UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
☒
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 2022
Or
☐
For the quarterly period ended June 30, 2023
Or
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number: 001-41617
Nextracker Inc.
(Exact name of registrant as specified in its charter)
For the transition period from
to
Nextracker Inc.
(Exact name of registrant as specified in its charter)
Delaware36-5047383
(State or other jurisdiction of(I.R.S. Employer
incorporation or organization)Identification No.)
Delaware
36-5047383
6200 Paseo Padre Parkway, Fremont, California 94555
(State or other jurisdictionAddress, including zip code of
incorporation or organization)
registrant’s principal executive offices)
(510) 270-2500
(I.R.S. Employer
Identification No.)
Registrant’s telephone number, including area code)
6200 Paseo Padre Parkway, Fremont, California 94555
(Address, including zip code of registrant’s principal executive offices)
(510)
270-2500
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading
Symbol(s)
Name of each exchange
on which registered
Class A Common Stock, $0.0001 par value
NXT
The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☐☒ No ☒
☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation
S-T
during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
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"emerging growth company”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 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2
of the Exchange Act). Yes ☐ No ☒
The number of shares of the registrant’s Class A common stock outstanding as of March 1,July 24, 2023 was 61,985,696.
45,869,190.
1

PART I. FINANCIAL INFORMATION

PART I. FINANCIAL INFORMATION
Item 1.Financial Statements:Page
Item 1.

Financial Statements:

Nextracker Inc.

Nextracker Inc.

Unaudited Condensed Balance Sheet as of December 31, 2022

1

Notes to the Unaudited Condensed Financial Statement

2

Nextracker

Unaudited Condensed CombinedConsolidated Balance Sheets as of December 31, 2022June 30, 2023 and March 31, 2022

2023		6
2

Unaudited Condensed CombinedConsolidated Statements of Operations and Comprehensive Income for the three-month and nine-month periods ended December 31,June 30, 2023 and July 1, 2022 and 2021

7
3

Unaudited Condensed CombinedConsolidated Statements of Redeemable Interest and Stockholders' Deficit / Parent Company Equity (Deficit) and Redeemable Preferred Units for the three-month and nine-month periods ended December 31,June 30, 2023 and July 1, 2022 and 2021

8
4

Unaudited Condensed CombinedConsolidated Statements of Cash Flows for the nine-monththree-month periods ended December 31,June 30, 2023 and July 1, 2022 and 2021

9
6

Notes to the Unaudited Condensed CombinedConsolidated Financial Statements

10
7
Item 2.

Management’sManagement's Discussion and Analysis of Financial Condition and Results of Operations

25
19
Item 3.

Quantitative and Qualitative Disclosures About Market Risk

39
30
Item 4.

Controls and Procedures

40
32
PART II. OTHER INFORMATION
Item 1.Legal Proceedings
32
Item 1.1A.Risk Factors
Legal Proceedings32
41
Item 1A.Risk Factors41
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds
32
Item 3.Defaults Upon Senior Securities41
33
Item 4.Mine Safety Disclosures
33
Item 5.Other Information
33
Item 6.Exhibits
33
Signatures
35


1

PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Nextracker Inc.
Unaudited condensed consolidated balance sheets
(in thousands, except share and per share amounts)
Item 3.Defaults Upon Senior Securities42
Item 4.Mine Safety Disclosures42
Item 5.Other Information42
Item 6.Exhibits42
Signatures45

i

As of June 30, 2023As of March 31, 2023
ASSETS 
Current assets:
Cash and cash equivalents$355,081$130,008
Accounts receivable, net of allowance of $1,621 and $1,768, respectively222,750271,159
Contract assets320,124297,960
Inventories136,656138,057
Other current assets82,19535,081
Total current assets1,116,806872,265
Property and equipment, net6,9147,255
Goodwill265,153265,153
Other intangible assets, net1,2581,321
Deferred tax assets and other assets266,741273,686
Total assets$1,656,872$1,419,680
LIABILITIES, REDEEMABLE INTERESTS AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable$293,451$211,355
Accrued expenses57,28059,770
Deferred revenue251,040176,473
Due to related parties22,04912,239
Other current liabilities52,31847,589
Total current liabilities676,138507,426
Long-term debt147,289147,147
TRA liability and other liabilities276,298280,246
Total liabilities1,099,725934,819
Commitments and contingencies (Note 9)
Redeemable non-controlling interest3,909,522 3,560,628 
 
Stockholders' deficit:
Class A common stock, $0.0001 par value, 900,000,000 shares authorized, 46,422,308 shares and 45,886,065 shares issued and outstanding, respectively55 
Class B common stock, $0.0001 par value, 500,000,000 shares authorized, 98,204,522 shares issued and outstanding1010 
Accumulated deficit(3,352,390)(3,075,782)
Additional paid-in-capital—— 
Total stockholders' deficit(3,352,375)(3,075,767)
Total liabilities, redeemable interests, and stockholders' deficit$1,656,872$1,419,680

PART I. FINANCIAL INFORMATION
ITEM 1.
FINANCIAL STATEMENTS
Nextracker Inc.
Unaudited condensed balance sheet
(In thousands, except share and per share amounts)
As of December 31,
2022
ASSETS
Cash and cash equivalents$—  
Total assets$—  
LIABILITIES AND STOCKHOLDER’S EQUITY
Total liabilities$—  
Stockholder’s equity:
Common stock, $0.01 par value per share, 100 shares authorized, 100 issued and outstanding—  
Additional
paid-in
capital
—  
Total liabilities and stockholder’s equity$—  
The accompanying notes are an integral part of thisthese condensed consolidated financial statement.
statements.
1
2

Nextracker Inc.
Unaudited condensed consolidated statements of operations and comprehensive income
(In thousands, except share and per share amounts)
Three-Month Periods Ended
June 30, 2023July 1, 2022
Revenue$479,543$403,230
Cost of sales365,799$353,367
Gross profit113,74449,863
Selling, general and administrative expenses34,23516,117
Research and development5,6293,977
Operating income73,88029,769
Interest and other (income) expense, net1,134(61)
Income before income taxes72,74629,830
Provision for income taxes9,1015,700
Net income and comprehensive income63,64524,130
Less: Net income attributable to Nextracker LLC prior to the reorganization transactions—24,130
Less: Net income attributable to redeemable non-controlling interests43,216—
Net income attributable to Nextracker Inc.$20,429$—
Earnings per share attributable to the stockholders of Nextracker Inc. (1)
Basic$0.44N/A
Diluted$0.43N/A
Weighted-average shares used in computing per share amounts:
Basic46,411,859N/A
Diluted146,868,852N/A
(1) Basic and diluted earnings per share is applicable only for the period following the initial public offering (“IPO”) and the related Transactions. See Note 5 for a description of the Transactions.
The accompanying notes are an integral part of these condensed consolidated financial statements.
3

Nextracker Inc.
Unaudited condensed consolidated statements of redeemable interest and stockholders' deficit / parent company equity (deficit)
(in thousands, except share amounts)
Class A common stockClass B common stock
Three Months Ended June 30, 2023Redeemable preferred unitsRedeemable non-controlling interestsAccumulated net parent investmentShares outstandingAmountsShares outstandingAmountsAdditional paid-in-capitalAccumulated deficitTotal stockholders' deficit
BALANCE AT MARCH 31, 2023$—$3,560,628$—45,886,065$598,204,522$10$—$(3,075,782)$(3,075,767)
Net income—43,216——————20,42920,429
Stock-based compensation expense and other———————8,641—8,641
Vesting of Nextracker Inc. RSU awards———536,243——————
Redemption value adjustment—305,678—————(8,641)(297,037)(305,678)
BALANCE AT JUNE 30, 2023$—$3,909,522$—46,422,308$598,204,522$10$—$(3,352,390)$(3,352,375)

4

Class A common stockClass B common stock
Three Months Ended July 1, 2022Redeemable preferred unitsRedeemable non-controlling interestsAccumulated net parent investment (deficit)Shares outstandingAmountsShares outstandingAmountsAdditional paid-in-capitalAccumulated deficitTotal stockholders' deficit
BALANCE AT MARCH 31, 2022$504,168$—$(3,035)—$——$—$—$—$—
Net income prior to reorganization transactions——24,130———————
Stock-based compensation expense prior to reorganization——1,005———————
Paid-in-kind dividend for Series A redeemable preferred units6,250—(6,250)———————
Net transfer to Parent——851———————
BALANCE AT July 1, 2022$510,418$—$16,701—$——$—$—$—$—
The accompanying notes are an integral part of these condensed consolidated financial statements.

5


Nextracker Inc.
Unaudited condensed consolidated statements of cash flows
(in thousands)
Three-Month Periods Ended
(In thousands)June 30, 2023July 1, 2022
Cash flows from operating activities: 
Net income$63,645$24,130
Depreciation and amortization1,0461,269
Changes in working capital and other, net161,076(22,605)
Net cash provided by operating activities225,7672,794
Cash flows from investing activities:
Purchases of property and equipment(694)(427)
Net cash used in investing activities(694)(427)
Cash flows from financing activities:
Net transfers (to) from Parent—(309)
Net cash used in financing activities—(309)
Effect of exchange rate on cash and cash equivalents——
Net increase in cash225,0732,058
Cash and cash equivalents beginning of period130,00829,070
Cash and cash equivalents end of period$355,081$31,128
Non-cash investing activity:
Unpaid purchases of property and equipment$155$116
Non-cash financing activity:
Capitalized offering costs$—$297
The accompanying notes are an integral part of these condensed consolidated financial statements.




