,902  

Total assets

     1,287,758        1,017,289       880,969  

Accumulated net parent investment

     86,400        (3,035     456,047  

 

 

 

(1)    Working capital is defined as current assets, less current liabilities.

 

     
     Six-month periods ended      Fiscal year ended March 31,  
(In thousands)    September 30,
2022
     October 1,
2021
     2022      2021      2020  
     (unaudited)                       
Combined Statements of Cash Flows Data:               

Net cash provided by (used in) operating activities

   $ 52,461      $ (31,187    $ (147,113    $ 94,273        $240,999  

Net cash used in investing activities

     (1,311      (3,272      (5,750      (2,963      (1,655

Net cash provided by (used in) financing activities

     3,989        (26,422      (8,656      96,329        (250,765

 

 

 

86


     
     Six-month periods ended      Fiscal year ended March 31,  
(In thousands, except percentages)    September 30,
2022
     October 1,
2021
     2022      2021      2020  
Other Financial Information:               

Non-GAAP gross profit(1)

   $ 115,282      $ 78,911      $ 152,599      $ 242,016      $ 222,503  

Non-GAAP operating income(1)

     73,614        49,987        90,363        177,850        168,025  

Non-GAAP net income(1)

     53,800        38,991        69,870        140,279        134,260  

Adjusted EBITDA(1)

     73,764        51,072        92,279        179,164        170,663  

Net income (% of revenue)

     5.9%        4.8%        3.5%        10.4%        10.1%  

Adjusted EBITDA (% of revenue)(1)

     8.5%        7.5%        6.3%        15.0%        14.6%  

Adjusted Free Cash Flow . . . .

   $ 51,150      $ (34,459)      $ (152,863)      $ 91,810      $ 239,344  

 

 

 

(1)   Non-GAAP gross profit, Non-GAAP operating income, Non-GAAP net income, Adjusted EBITDA, Adjusted EBITDA Margin and Adjusted Free Cash Flow are intended as supplemental measures of performance that are neither required by, nor presented in accordance with, GAAP. We present these non-GAAP financial measures because we believe they assist investors and analysts in comparing our performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance. In addition, we may use all or any combination of Non-GAAP gross profit, Non-GAAP operating income, Non-GAAP net income, Adjusted EBITDA, Adjusted EBITDA Margin and Adjusted Free Cash Flow as factors in evaluating management’s performance when determining incentive compensation and to evaluate the effectiveness of our business strategies.

 

    Among other limitations, Non-GAAP gross profit, Non-GAAP operating income, Non-GAAP net income, Adjusted EBITDA, Adjusted EBITDA Margin and Adjusted Free Cash Flow do not reflect our cash expenditures or future capital expenditures or contractual commitments (including under the Tax Receivable Agreement), do not reflect the impact of certain cash or non-cash charges resulting from matters we consider not to be indicative of our ongoing operations and do not reflect the associated income tax expense or benefit related to those charges. In addition, other companies in our industry may calculate Non-GAAP gross profit, Non-GAAP operating income, Non-GAAP net income, Adjusted EBITDA, Adjusted EBITDA Margin and Adjusted Free Cash Flow differently from us, which further limits their usefulness as comparative measures.

 

    Because of these limitations, Non-GAAP gross profit, Non-GAAP operating income, Non-GAAP net income, Adjusted EBITDA, Adjusted EBITDA Margin and Adjusted Free Cash Flow should not be considered in isolation or as substitutes for performance measures calculated in accordance with GAAP. We compensate for these limitations by relying primarily on our GAAP results and using Non-GAAP gross profit, Non-GAAP operating income, Non-GAAP net income, Adjusted EBITDA, Adjusted EBITDA Margin and Adjusted Free Cash Flow on a supplemental basis. You should review the reconciliation to the most directly comparable GAAP measure of Non-GAAP gross profit, Non-GAAP operating income, Non-GAAP net income, Adjusted EBITDA, Adjusted EBITDA Margin and Adjusted Free Cash Flow below and not rely on any single financial measure to evaluate our business.

 

87


     
    Six-month periods ended     Fiscal year ended March 31,  
(In thousands, except percentages)   September 30, 2022     October 1, 2021     2022     2021     2020  
    (unaudited)                    

Reconciliation of GAAP to Non-GAAP Financial Measures:

         

GAAP gross profit

  $ 114,402     $ 74,315     $ 147,031     $ 231,981     $ 212,907  

Stock-based compensation expense

    755       679       1,526       1,953       1,643  

Intangible amortization

    125       3,917       4,042       8,082       7,953  
 

 

 

   

 

 

   

 

 

 

Non-GAAP gross profit

  $ 115,282     $ 78,911     $ 152,599     $ 242,016     $ 222,503  
 

 

 

   

 

 

   

 

 

 

GAAP operating income

  $ 69,241     $ 41,224     $ 65,907     $ 158,531     $ 148,905  

Stock-based compensation expense

    1,850       1,380       3,048       4,306       4,236  

Intangible amortization

    1,082       7,383       8,465       15,013       14,884  

Legal costs(1)

    1,528       —         12,943       —         —    

Other

    (87     —         —         —         —    
 

 

 

   

 

 

   

 

 

 

Non-GAAP operating income

  $ 73,614     $ 49,987     $ 90,363     $ 177,850     $ 168,025  
 

 

 

   

 

 

   

 

 

 

GAAP net income

  $ 51,217     $ 32,573     $ 50,913     $ 124,348     $ 118,256  

Stock-based compensation expense

    1,850       1,380       3,048       4,306       4,236  

Intangible amortization

    1,082       7,383       8,465       15,013       14,884  

Adjustment for taxes

    (1,790     (2,345     (5,499     (3,388     (3,116

Legal costs(1)

    1,528       —         12,943       —         —    

Other

    (87     —         —         —         —    
 

 

 

   

 

 

   

 

 

 

Non-GAAP net income

  $ 53,800     $ 38,991     $ 69,870     $ 140,279     $ 134,260  
 

 

 

   

 

 

   

 

 

 

Net income

  $ 51,217     $ 32,573     $ 50,913     $ 124,348     $ 118,256  

Interest, net

    (165     34       34       20       (144

Provision for income taxes

    16,776       8,371       14,195       33,681       30,673  

Depreciation expense

    1,563       1,331       2,681       1,796       2,758  

Intangible amortization

    1,082       7,383       8,465       15,013       14,884  

Stock-based compensation expense

    1,850       1,380       3,048       4,306       4,236  

Legal costs(1)