6
Table of Contents
NEXTRACKER INC.Nextracker Inc.
Notes to the unaudited condensed consolidated financial statement
statements
1. DescriptionOrganization of the Business and Summary of Significant Accounting PoliciesNextracker
Background and Nature of Operations
Nextracker Inc. (the “Company”) was formed as a Delaware corporation on December 19, 2022 (“date of incorporation”) as a 
100
%-owned subsidiary of Yuma, Inc. (“Yuma”), a Delaware corporation and indirect wholly-owned subsidiary of Flex Ltd., a Singapore incorporated public company limited by shares and having a registration no. 199002645H, and its consolidated subsidiaries (“Flex”). The Company was formed for the purpose of completing an initial public offering (the “IPO”) and related transactions (the “Transactions”) in order to carry on the business of Nextracker LLC (formerly known as NEXTracker Inc.) (the “LLC”) and its subsidiaries which is an entity comprised of(“Nextracker”, “we”, the legacy solar tracker business of Flex that“Company”) is 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.
Nextracker’s products enable solar panels in utility-scale power plants to follow the sun’s movement across the sky and optimize plant performance. Nextracker has operations in the United States, Mexico, Spain and other countries in Europe, India, Australia, the Middle East, Africa and Brazil.
Prior to the completion of the Transactions, as described in Note 5 and the Initial Public Offering as described below, we operated as part of Flex Ltd. (“Flex” or “Parent”) and not as a standalone entity. On December 19, 2022, Nextracker Inc. was formed as a Delaware corporation which is a 100%-owned subsidiary of Yuma, Inc., a Delaware corporation and indirect wholly-owned subsidiary of Flex Ltd. Nextracker Inc. was formed for the purpose of completing the initial public offering of its Class A common stock (the “IPO”) and other related Transactions, in order to carry on the business of Nextracker LLC.
The Initial Public Offering
On February 8, 2023, the Company’sCompany's registration statement on Form S-1 relating to its IPO was declared effective by the Securities and Exchange Commission (“SEC”) and the shares of its Class A common stock began trading on the Nasdaq Global Select Market on February 9, 2023. The IPO closed on February 13, 2023, pursuant to which the Company issued and sold 30,590,000 shares of its Class A common stock at a public offering price of $24.00 per share, giving effect to the exercise in full of the underwriters’underwriters' option to purchase additional shares. The Company received net proceeds of $693.8 million, after deducting $40.4 million in underwriting discount.discounts. The Company used all of the net proceeds from the IPO to purchase its member's interest in Nextracker LLC from Flex and holds a member’s interest of approximately 32% of Nextracker LLC as of June 30, 2023. On July 3, 2023 the Company completed a follow-on offering of Class A common stock. See further discussion in Note 12.
2.Summary of the Transactions relatedaccounting policies
Variable interest entities ("VIE") and consolidation
Subsequent to the IPO, the Company’s sole material asset is its member’s interest in Note 4.
Basis of Presentation
The accompanying condensed financial statement is presented in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and the requirements of the SEC for interim reporting. As permitted under these rules, certain information and disclosures normally included in financial statements prepared inNextracker LLC. In accordance with GAAP have been condensed or omitted. The interim condensed financial statement is unaudited. The unaudited interim condensed financial statement has been prepared on the same basis as the December 19, 2022 audited financial statement and, in the opinion of management, reflects all adjustments, which include only normal recurring adjustments, necessary to present fairly the Company’s financial position as of December 31, 2022. Separate statements of income and comprehensive income, changes in stockholder’s equity, and cash flows have not been presented because there have been no activities in this entity from the date of incorporation to December 31, 2022.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in our financial statement and the accompanying notes. Actual results may differ materially from our estimates.
2. Stockholder’s Equity
At the date of incorporation,Nextracker LLC Operating Agreement, the Company was authorizednamed the managing member of Nextracker LLC. As a result, the Company has all management powers over the business and affairs of Nextracker LLC and to issue 100 sharesconduct, direct and exercise full control over the activities of Nextracker LLC. Class A common stock par value $0.001 per share, and issued 100
 shares of common stock to Yuma
.
3. Income Taxes
Asin the IPO does not hold majority voting rights but hold 100% of the dateeconomic interest in the Company, which results in Nextracker LLC being considered a VIE. Due to the Company’s power to control the activities most directly affecting the results of incorporation and through December 31, 2022, we did not have any taxable income. TheNextracker LLC, the Company is subject to statutory tax requirementsconsidered the primary beneficiary of the locations in which it conducts its business. State and local income taxes will be accrued as deemed required in the best judgment of management based on analysis and interpretation of respective tax laws.
4. Subsequent events
The Company evaluated subsequent events through March 8, 2023, the date the condensed financial statement was available to be issued.
Reverse Unit Split of the LLC
In January 2023, the Board of Managers and the members of the LLC approved a 
1-for-2.1
 reverse unit split of the units of the LLC authorized and outstanding, which was effected on January 30, 2023. All unit and per unit data shown in the accompanying condensed financial statement and related notes has been retroactively revised to give effect to this reverse unit split for all periods presented. 
2
Table of Contents
The Transactions
The Company and the LLC completed the following organizational and other transactions in connectionVIE. Accordingly, beginning with the IPO (see Note 1):
Immediately prior to the
closing
of the IPO, the Company issued 
128,794,522
 sharesconsolidates the financial results of Nextracker LLC and its Class B common stock tosubsidiaries. Member’s interest in Nextracker LLC held by Yuma, Inc. ("Yuma"), Yuma Subsidiary, Inc., a Delaware corporation and wholly-owned subsidiary of Yuma (“("Yuma Sub”Sub"), and TPG Rise Flash, L.P. (“TPG Rise”("TPG"), an affiliate of the private equity firm TPG (“TPG”), in exchange for cash consideration, which number of shares was equal to the number of common units of the LLC (the “LLC Common Units”) held directly or indirectly by Yuma, Yuma Sub and TPG Rise immediately following the Transactions and before giving effect to the IPO. 
Immediately prior to the closing of the IPO, the LLC made a
cash
distribution in an aggregate amount of $
175.0
 million (the “Distribution”). With respect to such Distribution, $
21.7
 million was distributed to TPG Rise and $
153.3
 million to Yuma and Yuma Sub in accordance with their pro rata LLC units. The Distribution was financed, in part, with net proceeds from the $
150.0
 million term loan under the 2023 Credit Agreement, as further discussed below, together with cash on hand. 
The Company used all of the net proceeds from the IPO ($
693.8
 million) as consideration for Yuma’s transfer to the Company of 30,590,000 LLC
Common Units 
at a price per unit equal to $
22.68
, and, as a result, did not retain any of the net proceeds from the IPO. 
In connection with Yuma’s transfer to the Company of 
30,590,000
 LLC
Common Units
, a corresponding number of shares of the Company’s
Class B common stock held by Yuma was canceled. 
In connection with the IPO, the LLC’s redeemable preferred units designated as “Series A Preferred Units” held by TPG Rise were automatically converted into
25,026,093
 LLC Common Units which are exchangeable, together with a corresponding number of shares of the Company’s Class B common stock, for shares of the Company’s Class A common stock (or cash). Notwithstanding the foregoing, as permitted under and in accordance with the limited liability company agreement of the LLC in effect prior to the IPO (the “Prior LLC Agreement”), on February 8, 2023, TPG Rise exercised its right to have certain blocker corporations affiliated with TPG Rise each merge with a separate direct, wholly-owned subsidiary of the Company, with the blocker corporations surviving each such merger, in a transaction intended to qualify as a tax-free
transaction. In connection with such blocker corporations’ mergers, the investors in each such blocker corporation received a number of shares of the Company’s Class A common stock with a value based on the Series A Preferred Units held by such blocker corporation for a total of 

15,279,190 shares of the Company’s Class A common stock.
In connection with the IPO, the Company repurchased all 100 shares of common stock previously issued to Yuma for an immaterial amount.
On February 8, 2023, the Company amended and restated its certificate of incorporation to, among other things, authorize 900,000,000 shares of $0.0001 par value Class A common stock, 500,000,000 shares of $0.0001 par value Class B common stock, and 50,000,000 shares of par value $0.0001 preferred stock.
On February 13, 2023, the members of the LLC entered into the Third Amended and Restated Limited Liability Company Agreement of the LLC to, among other things, effect the Transactions described above and to appoint the Company as the managing member of the LLC. The Company beneficially owns
45,869,190
LLC Common Units after the closing of the IPO and the Transactions. 

3
Table of Contents
2023 Credit Agreement
On February 13, 2023, the Company and the LLC, as the borrower, entered into a senior credit facility with a syndicate of banks (the “2023 Credit Agreement”) comprised of (i) a term loan in the aggregate principal amoun
t of $
150.0
 million (the “Term Loan”), and (ii) a revolving credit facility in an aggregate principal amount of $
500.0
 million (the “RCF”). The LLC borrowed the Term Loan, and used the proceeds to finance, in part, the Distribution. 
The RCF is available in U.S. dollars, euros and such currencies as mutually agreed on a revolving basis during the five-year period through February 11, 2028 and is available to fund working capital and other general corporate purposes. A portion of the RCF not to exce
ed $
300.0 
million is available for the issuance of letters of credit. A portion of the RCF not to exceed
$50.0 
million is available for swing line loans. Subject to the satisfaction of certain conditions, the LLC will be permitted to incur incremental term loan facilities or increase the RCF commitment in an aggregate principal amount
 equal to $100.0 
million plus an additional amount such that the secured net leverage ratio or total net leverage ratio, as applicable, is equal to or less than a specified threshold after giving pro forma effect to such incurrence.
The obligations of the LLC under the 2023 Credit Agreement and related loan documents are jointly and severally guaranteed by the Company, certain other holding companies (collectively, the “Guarantors”) and, subject to certain exclusions, certain of the LLC’s existing and future direct and indirect wholly-owned domestic subsidiaries. 
As of the closing of the 2023 Credit Agreement, all obligations of the LLC and the guarantors are secured by certain equity pledges by the LLC and the Guarantors. However, if the LLC’s total net leverage ratio exceeds a specified threshold, the collateral will include substantially all of the assets of the LLC and the Guarantors and, if the LLC meets certain investment grade conditions, such lien will be released. 
The Term Loan requires quarterly principal payments beginning on June 30, 2024 in an amount equal to 0.625% of the original aggregate principal amount of the Term Loan. From June 30, 2025, the quarterly principal payment will increase to 1.25% of the original aggregate principal amount of the Term Loan. The remaining balance of the Term Loan and the outstanding balance of any RCF loans will be repayable on February 11, 2028.

Borrowings under the 2023 Credit Agreement are prepayable and commitments subject to being reduced in each case at the LLC’s option without premium or penalty. The 2023 Credit Agreement contains certain mandatory prepayment provisions in the event that the LLC or its restricted subsidiaries incur certain types of indebtedness or, subject to certain reinvestment rights, receive net cash proceeds from certain asset sales or other dispositions of property.
Borrowings in U.S. dollars under the 2023 Credit Agreement bear interest at a rate based on either (a) a term secured overnight financing rate (“SOFR”)-based formula (including a credit spread adjustment of 10 basis points) plus a margin
of
162.5
basis points to
200
basis points, depending on the LLC’s total net leverage ratio, or (b) a base rate formula plus a margin
of
62.5
basis point to
100
basis points, depending on the LLC’s total net leverage ratio. Borrowings under the RCF in euros will bear interest based on the adjusted EURIBOR rate plus a margin
of
162.5
basis points to
200
basis points, depending on the LLC’s total net leverage ratio. The LLC will also be required to pay a quarterly commitment fee on the undrawn portion of the RCF commitments
of 
20
basis points to
35
basis points, depending on the LLC’s total net leverage ratio. The interest rate for the Term Loan
is 5.12% (SOFR rate of 3.49% plus a margin of 1.63
%). 
The 2023 Credit Agreement contains certain affirmative and negative covenants that, among other things and subject to certain exceptions, limit the ability of the LLC and its restricted subsidiaries to incur additional indebtedness or liens, to dispose of assets, change their fiscal year or lines of business, pay dividends and other restricted payments, make investments and other acquisitions, make optional payments of subordinated and junior lien debt, enter into transactions with affiliates and enter into restrictive agreements. In addition, the 2023 Credit Agreement requires the LLC to maintain a maximum consolidated total net leverage ratio.
Exchange Agreement
On February 13, 2023, the Company, the LLC, Yuma, Yuma Sub and TPG entered into an exchange agreement (the “Exchange Agreement”) under which Yuma, Yuma Sub and TPG (or certain permitted transferees thereof) 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, the Company 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, the Company 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.
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Table of Contents
Tax Receivable Agreement
On February 13, 2023, the Company entered into a tax receivable agreement (the “Tax Receivable Agreement”) with the LLC, Yuma, Yuma Sub, TPG Rise and the following affiliates of TPG Rise: TPG Rise Climate Flash Cl BDH, L.P., TPG Rise Climate BDH, L.P. and The Rise Fund II BDH, L.P. (collectively, the “TPG Affiliates”). The Tax Receivable Agreement provides for the payment by the Company to Yuma, Yuma Sub, TPG and the TPG Affiliates (or certain permitted transferees thereof) of
85
% of the tax benefits, if any, that the Company is deemed to realize under certain circumstances as a result of (i) its allocable share of existing tax basis in tangible and intangible assets resulting from exchanges or acquisitions of outstanding Series A Preferred Units or LLC Common Units (the Series A Preferred Units and the LLC Common Units, collectively, 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 the Company’s 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 Rise that each merged with a separate direct, wholly-owned subsidiary of the Company, as part of the Transactions, and (iv) certain other tax benefits related to the Company entering into the Tax Receivable Agreement, including tax benefits attributable to payments under the Tax Receivable Agreement. 
Brazil Umbrella Agreement
In February 2023, Nextracker Brasil Ltda., an indirect, wholly-owned subsidiary of the Company, and Flextronics International Technologia Ltda., an affiliate of Flex, entered into an umbrella agreement (the “Umbrella Agreement”) that governs the terms, conditions and obligations of a strategic commercial relationship between the Company, and Flex for the sale of the LLC’s solar trackers in Brazil. The Umbrella Agreement is renewable automatically for successive one-year periods, unless a party provides written notice to the other parties that such party does not intend to renew within at least ninety days prior to the end of any term. 
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Table of Contents
Nextracker
Unaudited condensed combined balance sheets
(In thousands, except unit and per unit amounts)  As of December 31,
2022		   As of March 31, 2022 
ASSETS    
Current assets:    
Cash  $100,081   $29,070 
Accounts receivable, net of allowance of $1,926 and $3,574, respectively   285,800    168,303 
Contract assets   267,665    292,407 
Inventories   251,198    172,208 
Other current assets   49,593    52,074 
          
Total current assets   954,337    714,062 
Property and equipment, net   7,910    7,423 
Goodwill   265,153    265,153 
Other intangible assets, net   1,383    2,528 
Other assets   30,912    28,123 
          
Total assets  $1,259,695   $1,017,289 
          
LIABILITIES, REDEEMABLE PREFERRED UNITS AND PARENT COMPANY EQUITY (DEFICIT)    
Current liabilities:    
Accounts payable   311,354    266,596 
Accrued expenses   44,189    26,176 
Deferred revenue   173,219    77,866 
Due to related parties   41,185    39,314 
Other current liabilities   34,665    63,419 
          
Total current liabilities   604,612    473,371 
Other liabilities   35,907    42,785 
          
Total liabilities   640,519    516,156 
          
Redeemable preferred units, $0.001 par value, 23,809,524 units and 238,096 units issued and outstanding, respectively   522,918    504,168 
Parent company equity (deficit):    
Accumulated net parent investment   96,258    (3,035) 
          
Total parent company equity (deficit)   96,258    (3,035) 
          
Total liabilities, redeemable preferred units and parent company equity (deficit)  $1,259,695   $1,017,289 
          
The accompanying notesaffiliates are an integral part of these condensed combined financial statements.
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Nextracker
Unaudited condensed combined statements of operations and comprehensive income
   
Three-Month Periods Ended
   
Nine-Month Periods Ended
 
(In thousands)
  
December 31,
2022
  
December 31,
2021
   
December 31,
2022
  
December 31,
2021
 
Revenue  $513,370  $337,607   $1,383,742  $1,017,779 
Cost of sales   431,111   303,843    1,187,081   909,700 
                  
Gross profit   82,259   33,764    196,661   108,079 
Selling, general and administrative expenses   18,613   13,009    55,475   39,149 
Research and development   4,984   3,649    13,283   10,600 
                  
Operating income   58,662   17,106    127,903   58,330 
Interest and other (income) expense, net   (2,366)   91    (1,118)   371 
                  
Income before income taxes   61,028   17,015    129,021   57,959 
Provision for income taxes   18,442   4,469    35,218   12,840 
                  
Net income and comprehensive income  $42,586  $12,546   $93,803  $45,119 
                  
The accompanying notes are an integral part of these condensed combined financial statements.
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Nextracker
Unaudited condensed combined statements of parent company equity (deficit) and redeemable preferred units
Three-Month Periods ended December 31, 2022 and 2021
  
Net Parent Investment
  
Redeemable Preferred
Units
 
        
   (In thousands) 
BALANCE AT SEPTEMBER 30, 2022  $86,400  $516,668 
Stock-based compensation expense   940   —   
Net income   42,586   —   
Paid-in-Kind
dividend for Series A redeemable preferred units
   (6,250)   6,250 
Net transfers from Parent   (27,418)   —   
         
BALANCE AT DECEMBER 31, 2022  $96,258  $522,918 
         
BALANCE AT OCTOBER 1, 2021  $463,578  $—   
Stock-based compensation expense   842   —   
Net income   12,546   —   
Net transfers to Parent   11,550   —   
         
BALANCE AT DECEMBER 31, 2021  $488,516  $—   
         
Nine-Month Periods ended December 31, 2022 and 2021
  
Net Parent Investment
  
Redeemable Preferred
Units
 
        
   (In thousands) 
BALANCE AT MARCH 31, 2022  $(3,035)  $504,168 
Stock-based compensation expense   2,790   —   
Net income   93,803   —   
Paid-in-Kind
dividend for Series A redeemable preferred units
   (18,750)   18,750 
Net transfers from Parent   21,450   —   
         
BALANCE AT DECEMBER 31, 2022  $96,258  $522,918 
         
BALANCE AT MARCH 31, 2021  $456,047  $—   
Stock-based compensation expense   2,222   —   
Net income   45,119   —   
Net transfers to Parent   (14,872)   —   
         
BALANCE AT DECEMBER 31, 2021  $488,516  $—   
         
The accompanying notes are an integral part of these condensed combined financial statements.
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Nextracker
Unaudited condensed combined statements of cash flows
   
Nine-Month Periods Ended
 
(In thousands)
  
December 31, 2022
  
December 31, 2021
 
Cash flows from operating activities:   
Net income  $93,803  $45,119 
Depreciation and amortization   3,594   9,889 
Changes in working capital and other, net   (25,015)   (160,750) 
         
Net cash provided by (used in) operating activities   72,382   (105,742) 
         
Cash flows from investing activities:   
Purchases of property and equipment   (2,653)   (5,123) 
Proceeds from the disposition of property and equipment   24   167 
         
Net cash used in investing activities   (2,629)   (4,956) 
         
Cash flows from financing activities:   
Net transfers (to) from Parent   1,258   (14,872) 
         
Net cash provided by (used in) financing activities   1,258   (14,872) 
         
Net increase (decrease) in cash   71,011   (125,570) 
Cash beginning of period   29,070   190,589 
         
Cash end of period  $100,081  $65,019 
         
Non-cash
investing activity:
   
Unpaid purchases of property and equipment  $422  $480 
Non-cash
financing activity:
   
Capitalized offering costs  $2,534  $3,815 
Legal settlement paid by Parent, net of insurance recoveries  $20,428  $—   
The accompanying notes are an integral part of these condensed combined financial statements.
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NEXTRACKER
Notes to
the
unaudited condensed combined financial statements
1.Organization of Nextracker
The accompanying unaudited condensed combined financial statements reflect the operations that comprise the legacy solar tracker business of Flex Ltd., a Singapore incorporated public company limited by shares and having a registration no. 199002645H, and its consolidated subsidiaries (“Flex” or the “Parent”), including Nextracker LLC (formerly known as NEXTracker Inc.) (the “LLC”) and its subsidiaries, collectively called Nextracker (or the “Company”). On December 19 ,2022, Nextracker Inc. was formed as a Delaware corporation which is a
100
%-
owned subsidiary of Yuma, Inc., a Delaware corporation and indirect wholly-owned subsidiary of Flex Ltd. Nextracker Inc. was formed for the purpose of completing a public offering of its Class A common stock (the “IPO”) and other related Transactions (as described in Note 10), in order to carrypresented on the business of Nextracker LLC. As of the date of and for the periods presented in the financial statements, set forth in this quarterly report on Form
10-Q
(the “Quarterly Report”), and prior to the IPO and the completion of the Transactions (see Note 10), Nextracker Inc. had no operations and all of the business operation of Nextracker Inc. were conducted through Nextracker.
The condensed combined financial statements have been derived from the condensed consolidated financial statements and accounting records of Flex. See Note 2 for basis of presentation details.
Nextracker was acquired by Flex in 2015. In 2016, Flex acquired BrightBox Technologies, Inc. (“BrightBox”) on behalf of Nextracker to further its machine learning capabilities. Nextracker operatesbalance sheets as a separate operating and reportable segment of Flex and its results of operations have been reported in Flex’s consolidated financial statements.
Nextracker istemporary equity under the leading provider of intelligent, integrated solar tracker and software solutions used in utility-scale and distributed generation solar projects around the world. Nextracker’s products enable solar panels in utility-scale power plants to follow the sun’s movement across the sky and optimize plant performance. Nextracker has operations in the United States, Mexico, Chile, Spain and other countries in Europe, India, Australia, the Middle East, Africa and
Brazil.caption “Redeemable non-controlling interests.”
The Initial Public Offering
On February 8, 2023, Nextracker Inc.’s registration statement on Form S-1 relating to its IPO was declared effective by the Securities and Exchange Commission (“SEC”) and the shares of its Class A common stock began trading on the Nasdaq Global Select Market on February 9, 2023. The IPO closed on February 13, 2023, pursuant to which Nextracker Inc. issued and sold 30,590,000 shares of its Class A common stock at a public offering price of $24.00 per share, giving effect to the exercise in full of the underwriters’ option to purchase additional shares. Nextracker Inc. received net proceeds of $693.8 million, after deducting $40.4 million in underwriting discount. Upon closing of the IPO, approximately $8.3 million of offering costs were paid by Flex, and the Company netted the previously capitalized offering costs ($7.9 million as of December 31, 2022) against the net parent investment. See further discussion of the Transactions related to the IPO in Note 10.
2.Summary of accounting policies
Basis of presentation
Throughout the period covered by the condensed combined financial statements, Nextracker did not operate as a separate entity and stand-alone separate historical financial statements for Nextracker have not been prepared. The financial statements in this Quarterly Report have been derived from Flex’s historical accounting records and are presented on a
carve-out
basis.
Nextracker is primarily comprised of certain stand-alone legal entities for which discrete financial information is available. The accompanying condensed combined financial statements have been prepared on a stand-alone basis and are derived from Flex’s consolidated financial statements and accounting records, using Flex’s historical basis in Nextracker’s assets and liabilities. The accompanying condensed combined financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and pursuant to the requirementsrules and regulations of the SEC for reporting interim reporting. As permitted under these rules, certainfinancial information. Accordingly, they do not include all of the information and disclosures normally included in combined financial statements prepared in accordance withfootnotes required by U.S. GAAP have been condensed or omitted. The interim condensed combined financial statements are unaudited. The unaudited interim condensed combined financial statements have been prepared on the same basis as the annual combinedfor complete financial statements, and should be read in conjunction with the Company’s audited consolidated financial statements as of and for the fiscal year ended March 31, 2023, contained in the Company’s Annual Report on Form 10-K (the "Form 10-K"). In the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the Company’s financial position as of December 31, 2022 and its results of operations for the three- and nine-month periods ended December 31, 2022 and 2021 and its cash flows for the nine-month periods ended December 31, 2022 and 2021.