    1,528       —         12,943       —         —    

Other

    (87     —         —         —         —    
 

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

  $ 73,764     $ 51,072     $ 92,279     $ 179,164     $ 170,663  
 

 

 

   

 

 

   

 

 

 

Net income (% of revenue)

    5.9%       4.8%       3.5%       10.4%       10.1%  

Adjusted EBITDA (% of revenue)

    8.5%       7.5%       6.3%       15.0%       14.6%  

Net cash provided by (used in) operating activities

  $ 52,461     $ (31,187   $ (147,113   $ 94,273     $ 240,999  

Purchase of property and equipment

    (1,335     (3,439     (5,917     (2,473     (1,655

Proceeds from disposition of property and equipment

    24       167       167       —         —    
 

 

 

   

 

 

   

 

 

 

Adjusted Free Cash Flow

  $ 51,150     $ (34,459   $ (152,863   $ 91,810     $ 239,344  

 

 

 

(1)    Represents additional charges incurred in relation to the litigation with ATI, as further described in Note 9, “Commitments and contingencies” to the combined financial statements. The estimated net settlement and direct legal costs in the aggregate are excluded from the Company’s Non-GAAP income. Based on historical experience, we do not believe that the settlement and associated charges are normal, recurring operating expenses indicative of our core operating performance, nor were these charges taken into account as factors in evaluating management’s performance when determining incentive compensation or to evaluate the effectiveness of the Company’s business strategies.

 

88


Unaudited pro forma combined financial statements

The following unaudited pro forma combined financial statements consist of the unaudited pro forma combined statement of operations and comprehensive income (loss) for the six-month period ended September 30, 2022 and the year ended March 31, 2022 and the unaudited pro forma combined balance sheet as of September 30, 2022, which were derived from our historical unaudited condensed combined financial statements and our historical audited combined financial statements included elsewhere in this prospectus. The pro forma adjustments give effect to the Transactions and this offering, as described in the notes to the unaudited pro forma combined financial statements. The unaudited pro forma combined statements of operations and comprehensive income for the six-month period ended September 30, 2022 and the year ended March 31, 2022 give effect to the Transactions and this offering as if they had occurred on April 1, 2021, which was the first day of fiscal year 2022. The unaudited pro forma combined balance sheet as of September 30, 2022 gives effect to the Transactions and this offering as if they had occurred on September 30, 2022. References to the “Company” in this section and in the following unaudited pro forma combined financial statements and our combined financial statements included in this prospectus shall mean the legacy Nextracker business.

The unaudited pro forma combined financial statements giving effect to the Transactions have been prepared in accordance with Article 11 of the SEC’s Regulation S-X. In May 2020, the SEC adopted Release No. 33-10786 “Amendments to Financial Disclosures about Acquired and Disposed Businesses,” which became effective on January 1, 2021, and the unaudited pro forma combined financial statements are presented in accordance therewith.

The unaudited pro forma combined financial statements include certain adjustments that are necessary to present fairly our unaudited pro forma combined statement of operations and comprehensive income (loss) and unaudited pro forma combined balance sheet as of and for the periods indicated. The pro forma adjustments are based on currently available information and assumptions that management believes are, under the circumstances and given the information available at this time, reasonable and include changes necessary to reflect the Company’s financial condition and results of operations as if we were a stand-along entity. Actual adjustments may differ materially from the information presented herein.

Transaction accounting adjustments that reflect the effects of the Transactions include the following adjustments:

 

 

the incurrence of $150.0 million in proceeds under the 2023 Credit Facility to, in part, make the Distribution of $175.0 million in respect of the LLC Units immediately prior to the consummation of this Offering;

 

 

the impact of selling                 shares of our Class A common stock in this offering and the use of proceeds from this offering to purchase                LLC Common Units, together with a corresponding number of shares of Class B common stock, from Yuma (or                LLC Common Units if the underwriters exercise in full their option to purchase additional shares of Class A common stock) at a price per unit equal to the initial public offering price per share of Class A common stock in this offering less the underwriting discount and estimated offering expenses payable by us; and

 

 

the anticipated post-offering capital structure.

Autonomous entity adjustments that reflect the incremental expense or other changes necessary to reflect the operations and financial position of the Company as an autonomous entity when the Company was previously part of Flex include the following adjustments:

 

 

the transfer to us from Flex and Flex affiliates pursuant to the separation agreement and related agreements of certain assets and liabilities that were not included in the historical combined financial statements;

 

 

additional personnel costs, including salaries, benefits and potential bonuses and/or share-based compensation awards for staff, including staff additions to replace support provided by Flex that is not covered by the transition services agreement;

 

89


 

corporate governance costs, including director and officer insurance costs, board of director compensation and expenses, audit and other professional services fees, annual report and proxy statement costs, SEC filing fees, transfer agent fees, consulting and legal fees and stock exchange listing fees; and

 

 

other adjustments as described in the notes to these unaudited pro forma combined financial statements.

The unaudited pro forma combined financial statements are subject to the assumptions and adjustments described in the accompanying notes.

In connection with the separation, we entered into a transition services agreement with Flex, pursuant to which Flex and its subsidiaries will provide us and our subsidiaries with various services. The charges for transition services generally are expected to allow the providing company to fully recover all out-of-pocket costs and expenses it actually incurs in connection with providing the service, plus, in some cases, the allocated indirect costs of providing the services.

No adjustments have been included in the unaudited pro forma combined statement of operations and comprehensive income for additional annual operating costs. Although expenses reported in our combined statements of operations and comprehensive income include allocations of certain general, administrative, sales and marketing expenses and cost of sales from Flex’s corporate office and allocations of related assets, liabilities, and Flex’s investment, as applicable, we anticipate incurring additional recurring costs as a public company that could be materially different from the allocations of Flex costs included within the historical combined financial statements, as described in the autonomous entity adjustments listed above.

Certain factors could impact the nature and amount of these separate public company costs, including the finalization of our staffing and infrastructure needs.

We expect to incur additional separate public company costs in excess of the costs that have been historically allocated to us. We have not adjusted the accompanying unaudited pro forma combined financial statements for any of these estimated costs as they are projected amounts based on estimates.

Moreover, we expect Flex or us to incur certain nonrecurring internal costs to implement certain new systems. All such costs incurred prior to the transactions described above were incurred entirely by Flex and we estimate such costs going forward will not have a material impact on our financial statements.