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NEXTRACKERNextracker Inc.
Notes to the unaudited condensed combinedconsolidated financial statements
Nextracker’smanagement, all adjustments (consisting only of normal recurring adjustments) considered necessary to present the Company's financial statements fairly have been included. Operating results of operations for the nine-monththree-month period ended December 31, 2022June 30, 2023 are not necessarily indicative of the results that may be expected for the fiscal year ending March 31, 20232024 or for any other future annual or interim period. All intracompany transactions and accounts within Nextracker have been eliminated.
Further,Prior to the results stated herein mayTransactions (as described in Note 5), Nextracker did not be indicative of what Nextracker’s financial position, results of operations and cash flows might be now that Nextracker operatesoperate as a separate entity and stand-alone company since the IPO. The condensed combinedseparate historical financial statements included herein dofor Nextracker were not reflect any changes that have occurred or may occur in Nextracker’s financing and operations as a result ofprepared. Accordingly, the IPO.
Theunaudited condensed combined balance sheet as of March 31, 2022 was derived from the Company’s audited combined financial statements. These condensed combinedconsolidated financial statements should be read in conjunction withfor the Company’s audited combined financial statements included in the prospectus dated February 8, 2023 that forms a part of Nextracker Inc.’s Registration Statement on Form S-1 (File No. 333-269238), as filed with the SEC pursuant to Rule 424(b)(4) promulgated under the Securities Act of 1933, as amended.
The first quarters for fiscal years 2023 and 2022three-month period ended on July 1, 2022 (92 days),were derived from Flex’s historical accounting records and July 2, 2021 (93 days), respectively. The second quarters for fiscal years 2023were presented on a carve-out basis and 2022 ended on September 30, 2022 and October 1, 2021 (91 days in each period), respectively. The third quarters for fiscal years 2023 and 2022 ended on December 31, 2022 and 2021, which are comprised of 93 days and 92 days, respectively.
The condensed combined financial statements include all revenues, expenses, assets and liabilities directly attributable to Nextracker. Where it is possible to specifically attribute such expenses to activities of Nextracker, these amounts have been charged or credited directly to Nextracker without allocation or apportionment. The condensed combined statements of operations and comprehensive income also include allocations of certain costs from Flex incurred on Nextracker’s behalf. Such corporate-level costs are allocated to Nextracker using methods based on proportionate formulas such as revenue and headcount, among others. Such corporate-level costs include costs pertaining to accounting and finance, legal, human resources, information technology, insurance, tax services, and other costs. Such costs may not representhave represented the amounts that would have been incurred had Nextracker operated autonomously or independently from Flex during the period preceding the IPO.
The condensed consolidated balance sheet as of March 31, 2023 was derived from the relevant time period. Management considers the expense allocation methodology and results to be reasonable for all periods presented. However, these costs may not be indicative of what Nextracker may incur in the future. During the fourth quarter of fiscal year 2022, Nextracker entered into a Transition Service Agreement (“TSA”) with Flex, whereby Flex agreed to provide or cause to be provided certain services to Nextracker which were previously included as part of the allocations from Flex. As consideration, Nextracker agreed to pay Flex the amount specified for each service as described in the TSA.
All intracompany transactions and accounts within Nextracker have been eliminated. All significant transactions between Nextracker and Flex that have not been historically cash settled have beenCompany’s audited consolidated financial statements included in the condensed combined balance sheets within accumulated net parent investmentForm 10-K.
The first quarters for fiscal years 2024 and reflected in the condensed combined statements of cash flows as a financing activity as these are deemed to be internal financing transactions.
In connection with the Parent’s acquisition of Nextracker2023 ended on June 30, 2023 (91 days), and BrightBox in 2015 and 2016, respectively, Flex applied pushdown accounting to separate financial statements of acquired entities in accordance with ASC 805. The application of pushdown accounting impacted goodwill and intangible assets (see Note 4).
Cash included in the condensed combined balance sheets reflects cash that is controlled by Nextracker. Flex’s debt has not been allocated to Nextracker for any of the periods presented because the debt is not specifically identifiable to Nextracker.
Redeemable preferred units that are redeemable upon the occurrence of conditions outside of the control of Nextracker are reported as temporary equity in the condensed combined balance sheets.
Flex historically maintains stock-based compensation plans at a corporate level. Starting in fiscal year 2023, Nextracker is granting equity compensation awards to its employees under the First Amended and RestatedJuly 1, 2022 Nextracker LLC Equity Incentive Plan (the “2022 Nextracker Plan”). Nextracker employees participate in those plans and a portion of the cost of those plans is included in Nextracker’s condensed combined financial statements. See Note 5 for a further description of the accounting for stock-based compensation.(92 days), respectively.
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NEXTRACKER
Notes to unaudited condensed combined financial statements
Use of estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ materially from those estimates. Estimates are used in accounting for, among other things, impairment of goodwill, impairment of long-lived assets, allowance for doubtful accounts, reserve for excess or obsolete inventories, valuation of deferred tax assets, warranty reserves, contingencies, operation accruals, and fair values of stock options and restricted share unit awards granted under stock-based compensation plans. Due to the
long-term economic effect of the COVID-19
pandemic and geopolitical conflicts (including the Russian invasion of Ukraine), there has been and will continue to be uncertainty and disruption in the global economy and financial markets. The Company has made estimates and assumptions taking into consideration certain possible impacts due to the
COVID-19
pandemic and the Russian invasion of Ukraine. These estimates may change, as new events occur, and additional information is obtained. Actual results may differ from previously estimated amounts, and such differences maybemay be material to the condensed combinedconsolidated financial statements. Estimates and assumptions are reviewed periodically, and the effects of revisions are reflected in the period they occur. Management believes that these estimates and assumptions provide a reasonable basis for the fair presentation of the condensed combinedconsolidated financial statements.
Product warranty
Nextracker offers an assurance type warranty for its products against defects in design, materials and workmanship for a period ranging from five to ten years, depending on the component. For these assurance type warranties, a provision for estimated future costs related to warranty expense is recorded when they are probable and reasonably estimable, which is typically when products are delivered. The estimated warranty liability is based on our warranty model which relies on historical warranty claim information and assumptions based on the nature, frequency and average cost of claims for each product line by project. When little or no experience exists, the estimate is based on comparable product lines and/or estimated potential failure rates. These estimates are based on data from Nextracker specific projects and overall industry statistics.projects. Estimates related to the outstanding warranty liability are
re-evaluated
on an ongoing basis using best-available information and revisions are made as necessary.
The following table summarizes the activity related to the estimated accrued warranty reserve for the three-three-month periods ended June 30, 2023 and nine-month periods ended December 31, 2022 and 2021:July 1, 2022:
   
Three-month periods ended
   
Nine-month periods ended
 
(In thousands)  
December 31,
2022
   
December 31,
2021
   
December 31,
2022
   
December 31,
2021
 
Beginning balance  $11,431   $16,213   $10,485   $17,085 
Provision (release) for warranties issued (1)   8,582    (2,373)    9,974    (2,608) 
Payments   (117)    (404)    (563)    (1,041) 
                     
Ending balance  $19,896   $13,436   $19,896   $13,436 
                     
(1)
During the three- and nine-month periods ended December 31, 2022, the Company identified a specific design issue with a
non-core
product, and recorded an additional $8.7 million charge to cost of sales on its condensed combined statement of operations and comprehensive income, related to future remediation costs, which may include replacement parts and services.