The unaudited pro forma combined financial statements have been presented for informational purposes only. The pro forma information is not necessarily indicative of our results of operations or financial condition had the Transactions and our anticipated post-Transaction capital structure been completed on the date assumed and should not be relied upon as a representation of our future results of operations or financial position as a separate, publicly-traded company during such periods.

The following unaudited pro forma combined balance sheet and unaudited pro forma combined statement of operations and comprehensive income should be reviewed in combination with our historical combined financial statements and accompanying notes and “Management’s discussion and analysis of financial condition and results of operations” included in this prospectus.

 

90


   
     As of September 30, 2022  
(In thousands, except share and per share data)   

Historical

   

Transaction
accounting

adjustments(1)

    Autonomous
entity
adjustments
   

Pro forma

 

Unaudited Pro Forma Combined Balance Sheet:

        

Assets

        

Current assets:

        

Cash

   $ 84,209       (2                                              

Accounts receivable, net of allowance of $2,792

     280,911        

Contract assets

     283,773        

Inventories

     240,024        

Other current assets

     96,549        
  

 

 

 

Total current assets

     985,466        
  

 

 

 

Property and equipment, net

     7,509        

Goodwill

     265,153        

Other intangible assets, net

     1,446        

Other assets

     28,184       (3    
  

 

 

 

Total assets

   $ 1,287,758        
  

 

 

 

Liabilities and equity

        

Current liabilities:

        

Accounts payable

   $ 355,829        

Accrued expenses

     57,334        

Deferred revenue

     169,774        

Due to related parties

     48,367        

Other current liabilities

     20,462        
  

 

 

 

Total current liabilities

     651,766        

Other liabilities

     32,924        
  

 

 

 

Total liabilities

   $ 684,690        
  

 

 

 

Commitments and contingencies

        

Redeemable preferred units, $0.001 par value, 50,000,000 units issued and outstanding

     516,668        

Equity

        

Class A units

       (4    

Member’s equity

       (4    

Class A common stock, par value $0.0001 per share

       (5    

Class B common stock, par value $0.0001 per share

       (5    

Accumulated net parent investment

   $ 86,400        

Accumulated other comprehensive loss

       (6 ) (7)     
  

 

 

 

Total equity

   $ 86,400        
  

 

 

 

Total liabilities, redeemable preferred units and parent company equity

   $ 1,287,758        

 

 

 

(1)   Reflects the net effect on cash of the receipt of proceeds from FIUI in exchange for                shares of common stock of Nextracker Inc., representative of         % of the common stock outstanding.

 

(2)   Reflects the net effect on cash of the receipt of proceeds from FIUI in exchange for                 shares of common stock of Nextracker Inc., representative of         % of the common stock outstanding, at a price per unit equal to the assumed initial public offering price per share of Class A common stock based on the midpoint of the estimated initial public offering price range set forth on the cover page of this prospectus less the underwriting discount and estimated offering expenses payable by us.

 

91


(3)   We are subject to U.S. federal, state and local income taxes. This adjustment reflects the recognition of deferred taxes in connection with the Transactions, assuming the U.S. federal income tax rate currently in effect and the highest statutory rates apportioned to each applicable and state and local jurisdiction. We have recorded a pro forma deferred tax asset adjustment of $                 million.

 

(4)   As described in “Our organizational structure,” we will become the managing member of the LLC and will control the business and affairs of the LLC and all of its subsidiaries. As a result, we will consolidate the financial results of the LLC and will report a non-controlling interest for LLC Units in the LLC held by Yuma, Yuma Sub and TPG on our consolidated balance sheet. Immediately following the Transactions, the LLC Units represented by the non-controlling interest will represent approximately         % of the economic interest in the business of Nextracker Inc. If the underwriters exercise in full their option to purchase additional shares of our Class A common stock, the LLC Units represented by the non-controlling interest would represent approximately         % of the economic interest in the business of the LLC.

 

(5)   Reflects the issuance of                 shares of Class A common stock pursuant to our Equity Incentive Plan.

 

(6)   Reflects the impact of the costs incurred to net income and comprehensive income of pro forma adjustments.

 

(7)   Upon completion of the Transactions, we will become the managing member of the LLC. Although there will be a non-controlling ownership interest in the LLC, we will control the management of, the LLC. As a result, we will consolidate the results of the LLC and will report a non-controlling interest related to the LLC Units held by Yuma, Yuma Sub and TPG on our consolidated balance sheet. The computation of the non-controlling interest following the consummation of this offering, based on the initial public offering price of $    , which is the midpoint of the estimated offering price range on the cover of this prospectus, is as follows:

 

     
    

Units

  

Percentage

Interests in Nextracker LLC

                                       

Non-controlling interest in Nextracker LLC

     
  

 

Total

     

 

 

92


   
     Six-month period ended September 30, 2022  
(In thousands, except share and per share data)   

Historical

    

Transaction
accounting
adjustments(1)

     Autonomous
entity
adjustments
    

Pro forma

 

Unaudited Pro Forma Combined Statement of Operations and Comprehensive Income (loss):

           

Revenue

   $ 870,372                                    

Cost of sales

     755,970           
  

 

 

 

Gross profit

     114,402           

Selling, general and administrative expenses

     36,862           

Research and development

     8,299           
  

 

 

 

Operating income

     69,241           

Interest and other, net

     1,248           
  

 

 

 

Income before income taxes

     67,993           

Provision for income taxes

     16,776           
  

 

 

 

Net income and comprehensive income

     51,217           

Net income and comprehensive income attributable to non-controlling interests

           
  

 

 

 

Net income and comprehensive income attributable to controlling interests

           
  

 

 

 

Unaudited Pro Forma Earnings Per Share(2)

           

Basic

           

Diluted

           

Number of shares used in calculating earnings per share

           

Basic

           

Diluted

           

 

 

 

93


   
     Fiscal year ended March 31, 2022  
(In thousands, except share and per share data)   

Historical

    

Transaction
accounting
adjustments(1)

     Autonomous
entity
adjustments
    

Pro forma

 

Unaudited Pro Forma Combined Statement of Operations and Comprehensive Income (loss):

           

Revenue

   $ 1,457,592           

Cost of sales

     1,310,561           
  

 

 

 

Gross profit

     147,031           

Selling, general and administrative expenses

     66,948           

Research and development

     14,176           
  

 

 

 

Operating income

     65,907           

Interest and other, net

     799           
  

 

 

 

Income before income taxes

     65,108           

Provision for income taxes

     14,195           
  

 

 

 

Net income and comprehensive income

     50,913           

Net income and comprehensive income attributable to non-controlling interests

           
  

 

 

 

Net income and comprehensive income attributable to controlling interests

           
  

 

 

 

Unaudited Pro Forma Earnings Per Share(2)

           

Basic

           

Diluted

           

Number of shares used in calculating earnings per share

           

Basic

           

Diluted

           

 

 

 

(1)   Reflects the net effect on cash of the receipt of proceeds from FIUI in exchange for shares of common stock of Nextracker Inc., representative of         % of the common stock outstanding.

 

(2)   We compute pro forma earnings per share as if the dividend distribution to Parent had occurred on April 1, 2021. We include this dividend in the pro forma earnings per share to show the effect of the common shares for which we must raise proceeds to pay the portion of dividends exceeding current year’s income. The dividend exceeds our fiscal year 2022 earnings by $             million ($             million dividend, less $             million net income), which is deemed to be paid from the offering proceeds.

Pro forma basic earnings per share is computed using pro forma net income (loss) and comprehensive income (loss) divided by the weighted average number of shares outstanding during the period. The shares that are assumed issued are added to historical shares outstanding in the denominator of the pro forma earnings per share calculation (the excess does not exceed total offering proceeds).

Weighted average number of shares outstanding includes            shares to give effect to the number of shares whose proceeds would be necessary. Pro forma diluted earnings per share is computed using the weighted average number of shares and the effect of potentially dilutive equity awards outstanding during the period. There were no potentially dilutive equity securities in the periods presented.

 

94


Management’s discussion and analysis of financial condition and results of operations

Unless the context otherwise requires, references in this Management’s Discussion and Analysis of Financial Condition and Results of Operations to “Nextracker,” the “Company,” “we,” “us” and “our” shall mean the LLC (formerly known as NEXTracker Inc. and its subsidiaries).

This Management’s Discussion and Analysis of Financial Condition and Results of Operations is designed to provide a reader of our financial statements with a narrative from the perspective of Company’s management. You should read the following discussion in conjunction with the “Selected historical combined financial data,” our combined financial statements and accompanying notes and the section entitled “Business” included in this prospectus. In addition to historical financial information, the following discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results and timing of selected events may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those discussed under the sections entitled “Special note regarding forward-looking statements” and “Risk factors.”

Overview

We are a leading provider of intelligent, integrated solar tracker and software solutions used in utility-scale and ground-mounted distributed generation solar projects around the world. Our products enable solar panels, also known as modules, in utility-scale power plants to follow the sun’s movement across the sky and optimize plant performance. We have led the solar industry based on GW shipped globally from 2015 to 2021 and both globally and in the United States from 2016 to 2021. We delivered approximately 15 GW, 12 GW and over 10 GW to our customers in fiscal years 2022, 2021 and 2020, respectively. In addition, we delivered approximately 8.0 GW during the six-month period ended September 30, 2022 compared to approximately 6.9 GW during the six-month period ended October 1, 2021.

We were founded in 2013 by our Chief Executive Officer, Dan Shugar, and were acquired by Flex Ltd. in 2015. Flex provides design, manufacturing and supply chain services through a network of over 100 locations in approximately 30 countries across five continents. Flex’s expertise in global supply chains and procurement and its strong financial backing has helped us accelerate our penetration of our end markets and run an optimized supply chain. Over time, we have developed new and innovative hardware and software products and services to scale our capabilities. In 2016, Flex acquired BrightBox Technologies on our behalf to further our machine learning capabilities.

On February 1, 2022, we issued Series A LLC Preferred Units to Flex and Flex sold all Series A LLC Preferred Units, representing a 16.67% interest of Nextracker to TPG. Additionally and in conjunction with the issuance of the Series A LLC Preferred Units, NEXTracker Inc. converted to a limited liability company, Nextracker LLC.

 

95


 

LOGO

We have shipped approximately 70 GW of solar tracker systems as of September 30, 2022 to projects on six continents. Our customers include engineering, procurement and construction firms (“EPCs”), as well as solar project developers and owners. Developers originate projects, select and acquire sites, obtain permits, select contractors, negotiate power offtake agreements, and oversee the building of projects. EPCs design and optimize the system, procure components, build and commission the plant, and operate the plant for a limited time until transfer to a long-term owner. Owners, which are often independent power producers, own and operate the plant, typically as part of a portfolio of similar assets. Owners generate cash flows through the sale of electricity to utilities, wholesale markets, or end users.

For the majority of our projects, our direct customer is the EPC. We also engage with project owners and developers and enter into master supply agreements that cover multiple projects. We are a qualified, preferred provider to some of the largest solar EPC firms and solar project developers and owners in the world. We had revenues of $870.4 million for the six-month period ended September 30, 2022 and $1.5 billion in fiscal year 2022.

The following tables set forth geographic information of revenue based on the locations to which the products are shipped:

 

   
     Six-month periods ended  

(In thousands)

(Unaudited)

   September 30, 2022      October 1, 2021  

Revenue:

           

U.S.

   $ 580,813        67%      $ 444,040        65%  

Rest of the World

     289,559            33%        236,132            35%  
  

 

 

 

Total

   $ 870,372         $ 680,172     

 

 

 

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     Fiscal year ended March 31,  
(In thousands)    2022      2021      2020  

Revenue:

                 

U.S.

   $ 904,946        62%      $ 900,927        75%      $ 937,163        80%  

Rest of the World

     552,646            38%        294,690            25%        234,124            20%  
  

 

 

 

Total

   $ 1,457,592         $ 1,195,617         $ 1,171,287     

 

 

The following table sets forth the revenue from customers that individually accounted for greater than 10% of our revenue during the periods included below:

 

     
     Six-month periods ended      Fiscal year ended March 31,  
(In millions)    September 30, 2022      October 1, 2021      2022      2021      2020  
     (Unaudited)                       

Customer A*

   $ 163.0      $ 105.2      $ 196.2      $ 230.3      $ 146.1  

Customer B

   $      $ 78.0      $      $      $  

Customer D

   $      $      $      $      $ 188.3  

 