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NEXTRACKERNextracker Inc.
Notes to the unaudited condensed combinedconsolidated financial statements
Three-month periods ended
(In thousands)June 30, 2023July 1, 2022
Beginning balance$22,591$10,485
Provision (release) for warranties issued(1,582)127
Payments(278)(225)
Ending balance$20,731$10,387
Inventories
Inventories are stated at the lower of cost (on a
first-in,
first-out
basis) or net realizable value. Nextracker’s inventory primarily consists of finished goods to be used and to be sold to customers, including components procured to complete the tracker system projects.
Other current assets
Other current assets include short-term deposits and advances of $22.6$74.9 million and $9.3$29.3 million as of December 31, 2022June 30, 2023 and March 31, 2022,2023, respectively, primarily related to advance payments to certain vendors for procurement of inventory. Additionally, other current assets include $22.3 
million as of March 31, 2022, for an estimated insurance recovery related to a certain litigation settlement as further described in Note 7. The insurance recovery amount, which w
ill be
 received by Flex, has been netted with net parent investment on the condensed combined balance sheet as of December 31, 2022.
Capitalized offering costs
Capitalized offering costs consist primarily of legal and accounting fees, which are direct and incremental fees related to the offering. These associated costs will be paid by Flex and offset against the net parent investment upon the IPO (see Note 1). The Company had $
7.9
 million and $
5.3
 million in capitalized offering costs as of December 31, 2022 and March 31, 2022, respectively, which are included in other current assets on the condensed combined balance sheets.
Accrued expenses
Accrued expenses include accruals primarily for freight and tariffs of $31.5$42.6 million and $20.7$44.6 million as of December 31, 2022June 30, 2023 and March 31, 2022,2023, respectively. In addition, it includes $12.7$14.7 million and $5.5$15.2 million of accrued payroll as of December 31, 2022June 30, 2023 and March 31, 2022,2023, respectively.
OtherTRA liability and other liabilities
OtherTax Receivable Agreement ("TRA") liability and other liabilities primarily include the liability of $230.3 million as of June 30, 2023 and March 31, 2023, related to the expected amount to be paid to Yuma, Yuma Sub, TPG and the TPG affiliates pursuant to the TRA. Additionally, the balance includes the long-term portion of standard product warranty liabilities of $
9.3
$10.4 million and $
8.8
$11.8 million, respectively, and the long-term portion of deferred revenue of $
22.6
$35.6 million and $
29.6
$35.8 million as of December 31, 2022June 30, 2023 and March 31, 2022,2023, respectively.
Redeemable preferred units
non-controlling interests
On February 1, 2022,The balance of the LLC issued redeemable preferred units designated as “Series A Preferred Units,” representing a 16.67% interestnon-controlling interests is reported at the greater of the initial carrying amount adjusted for the redeemable non-controlling interest’s share of earnings or losses and other comprehensive income or loss, or its estimated maximum redemption amount. The resulting changes in the LLC, to Flexestimated maximum redemption amount (increases or decreases) are recorded with corresponding adjustments against retained earnings or, in exchange for the cancellationabsence of a portion of the LLC’s previously issued and outstanding common units. Flex sold all of the LLC’s Series A Preferred Units to TPG Rise Flash, L.P. (“TPG Rise”), an affiliate of the private equity firm TPG (“TPG”),retained earnings, additional paid-in-capital. These interests are presented on the same day. The holder of the Series A Preferred Units
is
entitled to cumulative
paid-in-kind
or cash dividends and ha
s
 the option to redeem the Series A Preferred Units or convert the Series A Preferred Units upon certain conditions. Because the redemption or conversion conditions are outside of the control of the Company, the Company had classified the Series A Preferred Unitscondensed consolidated balance sheets as temporary equity onunder the combined balance sheets.caption “Redeemable non-controlling interests.”
The following table present a reconciliation of the change in redeemable non-controlling interests for the period presented:
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NEXTRACKERNextracker Inc.
Notes to the unaudited condensed combinedconsolidated financial statements
For
Three-month period ended
June 30, 2023
(in thousands)
Balance at beginning of period$3,560,628 
Net income attributable to redeemable non-controlling interests43,216 
Redemption value adjustment305,678 
Balance at end of period$3,909,522 
The maximum redemption amount was higher than the nine-month period ended December 31, 2022, Nextracker recorded $18.8 million dividend to be paid in kind to TPG Rise based on a ratecarrying amount adjusted for the redeemable non-controlling interest’s share of 5% per annum.
At TPG Rise’s election, Flex is required to repurchase all of the outstanding Series A Preferred Units at their liquidation preference, which shall include all contributed but unreturned capital plus accrued but unpaid dividends, at the earlier of certain change in control events and February 1, 2028. Additionally, if Nextracker has not completed a Qualified Public Offering prior to February 1, 2027, then TPG Rise may cause Flex to repurchase all of the outstanding Series A Preferred Units at their fair market value. Nextracker has determined that a Qualified Public Offering is likely and that the change in control is not probableearnings as of December 31, 2022, andJune 30, 2023 as such, it is not probable that the Series A Preferred Units will become redeemable as of December 31, 2022 and the Series A Preferred Units are not accreted to current redemption value.
In April 2022, the Board approved the amendment and restatement of the Amended and Restated Limited Liability Company Agreement (“A&R LLC Agreement”) dated as of February 1, 2022. Such amendment provided for, among other things, an increase in the total number of Series A Preferred Units issued with a proportionate reduction in the Series A issue price, such that the ownership percentage of TPG Rise remained unchanged at 16.67%. As a result of the amendment,increase in the numberCompany's share price as of Series A Preferred Units issued and outstanding was increasedJune 30, 2023 as compared to 23,809,524.March 31, 2023.
Recently issued accounting pronouncement
In December 2022, the FASB issued ASU
2022-063.Revenue
“Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848”, which defers the sunset date of ASC 848 from December 31, 2022 to December 31, 2024. ASC 848 provides relief for companies preparing for the discontinuation of interest rates, such as LIBOR. Entities that apply ASC 848 can continue to do so until December 31, 2024. The Company adopted the guidance during the third quarter of fiscal year 2023 with an immaterial impact on its condensed combined financial statements.
3.Revenue
Based on TopicASC 606 provisions, the Company disaggregates its revenue from contracts with customers by those sales recorded over time and sales recorded at a point in time. The following table presents Nextracker’s revenue disaggregated based on timing of transfer—point in time and over time for the three- and nine-monththree-month periods ended December 31, 2022June 30, 2023 and 2021:July 1, 2022:
   
Three-month periods ended
   
Nine-month periods ended
 
(In thousands)
  
December 31, 2022
   
December 31, 2021
   
December 31, 2022
   
December 31, 2021
 
Timing of Transfer                    
Point in time  $7,618   $41,220   $40,771   $63,024 
Over time   505,752    296,387    1,342,971    954,755 
                     
Total revenue  $513,370   $337,607   $1,383,742   $1,017,779 
                     
Three-month periods ended
(In thousands)June 30, 2023July 1, 2022
Timing of Transfer
Point in time$5,641$23,251
Over time473,902379,979
Total revenue$479,543$403,230
Contract balances
The timing of revenue recognition, billings and cash collections results in contract assets and contract liabilities (deferred revenue) on the condensed combinedconsolidated balance sheets. Nextracker’s contract amounts are billed as work progresses in accordance with agreed-upon contractual terms, which generally coincide with the shipment of one or more phases of the project. When billing occurs subsequent to revenue recognition, a contract asset results. Contract assets of $267.7$320.1 million and $292.4$298.0 million as of December 31, 2022June 30, 2023 and March 31, 2022,2023, respectively, are presented in the condensed combinedconsolidated balance sheets, of which $120.9$122.7 million and $86.5$116.3 million, respectively, will be invoiced at the end of the projects as they represent funds withheld until the products are installed by a third party, arranged by the customer, and the project is declared operational. The remaining unbilled receivables will be invoiced throughout the project based on a set billing schedule such as milestones reached or completed tracker rows delivered. Contract assets decreased $24.7increased $22.1 million from March 31, 20222023 to December 31, 2022June 30, 2023 due to fluctuations in the timing and volume of billings for the Company’s revenue recognized over-time.over time.
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NEXTRACKER
Notes to unaudited condensed combined financial statements
During the nine-monththree-month periods ended December 31, June 30, 2023 and July 1, 2022 and 2021,, Nextracker converted $73.1converted $71.4 million and $71.3and $56.3 million deferredof deferred revenue to revenue, respectively, which represented 68%represented 34% and 77%52%, respectively, of the beginning period balance of deferred revenue.

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Nextracker Inc.
Notes to the unaudited condensed consolidated financial statements
Remaining performance obligations
As of December 31, 2022,June 30, 2023, Nextracker had $195.8$286.6 million of the transaction price allocated to the remaining performance obligations. The Company expects to recognize revenue on approximately 88% of these performance obligations in the next 12 months. The remaining long-term unperformed obligationobligations primarily relatesrelate to extended warranty and deposits collected in advance on certain tracker projects.
4.Goodwill and intangible assets
4.Goodwill and intangible assets
Goodwill
Goodwill relates to the 2015 acquisition of Nextracker LLC and the 2016 acquisition of BrightBox by Flex on behalf of Nextracker.Nextracker LLC. As of December 31, 2022June 30, 2023 and March 31, 2022,2023, goodwill totaled $265.2 million, respectively and is not deductible for tax purposes.
Other intangible assets
Nextracker amortizes identifiable intangible assets consisting of developed technology, customer relationships, and trade names because these assets have finite lives. Nextracker’s intangible assets are amortized on a straight-line basis over the estimated useful lives. The basis of amortization approximates the pattern in which the assets are utilized over their estimated useful lives. No residual value is estimated for any intangible assets. The fair value of Nextracker’s intangible assets is determined based on management’s estimates of cash flows and recoverability.
Intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an intangible asset may not be recoverable. An impairment loss is recognized when the carrying amount of an intangible asset exceeds its fair value. Nextracker reviewed the carrying value of its intangible assets as of December 31, 2022 and March 31, 2022 and concluded that such amounts continued to be recoverable.
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NEXTRACKER
Notes to unaudited condensed combined financial statements
The components of identifiable intangible assets are as follows:
  
As of December 31, 2022
   
As of March 31, 2022
 As of June 30, 2023As of March 31, 2023
(In thousands)  
Gross

carrying

amount
   
Accumulated

amortization
 
Net

carrying

amount
   
Gross

carrying

amount
   
Accumulated

amortization
 
Net

carrying

amount
 (In thousands)Gross
carrying
amount		Accumulated
amortization		Net
carrying
amount		Gross
carrying
amount		Accumulated
amortization		Net
carrying
amount
Intangible assets:            Intangible assets:
Trade name and other intangibles  $15,900   $(14,517)  $1,383   $15,900   $(13,372)  $2,528 Trade name and other intangibles$2,500$(1,242)$1,258$2,500$(1,179)$1,321
                      
Total  $15,900   $(14,517)  $1,383   $15,900   $(13,372)  $2,528 Total$2,500$(1,242)$1,258$2,500$(1,179)$1,321
                      
Total intangible asset amortization expense recognized in operations during the three- and nine-month periods ended December 31, 2022 and 2021 are as follows:
   
Three-month periods ended
   
Nine-month periods ended
 
(In thousands)
  
December 31,
2022
   
December 31,
2021
   
December 31,
2022
   
December 31,
2021
 
Cost of sales  $63   $63   $188   $3,980 
Selling general and administrative expense   —      478    957    3,944 
                     
Total amortization expense  $63   $541   $1,145   $7,924 
                     
Estimated future annual amortization expense for the above amortizable intangible assets are as follows:
(In thousands)  
Amount
 
Fiscal year ending March 31,     
2023 (1)  $62 
2024   250 
2025   250 
2026   250 
2027   250 
Thereafter   321 
      
Total amortization expense  $1,383 
      
(1)Represents estimated amortization for the remaining fiscal three-month period ending March 31, 2023.
5.Stock-based compensation
Flex maintains several stock-based incentive plans (collectively, the “Plans”) for the benefit of certain of its officers, directors and employees, including the employees of Nextracker. The following disclosures represent Nextracker’s portion of the Plans maintained by Flex in which Nextracker’s employees participated. All awards granted under the Plans consist of Flex common shares. Accordingly, the amounts presented are not necessarily indicative of future performance and do not necessarily reflect the results that Nextracker would have experienced as a stand-alone company for the period presented.
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NEXTRACKER
Notes to unaudited condensed combined financial statements
The following table summarizes Nextracker’s stock-based compensation expense related to Flex equity incentive plans:
   
Three-month periods ended
   
Nine-month periods ended
 
(In thousands)  
December 31,
2022
   
December 31,
2021
   
December 31,
2022
   
December 31,
2021
 
Cost of sales  $350   $426   $1,105   $1,105 
Selling, general and administrative expenses   590    416    1,685    1,117 
                     