  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
*   SOLV Energy

During fiscal year 2020, we experienced very high demand from customers procuring system components in order to qualify for a higher ITC rate available for projects that commenced construction prior to the end of 2019. The ITC decreased from 30% for projects that commenced construction in calendar year 2019 to 26% for projects that commenced construction in 2020. An IRS safe harbor allowed solar power plant investors to treat construction as having commenced during 2019 (and thus qualify for the higher ITC rate) if a qualifying percentage of integral components was pre-purchased before the end of 2019 and certain other requirements were satisfied. As a result, many investors accelerated equipment purchases, including purchases of our tracker products, during calendar year 2019 (our fiscal year 2020) in an attempt to qualify for the commencement of construction safe harbor in 2019 and secure a 30% tax credit for the relevant projects that would be constructed in later periods. This purchasing activity significantly increased our revenue in the United States during fiscal year 2020. An additional step down to the ITC was scheduled to occur for projects that commenced construction after 2022 (from 26% to 22%) and again for projects that commenced construction after 2023 (from 22% to 10%), subject to the same safe harbor. As a result of changes made to the ITC as part of the recently-enacted Inflation Reduction Act of 2022 (the “IRA”), however, these step-downs will no longer occur. Under the IRA, when construction of a project commences will only be relevant in the near term for purposes of determining whether satisfaction of the IRA’s prevailing wage and apprenticeship requirements will need to be satisfied in order to qualify for the maximum credit generally available. Accordingly, while customers may continue to have an incentive to commence construction before certain dates, customers generally will no longer need to commence construction before the end of calendar year 2022 or calendar year 2023 to qualify for a higher credit rate. As a result, while the IRA is intended to encourage investment in solar facilities, a portion of any resulting increase in demand might be offset by a reduction in the demand surge that had been expected in fiscal years 2023 and 2024 from customers who would have purchased our tracker products in advance of the step-down in the ITC.

Our business model

We generate revenue from the sale of solar trackers, such as NX Horizon and NX Gemini, and from licensing our TrueCapture software product. Our most significant source of revenue is the sale of solar tracking products. Our customers include EPCs, as well as solar project developers and owners. We usually enter into a different contract with our customers for each individual solar project. Contracts typically stipulate total price, technical solution,

 

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specifications of the system sold, delivery and activation schedule, warranty terms and related services provided. The delivery period for a specific contract can range from days to several months depending on the size of the project. Our contract prices range from a few hundred thousand dollars for the smallest projects to over one hundred million dollars for the largest.

Demand for our products is driven by installations of utility-scale solar projects around the world. The volume of solar projects installations is dependent on a variety of factors, including the cost of solar plants in comparison to other forms of power generation, prevailing electricity prices, conventional power generation plant retirement, global renewable energy targets, government regulations, and public incentives promoting solar energy. Our revenue is subject to variability as these factors change over time, and as a result may cause variability in our quarterly shipments. Increases in competitive tracker pricing pressure can also affect our revenue by lowering the average selling price (“ASP”) of our products.

We operate in nearly all significant tracker markets around the world. We have dedicated sales staff in the United States, Mexico, Spain, Australia, Brazil, Singapore, India and the United Arab Emirates to support our sales activities in those geographies. Our local presence is complemented with the following go-to-market strategies:

 

 

Our sales and marketing strategy is focused on building long-term relationships with key stakeholders involved in developing, building, owning, and maintaining utility-scale solar projects. We educate those stakeholders on the benefits of our solutions, including increased energy yield performance, superior constructability, reliability, ease of maintenance, and advanced software and sensor capabilities compared to competing products.

 

 

In the United States and more mature international markets, our sales team maintains active relationships with key stakeholders and customers such as developers and builders of utility-scale solar systems. We leverage these relationships and knowledge of the available project pipeline, inbound requests for proposals (“RFPs”) from potential customers, and competitive dynamics. Frequently we are either awarded the project outright or become ‘short-listed’ among a group of eligible bidders. In each case we create a detailed proposal that leverages our project engineering expertise to offer a compelling project and/or project portfolio-specific value proposition.

 

 

In less mature international markets, we leverage a variety of broad and account-based marketing techniques to acquire customers. These include conducting thought leadership seminars and developer forums, installation training programs, and participation in industry conferences, events, and trade associations.

 

 

We set pricing for our products based on the long-term value derived from energy yield performance and total cost of ownership. For our core tracker products, we offer differing pricing to address multiple market segments based on site characteristics and weather protection requirements, among other factors.

Basis of presentation

The accompanying combined financial statements present the historical financial position, results of operations and comprehensive income (loss), changes in parent company investment and our cash flows in accordance with GAAP.

We have historically operated as part of Flex and not as a separate, publicly-traded company. The combined financial statements have been derived from Flex’s historical accounting records and are presented on a carve-out basis. All sales and costs as well as assets and liabilities directly associated with our business activity are included as a component of the combined financial statements. The combined financial statements also

 

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include allocations of certain general, administrative, sales and marketing expenses and cost of sales from Flex’s corporate office and allocations of related assets, liabilities and Flex’s investment, as applicable. The allocations have been determined on a reasonable basis; however, the amounts are not necessarily representative of the amounts that would have been reflected in the combined financial statements had we been an entity that operated separately from Flex during these periods presented. Further, the historical financial statements may not be reflective of what our results of operations, comprehensive income, historical financial position, equity or cash flows might be in the future as a separate public company. During the fourth quarter of fiscal year 2022, we entered into a transition services agreement with Flex, whereby Flex agreed to provide or cause to be provided certain services to us, which were previously included as part of the allocations from Flex. As consideration, we agreed to pay Flex the amount specified for each service as described in the transition service agreement. See the section entitled “Certain relationships and related party transactions—Agreements with Flex.” Related-party allocations, including the method for such allocations, are discussed further in “Relationship with parent and related parties” in Note 8 of the notes to the audited combined financial statements.

For example, our historical combined financial statements include expense allocations for certain support functions that are provided on a centralized basis within Flex, such as corporate costs, shared services and other selling, general and administrative costs that benefit the Company, among others. Following this offering, under the transition services agreement Flex will continue to provide us with some of the services related to these functions on a transitional basis in exchange for agreed-upon fees, and we will incur other costs to replace the services and resources that will not be provided by Flex. We will also incur additional costs as a separate public company. Our total costs related to such support functions may differ from the costs that were historically allocated to us from Flex. These additional costs are primarily for the following:

 

 

additional personnel costs, including salaries, benefits and potential bonuses and/or stock-based compensation awards for staff, including staff additions to replace support provided by Flex that is not covered by the transition services agreement; and

 

 

corporate governance costs, including director and officer insurance costs, board of director compensation and expenses, audit and other professional services fees, annual report and proxy statement costs, SEC filing fees, transfer agent fees, consulting and legal fees and Nasdaq listing fees.

Certain factors could impact the nature and amount of these separate public company costs, including the finalization of our staffing and infrastructure needs. We expect to incur additional separate public company costs in excess of the costs that have been historically allocated to us.

As part of Flex, we have been dependent upon Flex for all of our working capital and financing requirements as Flex used a centralized approach to cash management and financing of its operations. Our financial transactions are accounted for through our “net parent investment” account and none of Flex’s debt at the corporate level has been assigned to us in the financial statements. Historically, as we generated cash flows from operations, cash has been swept by Flex into global cash accounts managed at the parent level. In March 2021, the U.S. cash pooling arrangement between us and Flex was terminated and we executed a new cash pooling agreement. For as long as Nextracker is a controlled entity of Flex, Nextracker’s U.S. operations will continue to participate in the Flex cash pooling management programs intra-quarter, and all outstanding positions are settled or scheduled for settlement as of each quarter end. We have also historically utilized Flex for financial support in the form of parent guarantees and letters of financial support to execute certain arrangements with our customers.

 

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Key factors affecting our performance

Our business, operating results and future performance are affected by a number of factors, including the following:

 

 

Product costs, supply chain disruptions and extreme weather.    Our products are manufactured using commodities such as steel. Fluctuations in the cost of steel or other commodities critical to the manufacturing of our products can impact our financial performance. In addition, transportation cost for shipping raw material or finished goods to and from our suppliers and to our customers can impact the final cost of our product and therefore affect our operating results. Shortages or other constraints in the supply chain, either as a result of component shortages, container shortages, disruptions to supplier or freight operations, COVID-19 (as described below) or other factors, can impact our ability to deliver our products in a timely manner and affect the cost of our products, our margins and our operating results. In addition, extreme weather events can impair our ability to deliver products on a timely basis to our customers and delay our recognition of revenue. Weather events may impact our business from the place of product origin through all shipment locations to the project site. Cold weather can also affect our customers’ ability to perform construction activities, shift the timing of deliveries, and affect our operating results.

 

 

Changes in the macro-economic environment and energy demand.    Our future operating results also depend on the continued demand for utility-scale solar energy. This is dependent on many factors, including the demand for cheaper energy sources driven by regional, national or global macroeconomic trends. If the demand for cheaper energy sources increases, we may face greater competition from conventional and other renewable energy sources, such as coal, nuclear, natural gas and wind to the extent they are able to offer energy solutions that are less costly. If utility-based customers opt for other sources of energy, the average selling price of our products may be affected if we seek to be more price competitive and as a result, our revenue and operating results could be negatively affected.

 

 

Our ability to acquire new customers.    Our operating results and growth will depend in part on our ability to continue to attract new customers. While we have historically been the global leader in the solar tracking business and we believe that the underlying market for utility based solar products will continue to grow, it is difficult to predict the growth of potential new customers for our products or whether we will be successful in acquiring these new customers. We plan to continue to invest in our sales and marketing efforts to acquire new customers in order to generate continued revenue growth on a year-over-year basis.

 

 

Our ability to expand relationships with existing customers.    Our operating results and growth will depend in part on our ability to maintain and expand relationships with existing customers. Many of our repeat customers currently have a backlog of projects to be built. In addition to new solar projects planned by existing customers, we have an opportunity to sell products, such as our software product TrueCapture, into our existing installed fleet of projects, which is the largest in the world by MW capacity. In order for us to address this opportunity to expand among our existing customer base, we will need to maintain the innovation, performance and reliability of our product offerings.

 

 

Availability of financing for solar projects.    Because solar plants are capital intensive assets, the availability of debt or equity project finance capital throughout the world can temporarily or permanently impact the viability or demand for solar projects, including our solar tracker products. Additionally, tax incentives in the United States enhance the financial return for investors in solar plants and, as a result, the availability of tax equity financing can affect the demand for our products in the United States For example, during fiscal year 2020, we experienced very high demand from customers procuring system components in order to qualify for a higher ITC rate available for projects that commenced construction prior to the end of 2019. The ITC decreased from 30% for projects that commenced construction in calendar year 2019 to 26% for projects that commenced construction in 2020. An IRS

 

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safe harbor allowed solar power plant investors to treat construction as having commenced during 2019 (and thus qualify for the higher ITC rate) if a qualifying percentage of integral components was pre-purchased before the end of 2019. As a result, many investors accelerated equipment purchases, including purchases of our tracker products, during calendar year 2019 (our fiscal year 2020) in an attempt to qualify for the commencement of construction safe harbor in 2019 and secure a 30% tax credit for the relevant projects that would be constructed in later periods. This purchasing activity significantly increased our revenue in the United States during fiscal year 2020. An additional step down to the ITC was scheduled to occur for projects that commenced construction after 2022 (from 26% to 22%) and again for projects that commenced construction after 2023 (from 22% to 10%), subject to the same safe harbor. As a result of changes made to the ITC as part of the IRA, however, these step-downs will no longer occur. Accordingly, while customers may continue to have an incentive to commence construction before certain dates, customers generally will no longer need to commence construction before the end of calendar year 2022 or calendar year 2023 to qualify for a higher credit rate. As a result, while the IRA is intended to encourage investment in solar facilities, a portion of any resulting increase in demand might be offset by a reduction in the demand surge that had been expected in fiscal years 2023 and 2024 from customers who would have purchased our tracker products in advance of the step-down in the ITC.

 

 

Impact of the recently-enacted IRA’s “domestic content” requirements.     As a result of changes made by the IRA, United Sates taxpayers will be entitled to a 30% ITC for projects placed in service after 2021, increased to 40% if certain “domestic content” requirements are satisfied, subject, in each case, to an 80% reduction if certain wage and apprenticeship requirements are not satisfied or deemed satisfied. United States taxpayers will generally also be allowed to elect to receive an inflation-adjusted PTC in lieu of the ITC for qualified solar facilities the construction of which begins before January 1, 2025 that are placed in service after 2021. The PTC amount otherwise available (which, similar to the ITC, will depend on the extent to which certain wage and apprenticeship requirements are satisfied or deemed satisfied) is increased by 10% if the “domestic content” requirements described above are satisfied. If we are unable to meet the domestic content requirements necessary for customers using our tracker products to qualify for the incremental domestic content bonus credit and our competitors are able to do so, we might experience a decline in sales for U.S. projects. The timing and nature of implementing regulations clarifying the domestic content requirements as applied to our products remain uncertain. Depending on the criteria set forth in those regulations, we may not have an adequate supply of tracker products satisfying the requirements. In addition, compliance with this requirement may increase our production costs.