Total stock-based compensation expense  $940   $842   $2,790   $2,222 
                     
Stock-based compensation expense includes an allocation of Parent’s corporate and shared functional employee expense of immaterial amounts for the three- and nine-month periods ended December 31, 2022 and 2021. These charges were recorded within selling, general and administrative expenses.
The Flex 2017 equity incentive plan (the “2017 Plan”)
All options have been fully expensed and none were outstanding and exercisable as of December 31, 2022.
The executives, officers and employees of Flex, including Nextracker, were granted restricted share unit (“RSU”) awards under the 2017 Plan. RSU awards are rights to acquire a specified number of ordinary Flex shares for no cash consideration in exchange for continued service with Flex. RSU awards generally vest in installments over a
two
to four-year period and unvested RSU awards are forfeited upon termination of employment. Vesting for certain RSU awards is contingent upon service and market conditions, or service and performance conditions.
As of December 31, 2022, the total unrecognized compensation cost related to unvested RSU awards held by Nextracker employees was approximately $2.7 million under the 2017 Plan. These costs will be amortized generally on a straight-line basis over a weighted-average period of approximately one year.
There were no options and no RSU awards granted under the 2017 Plan during the nine-month period ended December 31, 2022.
Of the 338,000 unvested RSU awards outstanding under the 2017 Plan as of December 31, 2022, an immaterial amount of these unvested RSU awards represent the target amount of grants made to certain key employees whereby vesting is contingent on meeting certain market conditions.
The 2022 Nextracker equity incentive plan
During the nine-month period ended December 31, 2022, Nextracker awarded 5.3 million equity-based compensation awards to its employees under the First Amended and Restated 2022 Nextracker LLC Equity Incentive Plan (the “2022 Nextracker Plan”). Of the 5.3 million unvested awards under that plan, the Company granted approximately 2.7 million unit options with an exercise price of $21.00 per unit and 1.9 million RSU awards whereby vesting is contingent upon continued service over a four-year and three-year period, respectively, and the occurrence of an initial public offering event or a sale of the Company. Vesting of the unit options is also contingent upon the growth of the equity valuation of the Company in the four years following the grant date, which could result in a range of
0-100%
of such unit options ultimately vesting. Finally, approximately 0.7 million unvested awards are performance-based restricted share unit awards (“PSU”) contingent upon the achievement of certain metrics specific to Nextracker measured over a three-year period and the occurrence of an IPO or a sale of the Company, which could result in a range of
0-200%
of such PSUs ultimately vesting. The performance-based metrics for the second and third years of vesting for the PSUs are not yet determined, and therefore only 0.2 million PSUs have met the criteria for a grant date under ASC 718 as of December 31, 2022.
Additionally, during the nine-month period ended December 31, 2022, approximately
0.3
million awards were forfeited due to employee terminations.
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NEXTRACKER
Notes to unaudited condensed combined financial statements
The valuation of our common units and RSUs was determined in accordance with the guidance provided by the American Institute of Certified Public Accountants Practice Aid, “Valuation of Privately-Held-Company Equity Securities Issued as Compensation”. Application of these approaches involves the use of estimates, judgment and assumptions that are highly complex and subjective, such as those regarding our expected future revenue and EBITDA, discount rates, market multiples, the selection of comparable companies and the probability of possible future events. Changes in any or all of these estimates and assumptions or the relationships between those assumptions impact our valuations as of each valuation date and may have a material impact on the valuation of our common stock. The fair values of our option units and PSUs were estimated using Monte-Carlo simulation models which is a probabilistic approach for calculating the fair value of the awards. Key assumptions for the Monte-Carlo simulation model are the risk-free interest rate, expected volatility, expected dividends and correlation coefficient.
The weighted average grant date fair values were
$5.17 per award for the unit options, $16.72 per award for the RSU, and $18.86 per award for the PSUs. The grant date fair values for the unit options and PSUs were determined using a Monte Carlo simulation. The Company will record cumulative stock-based compensation expense related to these awards in the period when its liquidity event is completed for the portion of the awards for which the relevant service condition has been satisfied with the remaining expense recognized over the remaining
service period.
The total unrecognized compensation expense related to unvested awards under the 2022 Nextracker Plan as of December 31, 2022 was approximately $47.5 million, which is expected to be recognized over a weighted-average period of approximately three years.
6.Relationship with parent and related parties
The condensed combined financial statements have been prepared on a stand-alone basis and are derived from the consolidated financial statements and accounting records of Flex. Prior to the IPO, Nextracker was historically managed and operated in the normal course of business by Flex. Accordingly, certain shared costs have been allocated to Nextracker and reflected as expenses in these condensed combined financial statements. Nextracker’s management and the management of Flex consider the expenses included and the allocation methodologies used to be reasonable and appropriate reflections of the historical Flex expenses attributable to Nextracker for purposes of the stand-alone financial statements; however, the expenses reflected in these condensed combined financial statements may not be indicative of the actual expenses that would have been incurred during the periods presented if Nextracker historically operated as a separate, stand-alone entity and would depend on a number of factors, including the chosen organizational structure, what functions were outsourced or performed by employees and strategic decisions made in areas such as information technology and infrastructure. In addition, the expenses reflected in the condensed combined financial statements may not be indicative of expenses that Nextracker will incur in the future.
Allocation of corporate expenses
The condensed combined financial statements include expense allocations for certain functions provided by Flex, including, but not limited to, general corporate expenses related to finance, legal, information technology, human resources, and stock-based compensation. These expenses have been allocated to Nextracker on the basis of direct usage when identifiable, with the remainder allocated on the basis of revenue, headcount or other measure.
During the three-month periods ended December 31, 2022 and 2021, Nextracker was allocated $1.0 million and $3.4 million, respectively, of general corporate expenses incurred by Flex. Of these expenses $0.7 million and $2.6 million, respectively, are included within selling, general and administrative expenses and $0.3 million and $0.8 million, respectively, are included in cost of sales in the condensed combined statements of operations and comprehensive income.
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NEXTRACKER
Notes to unaudited condensed combined financial statements
During the nine-month periods ended December 31, 2022 and 2021, Nextracker was allocated $4.2 million and $10.1 million, respectively, of general corporate expenses incurred by Flex. Of these expenses $2.8 million and $7.8 million, respectively, are included within selling, general and administrative expenses and $1.4 million and $2.3 million, respectively, are included in cost of sales in the condensed combined statements of operations and comprehensive income.
Risk management
Flex carries insurance for property, casualty, product liability matters, auto liability, and workers’ compensation and maintain excess policies to provide additional limits. Nextracker pays a premium to Flex in exchange for the coverage provided. In fiscal years 2023 and 2022, the policies with significant premiums included the Marine Cargo/Goods in Transit and the multiple Errors and Omissions policies all through various insurance providers. Expenses related to coverage provided by Flex are reflected in the condensed combined statements of operations and comprehensive income and were immaterial for the three- and nine-month periods ended December 31, 2022 and 2021, respectively.
presented.
Cash management and financing
Nextracker participates in Flex’ centralized cash management programs. Disbursements are independently managed by Nextracker.
All significant transactions between Nextracker and Flex that have not been historically cash settled have been included in the condensed combined balance sheets within accumulated net parent investment and reflected in the condensed combined statement of cash flows as net transfers to parent as these are deemed to be internal financing transactions. All intra-company accounts, profits and transactions among the combined entities have been eliminated. The following is a summary of material transactions reflected in the accumulated net parent investment during the three- and nine-month periods ended December 31, 2022 and 2021:
   
Three-month periods ended
   
Nine-month periods ended
 
(In thousands)
  
December 31,
2022
   
December 31,
2021
   
December 31,
2022
   
December 31,
2021
 
Corporate allocations (excluding stock-based compensation expense)  $65   $2,604   $1,463   $7,849 
Transfer of operations to Nextracker (1)   (51,527)    4,558    (8,440)    401 
Net cash pooling activities (2)   10,154    (655)    (1,195)   (37,843) 
Income taxes   13,890    5,043    29,622    14,721 
                     
Net transfers (to) from Parent  $(27,418)   $11,550   $21,450   $(14,872) 
                     
(1)Primarily represents certain international operations where related income and/or losses are included in Nextracker’s condensed combined statements of operations. Cash was also collected by the international operations on behalf of Nextracker, for which Nextracker and Flex do not intend to settle in the future. For the nine-month period ended December 31, 2022, the balance includes the legal settlement paid by Flex as further disclosed in Note 7.
(2)Primarily represents financing activities for cash pooling and capital transfers.
The cash balance reflected in the condensed combined balance sheets consist of the cash managed and controlled by Nextracker. For as long as Nextracker is a controlled entity of Flex, Nextracker’s U.S. operations may continue to participate in the Flex cash pooling management programs intra-quarter; all outstanding positions are settled or scheduled for settlement as of each quarter end. Cash pooling activities are reflected under net transfers from Parent in the condensed combined statements of parent company equity (deficit) and redeemable preferred units and condensed combined statements of cash flows.
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NEXTRACKER
Notes to unaudited condensed combined financial statements
Due to related parties relates to balances resulting from transactions between Nextracker and Flex subsidiaries that have historically been cash settled. Nextracker purchased certain components and services from other Flex affiliates of $14.1 million and $43.0 million for the three- and nine-month periods ended December 31, 2022, respectively, compared to $10.4 million and $37.1 million for the three- and nine-month periods ended December 31, 2021, respectively.
Flex also administers on behalf of Nextracker payments to certain freight providers as well as payrolls to certain employees based in the U.S. Nextracker’s average due to related parties balance was $43.0 million and $33.3 million for the nine-month periods ended December 31, 2022 and 2021, respectively. All related cash flow activities are under net cash used in operating activities in the condensed combined statement of cash flows.
Net parent investments
5.The net parent investment in the condensed combined balance sheets represents Flex’s net investment in Nextracker and is presented in lieu of stockholders’ equity.Transactions
7.Commitments and contingencies
Litigation and other legal matters
In connection with the matters described below, Nextracker has accrued for loss contingencies where it believes that losses are probable and estimable. The amounts accrued are not material. Although it is reasonably possible that actual losses could be in excess of Nextracker’s accrual, Nextracker is unable to estimate a reasonably possible loss or range of loss in excess of its accrual, except as discussed below, due to various reasons, including, among others, that: (i) the proceedings are in early stages or no claims have been asserted, (ii) specific damages have not been sought in all of these matters, (iii) damages, if asserted, are considered unsupported and/or exaggerated, (iv) there is uncertainty as to the outcome of pending appeals, motions, or settlements, (v) there are significant factual issues to be resolved, and/or (vi) there are novel legal issues or unsettled legal theories presented. Any such excess loss could have a material adverse effect on Nextracker’s results of operations or cash flows for a particular period or on Nextracker’s financial condition.
On July 15, 2022, the Company settled a case that was brought in January 2017 by Array Technologies, Inc. (“ATI”), in which ATI had alleged that Nextracker and Flex caused a former ATI employee to breach his
non-compete
agreement with ATI by joining Nextracker and made claims of, among other things, fraud, constructive fraud, trade secret misappropriation, breach of contract and related claims. All claims are fully released as part of a $42.8 million settlement reached in July 2022. The full settlement amount was paid by Flex on August 4, 2022, and is subject to partial coverage under the Flex insurance policy. The estimated insurance recovery of $22.3 
million, which was included in other current assets in the condensed combined balance sheets as of March 31, 2022, has been netted with net parent investment on the condensed combined balance sheet as of December 31, 2022.
8.Income taxes
The Company follows the guidance under ASC
740-270,
“Interim Reporting”, which requires that an estimated tax rate is applied to
year-to-date
ordinary income. At the end of each interim period, the Company estimates the effective tax rate expected to be applicable for the full fiscal year. The tax effect of discrete items is recorded in the quarter in which the discrete events occur.
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NEXTRACKER
Notes to unaudited condensed combined financial statements
The following table presents income tax expense recorded by the Company along with the respective combined effective tax rates for each period presented
:
   
Three-month periods ended
  
Nine-month periods ended
 
(In thousands)
  
December 31, 2022
  
December 31, 2021
  
December 31, 2022
  
December 31, 2021
 
Income tax   18,442   4,469   35,218   12,840 
Effective tax rates   30.2%   26.3%   27.3%   22.2 %
The effective tax rates differ from the U.S. domestic statutory income tax rate of 21% primarily due to the U.S state and local income taxes coupled with the jurisdictional mix of income between the U.S. and other operating jurisdictions.

9.Segment reporting
Operating segments are defined as components of an enterprise for which separate financial information is available that is evaluated regularly by the Chief Operating Decision Maker (“CODM”), or a decision-making group, in deciding how to allocate resources and in assessing performance. Resource allocation decisions and Nextracker’s performance are assessed by its Chief Executive Officer, identified as the CODM.
For all periods presented, Nextracker has
one
operating and reportable segment. The following table sets forth geographic information of revenue based on the locations to which the products are shipped:
   
Three-month periods ended
   
Nine-month periods ended
 
(In thousands)
  
December 31, 2022
   
December 31, 2021
   
December 31, 2022
   
December 31, 2021
 
Revenue:                    
U.S.  $327,548   $161,703   $908,361   $605,743 
Rest of the World   185,822    175,904    475,381    412,036 
                     
Total  $513,370   $337,607   $1,383,742   $1,017,779 
                     
The United States is the principal country of domicile.
10.Subsequent events
The Company evaluated subsequent events through March 8, 2023, the date the condensed combined financial statements were available to be issued.
Reverse unit split
In January 2023 the Board of Managers and the members of the Company approved a 1-for-2.1 reverse unit split of the units authorized and outstanding, which was effected on January 30, 2023. All unit and per unit data shown in the accompanying condensed combined financial statements and related notes has been retroactively revised to give effect to this reverse unit split for all periods presented. Units underlying authorized and outstanding equity-based awards were proportionately decreased and the respective per unit value and exercise prices, if applicable, were proportionately increased in accordance with the terms of the agreements governing such securities. There was no change in the par value of the Company’s Series A Preferred Units as a result of the reverse stock split.
The Transactions
Nextracker Inc. and the CompanyLLC completed the following organizationalreorganization and other transactions in connection with the IPO (see Note 1) (collectively, referred to as the “Transactions”):
•Immediately prior to the
closing
completion of the IPO, Nextracker Inc. issued 128,794,522 shares of its Class B common stock to Yuma, Yuma Subsidiary, Inc., a Delaware corporation and wholly-owned subsidiary of Yuma (“Yuma Sub”),Sub, and TPG Rise in exchange for cash consideration, which number of shares was equal to the number of common units of theNextracker LLC held directly or indirectly by Yuma, Yuma Sub and TPG Rise (not inclusive of those held by affiliated blocker corporations – see below) immediately following the Transactions and before giving effect to the IPO.
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NEXTRACKER
Notes to unaudited condensed combined financial statements
•Immediately prior to the closingcompletion of the IPO the LLC made a distribution in an aggregate amount of $175.0 million (the “Distribution”). With respect to such Distribution, $21.7 million was distributed to TPG Rise and $153.3 million to Yuma and Yuma Sub in accordance with their pro rata LLC units. The Distribution was financed, in part, with net proceeds from the $150.0 million term loan under the 2023 Credit Agreement, as further discussed below.
Nextracker Inc. used all of the net proceeds from the IPO ($693.8
 million
) as consideration for Yuma’s transfer to Nextracker Inc. of 30,590,000
LLC common units (the “LLC Common Units”) at a price per unit equal to $
22.68.
In connection with Yuma’s transfer to Nextracker Inc. of 30,590,000 LLC Common Units, a corresponding number of shares of Nextracker Inc.’s Class B common stock held by Yuma was canceled.
In connection with the IPO, the Series A Preferred Units held by TPG Rise were automatically converted into 25,026,093 LLC Common Units which are exchangeable, together with a corresponding number of shares of Nextracker Inc.’s Class B common stock, for shares of Nextracker Inc.’s Class A common stock (or cash). Notwithstanding the foregoing, as permitted under and in accordance with the limited liability company agreement of theNextracker LLC in effect prior to the IPO (the “Prior LLC Agreement”), on February 8, 2023, TPG Rise exercised its right to have certain blocker corporations affiliated with TPG Rise 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. In connection with such blocker corporations’ mergers, the investors in each such blocker corporation received a number of shares of Nextracker Inc.’s Class A common stock with a value based on the Series A Preferred Units held by such blocker corporation for a total of
15,279,190
shares of Nextracker Inc.’s Class A common stock. 

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Nextracker Inc.
Notes to the unaudited condensed consolidated financial statements
•Immediately prior to the closing of the IPO, Nextracker LLC made a distribution in an aggregate amount of $175.0 million (the “Distribution”). With respect to such Distribution, $21.7 million was distributed to TPG Rise and $153.3 million to Yuma and Yuma Sub in accordance with their pro rata units of Nextracker LLC. The Distribution was financed, in part, with net proceeds from the $150.0 million term loan under the 2023 Credit Agreement.
•Nextracker Inc. used all the net proceeds from the IPO ($693.8 million) as consideration for Yuma’s transfer to Nextracker Inc. of 30,590,000 Nextracker LLC common units at a price per unit equal to $22.68.
•In connection with Yuma’s transfer to Nextracker Inc. of 30,590,000 Nextracker LLC common units, a corresponding number of shares of Nextracker Inc.’s Class B common stock held by Yuma were canceled.
•In connection with the IPO, Nextracker Inc.’s repurchased all 100 shares of common stock previously issued to Yuma for an immaterial amount.
On February 8, 2023, the Company amended and restated its certificate of incorporation to, among other things, authorize 900,000,000 shares of $0.0001 par value Class A common stock, 500,000,000 shares of $0.0001 par value Class B common stock, and 50,000,000 shares of par value $0.0001 preferred stock.
On February 13, 2023, the members of theNextracker LLC entered into the Third Amended and Restated Limited Liability Company Agreement of theNextracker LLC to, among other things, effect the Transactions described above and to appoint Nextracker Inc. as the managing member of theNextracker LLC. Nextracker Inc. beneficially owns
45,869,190
45,886,065 Nextracker LLC Common Unitscommon units after the completion of the IPO and the Transactions. 
2023 Credit Agreement
On February 13, 2023, Nextracker Inc.Transactions and the LLC, as the borrower, entered into a senior credit facility with a syndicate of banks (the “2023 Credit Agreement”) comprised of (i) a term loan in the aggregate principal amount of $
150.0
 million (the “Term Loan”), and (ii) a revolving credit facility in an aggregate principal amount of $
500.0
 million (the “RCF”). The LLC borrowed the Term Loan, and used the proceeds to finance, in part, the Distribution. 
The RCF is available in U.S. dollars, euros and such currencies as mutually agreed on a revolving basis during the five-year period through February 11, 2028 and is available to fund working capital and other general corporate purposes. A portion of the RCF not to exceed $
300.0
 million is available for the issuance of letters of credit. A portion of the RCF not to exceed $
50.0
 million is available for swing line loans. Subject to the satisfaction of certain conditions, the LLC will be permitted to incur incremental term loan facilities or increase the RCF commitment in an aggregate principal amount equal to $
100.0
 million plus an additional amount such that the secured net leverage ratio or total net leverage ratio, as applicable, is equal to or less than a specified threshold after giving pro forma effect to such incurrence. 
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NEXTRACKER
Notes to unaudited condensed combined financial statements
The obligations of the LLC under the 2023 Credit Agreement and related loan documents are jointly and severally guaranteed by Nextracker Inc., certain other holding companies (collectively, the “Guarantors”) and, subject to certain exc
lusio
ns, certain of the LLC’s existing and future direct and indirect wholly-owned domestic subsidiaries.
As of the closing of the 2023 Credit Agreement, all obligations of the LLC and the guarantors are secured by certain equity pledges by the LLC and the Guarantors. However, if the LLC’s total net leverage ratio exceeds a specified threshold, the collateral will include substantially all of the assets of the LLC and the Guarantors and, if the LLC meets certain investment grade conditions, such lien will be released.
The Term Loan requires quarterly principal payments beginning on June 30, 2024 in an amount equal to
0.6252023.
% of the original aggregate principal amount of the Term Loan. From June 30, 2025, the quarterly principal payment will increase to
1.25
% of the original aggregate principal amount of the Term Loan. The remaining balance of the Term Loan and the outstanding balance of any RCF loans will be repayable on February 11, 2028. Borrowings under the 2023 Credit Agreement are prepayable and commitments subject to being reduced in each case at the LLC’s option without premium or penalty. The 2023 Credit Agreement contains certain mandatory prepayment provisions in the event that the LLC or its restricted subsidiaries incur certain types of indebtedness or, subject to certain reinvestment rights, receive net cash proceeds from certain asset sales or other dispositions of property.
Borrowings in U.S. dollars under the 2023 Credit Agreement bear interest at a rate based on either (a) a term secured overnight financing rate
(“SOFR”)-based
formula (including a credit spread adjustment of 10 basis points) plus a margin of
162.5
basis points to
200
 basis points, depending on the LLC’s total net leverage ratio, or (b) a base rate formula plus a margin of 
62.5
 basis point to 
100
 basis points, depending on the LLC’s total net leverage ratio. Borrowings under the RCF in euros will bear interest based on the adjusted EURIBOR rate plus a margin of 
162.5
 basis points to
200
 basis points, depending on the LLC’s total net leverage ratio. The LLC will also be required to pay a quarterly commitment fee on the undrawn portion of the RCF commitments of 
20
 basis points to 
35
 basis points, depending on the LLC’s total net leverage ratio. The interest rate for the Term Loan is 
5.12
% (
SOFR rate of 3.49
% plus a margin of
1.63
%).
The 2023 Credit Agreement contains certain affirmative and negative covenants that, among other things and subject to certain exceptions, limit the ability of the LLC and its restricted subsidiaries to incur additional indebtedness or liens, to dispose of assets, change their fiscal year or lines of business, pay dividends and other restricted payments, make investments and other acquisitions, make optional payments of subordinated and junior lien debt, enter into transactions with affiliates and enter into restrictive agreements. In addition, the 2023 Credit Agreement requires the LLC to maintain a maximum consolidated total net leverage ratio.
Exchange Agreement
On February 13, 2023,The Company, Nextracker Inc.,LLC, the LLC, Yuma, Yuma Sub and TPG entered into an exchange agreement (the “Exchange Agreement”) under which Yuma, Yuma Sub and TPG (or certain permitted transferees thereof) have the right, subject to the terms of the Exchange Agreement, to require theNextracker LLC to exchange Nextracker LLC Common Unitscommon units (together with a corresponding number of shares of Nextracker Inc.’s Class B common stock) for newly-issued shares of Nextracker Inc.’s Class A common stock of Nextracker Inc. on a one-for-oneone-to-one basis, or, in the alternative, Nextracker Inc. may elect to exchange such Nextracker LLC Common Unitscommon units (together with a corresponding number of shares of itsNextracker Inc. Class B common stock) for cash equal to the product of (i) the number of Nextracker LLC Common Unitscommon units (together with a corresponding number of shares of Nextracker Inc.’s 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 Nextracker Inc. Class A common stock value (based on the market price of Nextracker Inc.’sour 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 its Class A common stock for Nextracker LLC Common Unitscommon units and shares of its 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 Nextracker LLC. As Nextracker LLC interests are redeemable upon the LLC. occurrence of an event not solely within the control of the Company, such interests are presented in temporary equity on the condensed consolidated balance sheets.
6.Stock-based compensation
The Company adopted the First Amended and Restated 2022 Nextracker LLC Equity Incentive Plan in April 2022 (the “LLC Plan”), which provides for the issuance of options, unit appreciation rights, performance units, performance incentive units, restricted incentive units and other unit-based awards to employees, directors, and consultants of the Company. Additionally, in connection with the IPO in February 2023, the Company approved the Second Amended and Restated 2022 Nextracker Inc. Equity Incentive Plan (the “NI Plan,” and collectively with