 

 

Changes to laws and regulations such as solar policy incentives and trade regulations.    Our product components are manufactured in the United States, China, Thailand, Malaysia, Vietnam, Portugal, Brazil and other locations around the world and are shipped to countries in six continents. As a result, our operating results are impacted by changes to trade laws or regulations, local laws or regulations, tax incentives and any other significant policy in countries where either our suppliers or customers operate.

 

 

Impact of Potential Solar Module Supply Chain Disruptions.     Solar panel imports to the United States may also be impacted by the UFLPA that was signed into law by President Biden on December 23, 2021. According to the U.S. Customs and Border Protection, “it establishes a rebuttable presumption that the importation of any goods, wares, articles and merchandise mined, produced, or manufactured wholly or in part in the Xinjiang Uyghur Autonomous Region of the People’s Republic of China, or produced by certain entities, is prohibited by Section 307 of the Tariff Act of 1930 and that such goods, wares, articles, and merchandise are not entitled to entry to the United States. The presumption applies unless the Commissioner of U.S. Customs and Border Protection determines that the importer of record has complied with specified conditions and, by clear and convincing evidence, that the goods, wares, articles, or merchandise were not produced using forced labor.” There continues to be uncertainty in the market around achieving full compliance with UFLPA, whether related to sufficient traceability of materials or other factors. This has created a significant compliance burden and constrained solar panel imports. We cannot currently predict what, if any, impact the UFLPA will have on the overall future supply of solar panels into the United States and the related timing and cost of our clients’ solar project, development and construction activities. While we do not import or sell solar panels, project delays caused by solar panel constraints may negatively impact our product delivery schedules and future sales, and therefore our business, financial condition, and results of operations.

 

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In addition, on April 1, 2022, Commerce initiated anticircumvention inquiries of the Solar 1 Orders covering merchandise from Vietnam, Malaysia, Thailand, and Cambodia pursuant to Section 781 of the Tariff Act of 1930. Commerce issued preliminary determinations in these inquiries on December 1, 2022, affirmatively finding that certain photovoltaic solar cells and modules produced in Vietnam, Malaysia, Thailand, and Cambodia using parts and components from China from certain producers/exporters, are circumventing the Solar 1 Orders and therefore should be subject to the antidumping and countervailing duty liabilities arising from those orders. Commerce is expected to issue final determinations in May 2023.

As a result of these preliminary affirmative determinations in these inquiries, certain PV solar cells and modules produced in Vietnam, Malaysia, Thailand, and Cambodia using parts and components from China will be subject to the Solar 1 Orders and therefore could be subject to antidumping and countervailing duty liabilities. Such liabilities may vary but could result in cash deposit payments and eventual final duty payments of over 250% of the entered value of the imported merchandise. However, on June 6, 2022, President Biden issued an emergency declaration delaying the imposition of any cash deposit or duty payment obligations on merchandise subject to these inquiries until the earlier of (i) the expiration of the order on June 6, 2024, or (ii) the President terminates the emergency declaration. Merchandise from the four subject countries covered under the scope of these inquiries should therefore not be subject to any antidumping or countervailing duty liabilities under the Solar 1 Orders until the termination of the emergency declaration as long as the importer(s) and exporter(s) follow proper certification procedures that will be implemented by Commerce.

The affirmative determinations could have an adverse effect on the global solar energy marketplace, as such, an adverse effect on our business, financial condition, and results of operations. While we do not sell solar panels, the degree of our exposure is dependent on, among other things, the impact of Commerce’s determinations in these inquiries on the projects that are also intended to use our products. Such impacts are largely out of our control and may include project delays or cancellations. The ultimate severity or duration of the expected solar panel supply chain disruption or its effects on our clients’ solar project development and construction activities, and associated consequences on our business, is uncertain.

 

 

COVID-19 global pandemic.    The global COVID-19 pandemic continues to rapidly evolve, and we will continue to monitor the COVID-19 situation closely. The extent to which the COVID-19 pandemic will impact our business and financial results in the future will be dependent on ongoing developments such as the length and severity of the crisis, the potential resurgence of COVID-19 and its variants, future government actions in response to the crisis, the acceptance and effectiveness of the COVID-19 vaccines and the overall impact of the COVID-19 pandemic on the global economy and capital markets, among many other factors, all of which remain highly uncertain and unpredictable. To the extent possible, we are conducting business as usual, with necessary or advisable modifications to employee travel and many of our office employees working remotely. Our management team continues to commit significant time, attention and resources to monitoring the COVID-19 pandemic and seeking to mitigate its effects on our business and workforce. At this time, the extent to which the COVID-19 pandemic may affect our business, operations and plans, including the resulting impact on our expenditures and capital needs, remains uncertain and is subject to change. Impacts to our business can range from temporary delays in shipments to a significant increase in our logistics and materials supply cost and could both deteriorate our ability to generate profit and significantly change our capital needs.

 

 

Russia-Ukraine war.    The ongoing conflict in Ukraine has reduced the availability of material that can be sourced in Europe and, as a result, increased logistics costs for the procurement of certain inputs and materials used in our products. We do not know the ultimate severity or duration of the conflict in Ukraine, but we are continuously monitoring the situation and evaluating our procurement strategy and supply chain to try to mitigate any negative impact on our business, financial condition and results of operations.

 

 

Inflation.    We may be impacted by inflationary pressures. Inflation has continued to accelerate in the wake of Russia’s invasion of Ukraine, driving up energy prices, freight premiums, and other operating costs. Interest rates, notably mature market government bond yields, remain low by historical standards but are rising as central banks around the world tighten monetary policy in response to inflationary pressures, while government deficits and debt remain at high levels in many major markets. The eventual implications of higher government deficits and debt, tighter monetary policy, and potentially higher long-term interest rates may drive a higher cost of capital during our forecast period. These inflationary pressures are expected to

 

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persist, at least in the near-term, and will continue to negatively affect our results of operation. To help mitigate the inflationary pressures on our business, we have implemented selective price increases in certain markets, accelerated productivity initiatives and expanded our suppliers base, while continuing to execute on overhead cost containment practices.

 

 

Foreign Currency Translation.    For non-U.S. subsidiaries that operate in a local currency environment, assets and liabilities are translated into U.S. dollars at period end exchange rates. Income, expense and cash flow items are translated at average exchange rates prevailing during the period. Translation adjustments for these subsidiaries are accumulated as a separate component of net parent investment. For non-U.S. subsidiaries that use a U.S. dollar functional currency, local currency inventories and property, plant and equipment are translated into U.S. dollars at rates prevailing when acquired, and all other assets and liabilities are translated at period end exchange rates. Inventories charged to cost of sales and depreciation are remeasured at historical rates, and all other income and expense items are translated at average exchange rates prevailing during the period. Gains and losses which result from remeasurement are included in earnings.

Key business and operational metrics

In addition to information related to our financial performance, we use certain operating metrics to evaluate our business. These metrics, together with our financial statements, are used by our management to measure our performance, identify trends impacting our business and formulate projections. The primary operating metric we use to evaluate our sales performance and to track market acceptance of our products from year to year is gigawatts (“GW”) delivered generally and the change in GWs delivered from period to period specifically. GWs delivered is the only operational metric that directly relates to our revenues. GWs delivered is a commonly used operational metric by analysts and competitors in our industry and can provide additional information to investors related to the relative size of our operations as well as a basis to measure our market share. GWs is calculated specifically for each project and represents the nameplate, or maximum, power output capacity of the project under optimized conditions once the project is fully operational. GWs delivered for a project is calculated as the total nameplate capacity of the project multiplied by the cost of materials delivered to the project as a percentage of the total materials cost of the project.

 

     
       Six-month periods ended         
     

September 30,
2022

     October 1,
2021
     Percentage
Change
 

GW delivered

     8.0        6.9        16%  

 

 

 

       
     Fiscal year ended
March 31,
     2022 to
2021
percent
change
     2021 to
2020
percent
change
 
      2022      2021      2020  

GW delivered

     15.0        12.0        10.5        25%        14%  

 

 

Key components of our results of operations

The following discussion describes certain line items in our combined statements of operations and comprehensive income.

Revenue

We derive our revenue from the sale of solar trackers and software products to our customers. Our revenue growth is dependent on (i) our ability to maintain and expand our market share, (ii) total market growth and (iii) our ability to develop and introduce new products driving performance enhancements and cost efficiencies throughout the solar power plant.

 

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Cost of sales and gross profit

Cost of sales consists primarily of purchased components, shipping and other logistics costs, applicable tariffs, standard product warranty costs, amortization of certain acquired intangible assets, stock-based compensation and direct labor. Direct labor costs represent expenses of personnel directly related to project execution such as supply chain, logistics, quality, tooling, operations and customer satisfaction. Amortization of intangibles consists of developed technology and certain acquired patents over its expected period of use and is also included under cost of sales.

Steel prices, cost of transportation, and labor costs in countries where our suppliers perform manufacturing activities affect our cost of sales. Our ability to lower our cost of sales depends on implementation and design improvements to our products as well as on driving more cost-effective manufacturing processes with our suppliers. We generally do not directly purchase raw materials such as steel or electronic components and do not hedge against changes in their price. Most of our cost of sales are directly affected by sales volume. Personnel costs related to our supply chain, logistics, quality, tooling and operations are not directly impacted by our sales volume.

Gross profit may vary from quarter to quarter and is primarily affected by our revenue and cost of sales.

Operating expenses

Selling, general and administrative expenses

Selling, general and administrative expenses consist primarily of personnel-related costs associated with our administrative and support functions. These costs include, among other things, personnel costs, stock-based compensation, facilities charges including depreciation associated with administrative functions, professional services, travel expenses and allowance for bad debt. Professional services include audit, legal, tax and other consulting services. We have expanded our sales organization and expect to continue growing our sales headcount to support our planned growth. After the completion of this offering, we expect to incur on an ongoing basis certain new costs related to the requirements of being a separate publicly-traded company, including insurance, accounting, tax, legal and other professional services costs, which could be material. Amortization of intangibles consists of customer relationships and trade names over their expected period of use and is also included under selling, general and administrative expenses.

Research and development

Research and development expenses consist primarily of personnel-related costs associated with our engineering employees as well as third party consulting. Research and development activities include improvements to our existing products, development of new tracker products and software products. We expense substantially all research and development expenses as incurred. We expect that the dollar amount of research and development expenses will increase in amount over time, and may vary from period to period as a percentage of revenue.

Non-operating expenses

Income tax expense

We expect our taxable income to primarily be from the allocation of taxable income from the LLC. We are subject to federal and state income taxes in the United States on the income allocated to us from the LLC. In addition, while the majority of the LLC’s taxable income will be from United States sources and will not be subject to LLC level income tax, the LLC will have taxable income in some foreign subsidiaries that will be subject to tax at the level of the LLC. We may be entitled to foreign tax credits in the United States for our share of the foreign tax paid by the LLC.

 

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Results of operations for the six-month periods ended September 30, 2022 and October 1, 2021

 

     
     Six-month periods ended         

(In thousands, except percentages)

(Unaudited)

   September 30, 2022      October 1, 2021      % Change  

Condensed Combined Statement of Operations and Comprehensive Income Data:

        

Revenue

   $ 870,372      $ 680,172        28

Cost of sales

     755,970        605,857        25  
  

 

 

 

Gross profit

     114,402        74,315        54  

Selling, general and administrative expenses

     36,862        26,140        41  

Research and development

     8,299        6,951        19  
  

 

 

 

Operating income

     69,241        41,224        68  

Interest and other, net

     1,248        280        346  
  

 

 

 

Income before income taxes

     67,993        40,944        66  

Provision for income taxes

     16,776        8,371        100  
  

 

 

 

Net income and comprehensive income

   $ 51,217      $ 32,573        57

 

 

Results of operations for the fiscal years ended 2022, 2021, and 2020

 

       
     Fiscal year ended March 31,              
(In thousands, except percentages)    2022      2021      2020    

2022 to 2021

% Change

   

2021 to 2020

% Change

 

Combined Statement of Operations and Comprehensive Income Data:

            

Revenue

   $ 1,457,592      $ 1,195,617      $ 1,171,287       22     2

Cost of sales

     1,310,561        963,636        958,380       36       1  
  

 

 

 

Gross profit

     147,031        231,981        212,907       (37     9  

Selling, general and administrative expenses

     66,948        60,442        55,361       11       9  

Research and development

     14,176        13,008        8,641       9       51  
  

 

 

 

Operating income

     65,907        158,531        148,905       (58     6  

Interest and other, net

     799        502        (24     59       2,192  
  

 

 

 

Income before income taxes

     65,108        158,029        148,929       (59     6  

Provision for income taxes

     14,195        33,681        30,673       (58     10  
  

 

 

 

Net income and comprehensive income

   $ 50,913      $ 124,348      $ 118,256       (59 )%