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NEXTRACKERNextracker Inc.
Notes to the unaudited condensed combinedconsolidated financial statements
Tax Receivable Agreement
On February 13, 2023, Nextracker Inc. entered into a tax receivable agreement (the “Tax Receivable Agreement”) with the LLC Yuma, Yuma Sub,
TPG RisePlan, the “2022 Plan”) to reflect, among other things, that the underlying equity interests with respect to awards issued under the LLC Plan shall, in lieu of common units of Nextracker LLC, relate to Class A common stock of Nextracker for periods from and after the closing of the IPO.
In addition to the 2022 Plan, certain executives, officers and employees of the Company also participate in the Flex 2017 equity incentive plan (the “Flex 2017 Plan”), and as such, stock-based compensation expense for the period presented also include expense recognized under the Flex 2017 Plan.
The following table summarizes the Company’s stock-based compensation expense under the 2022 Plan and the following affiliatesFlex 2017 Plan:
Three-month periods ended
(In thousands)June 30, 2023July 1, 2022
Cost of sales$1,926$410
Selling, general and administrative expenses6,715595
Total stock-based compensation expense$8,641$1,005
Stock-based compensation expense includes an allocation of TPG Rise: TPG Rise Climate Flash Cl BDH, L.P., TPG Rise Climate BDH, L.P.Flex’s corporate and The Rise Fund II BDH, L.P. (collectively, the “TPG Affiliates”). The Tax Receivable Agreement providesshared functional employee expense of immaterial amounts for the payment bythree-month periods ended June 30, 2023 and July 1, 2022. These charges were recorded within selling, general and administrative expenses.
The 2022 Nextracker Inc.equity incentive plan
During the three-month period ended June 30, 2023, the Company granted 0.5 million time-based unvested restricted share units ("RSU") awards to Yuma, Yuma Sub, TPG and
certain of its employees under the TPG Affiliates (or certain permitted transferees thereof) of
85
%2022 Plan. The vesting for these unvested RSU awards is contingent upon time-based vesting with continued service over a three-year period from the grant date, with a portion of the tax benefits, if any,awards vesting at the end of each year. The weighted average fair value per share of the RSUs granted during the period was estimated to be $39.70 per award.
In addition, the Company also granted 0.4 million performance based vesting ("PSU") awards whereby vesting is generally contingent upon (i) time-based vesting with continued service through March 31, 2026, and (ii) the achievement of certain metrics specific to the Company, which could result in a range of 0 -300% of such PSUs ultimately vesting. The weighted average fair value per share of the PSUs granted during the period was estimated to be $40.47 per award, which corresponds to the Company's closing price per share as of the grant date of the awards.
Further, the Company granted 0.5 million options awards that Nextracker Inc.will cliff-vest on the third anniversary of the grant date, subject generally to continuous service through such vesting date. The exercise price for the shares underlying such Options is deemedequal to realize under certain circumstances$40.47 per award, which corresponds to the Company's closing price per share as of the grant date of the awards. As a result of (i) its allocable share of existing tax basis in tangible and intangible assets resulting from exchanges or acquisitions of outstanding Series A Preferred Units or LLC Common Units (Series A Preferred Units andthese new awards being granted close to the LLC Common Units, collectively, the “LLC Units”), including as partend of the Transactions orfirst fiscal quarter, the Company is in the process of finalizing its estimate of the grant date fair value of the new options granted during the three-month period ended June 30, 2023.
Additionally, during the three-month period ended June 30, 2023, an immaterial number of awards were forfeited due to employee terminations.
The total unrecognized compensation expense related to unvested awards under the Exchange Agreement, (ii) increases2022 Nextracker Plan as of June 30, 2023 was approximately $61.0 million, which is expected to be recognized over a weighted-average period of approximately 2.53 years.
The Flex 2017 equity incentive plan (the "2017 Plan")
All options have been fully expensed and none were outstanding and exercisable as of June 30, 2023.

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Nextracker Inc.
Notes to the unaudited condensed consolidated financial statements
The executives, officers and employees of Flex, including Nextracker, were granted restricted share unit (“RSU”) awards under the 2017 Plan. RSU awards are rights to acquire a specified number of ordinary Flex shares for no cash consideration in taxexchange for continued service with Flex. RSU awards generally vest in installments over a two to four-year period and unvested RSU awards are forfeited upon termination of employment. Vesting for certain RSU awards is contingent upon service and market conditions, or service and performance conditions.
As of June 30, 2023, the total unrecognized compensation cost related to unvested RSU awards held by Nextracker employees was approximately $1.4 million under the 2017 Plan. These costs will be amortized generally on a straight-line basis resulting from exchanges or acquisitionsover a weighted-average period of LLC Unitsapproximately one year.
There were no options and no RSU awards granted under the 2017 Plan during the three-month period ended June 30, 2023.
An immaterial amount of unvested RSU awards are outstanding under the Flex 2017 Plan as of June 30, 2023, some of which represent the target amount of grants made to certain key employees whereby vesting is contingent on meeting certain market conditions.
7.Earnings per share
Basic earnings per share excludes dilution and is computed by dividing net income available to common stockholders of the Company for the three-month period ended June 30, 2023 by the weighted-average number of shares of Nextracker Inc.’sClass A common stock outstanding during the same period.
Diluted earnings per share reflects the potential dilution from stock-based compensation awards. The potential dilution from awards was computed using the treasury stock method based on the average fair market value of the Company’s Class A common stock for the period. Additionally, the potential dilutive impact of Class B common stock (including as partconvertible into Class A was also considered in the calculation.
The computation of earnings per share and weighted average shares outstanding of the Transactions or underCompany’s common stock for the Exchange Agreement), (iii)period is presented below:


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Nextracker Inc.
Notes to the unaudited condensed consolidated financial statements
Three-month period ended June 30, 2023
IncomeWeighted average shares outstandingPer Share
(in thousands except share and per share amounts)NumeratorDenominatorAmount
Basic EPS
Net income available to Nextracker Inc. common stockholders$20,429 46,411,859 $0.44 
Effect of Dilutive impact
Common stock equivalents from options awards (1)896,988 
Common stock equivalents from RSUs (2)885,710 
Common stock equivalents from PSUs (3)469,773 
Income attributable to non-controlling interests and common stock equivalent from Class B common stock$43,216 98,204,522 
Diluted EPS
Net income and comprehensive income$63,645 146,868,852 $0.43 
(1)During the three-month period ended June 30, 2023, approximately 0.5 million options awards, were excluded from the computation of diluted earnings per share due to their anti-dilutive impact on the weighted-average ordinary share equivalents.
(2)During the three-month period ended June 30, 2023, approximately 0.4 million RSU awards, were excluded from the computation of diluted earnings per share due to their anti-dilutive impact on the weighted-average ordinary share equivalents.
(3)During the three-month period ended June 30, 2023, approximately 0.1 million PSU awards, were excluded from the computation of diluted earnings per share due to their anti-dilutive impact on the weighted-average ordinary share equivalents.
8.Relationship with parent and related parties
Prior to the IPO, Nextracker was managed and operated in the normal course of business by Flex. Accordingly, certain
pre-existing
tax attributes shared costs were allocated to Nextracker and reflected as expenses in these condensed consolidated financial statements. Nextracker’s management and the management of certain blocker corporations affiliated with TPG RiseFlex consider the expenses included and the allocation methodologies used to be reasonable and appropriate reflections of the historical Flex expenses attributable to Nextracker for purposes of the stand-alone financial statements up until the IPO. However, the expenses reflected in these condensed consolidated financial statements may not be indicative of the expenses that each merged withwould have been incurred by Nextracker during the periods presented if Nextracker historically operated as a separate, stand-alone entity during such period, which expenses would have depended on a number of factors, including the chosen organizational structure, what functions were outsourced or performed by employees and strategic decisions made in areas such as information technology and infrastructure. In addition, the expenses reflected in the condensed consolidated financial statements for the period prior to the IPO may not be indicative of expenses that Nextracker will incur in the future.
Allocation of corporate expenses
The condensed consolidated financial statements for the period prior to the IPO, include expense allocations for certain functions provided by Flex, including, but not limited to, general corporate expenses related to finance, legal, information technology, human resources, and stock-based compensation. These expenses have been

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Nextracker Inc.
Notes to the unaudited condensed consolidated financial statements
allocated to Nextracker on the basis of direct wholly-owned subsidiaryusage when identifiable, with the remainder allocated on the basis of revenue, headcount or other measure.
During the three-month period ended July 1, 2022, Nextracker was allocated $2.4 million of general corporate expenses incurred by Flex. Of these expenses $1.6 million was included within selling, general and administrative expenses and $0.8 million was included in cost of sales in the condensed consolidated statements of operations and comprehensive income. An immaterial amount of general corporate expenses incurred by Flex was allocated to Nextracker during the three-month period ended June 30, 2023.
Risk management
Flex carries insurance for property, casualty, product liability matters, auto liability, and workers’ compensation and maintain excess policies to provide additional limits. Prior to the IPO, Nextracker paid a premium to Flex in exchange for the coverage provided. In fiscal year 2023, the policies with significant premiums included the Marine Cargo/Goods in Transit and the multiple Errors and Omissions policies all through various insurance providers. Expenses related to coverage provided by Flex were reflected in the condensed consolidated statements of operations and comprehensive income and were immaterial for the three-month periods ended June 30, 2023, and July 1, 2022, respectively.
Cash management and financing
Prior to the IPO, Nextracker participated in Flex’ centralized cash management programs. Disbursements were independently managed by Nextracker.
All significant transactions between Nextracker and Flex that were not historically cash settled were reflected in the condensed consolidated statement of cash flows, for the period prior to the IPO, as net transfers to parent as these were deemed to be internal financing transactions. All intra-company accounts, profits and transactions have been eliminated. The following is a summary of material transactions reflected in the accumulated net parent investment during the three-month period ended July 1, 2022:
Three-month periods ended
(In thousands)July 1, 2022
Corporate allocations (excluding stock-based compensation expense)$1,360
Transfer of operations to Nextracker (1)3,229
Net cash pooling activities (2)(8,908)
Income taxes5,170
Net transfers from Parent$851
(1)Primarily represents certain international operations where related income and/or losses are included in Nextracker’s condensed consolidated statements of operations. Cash was also collected by the international operations on behalf of Nextracker, Inc., as partfor which Nextracker and Flex do not intend to settle in the future.
(2)Primarily represents financing activities for cash pooling and capital transfers.
The cash balance reflected in the condensed consolidated balance sheets consist of the Transactions,cash managed and (iv)controlled by Nextracker. Prior to the IPO when Nextracker was a controlled entity of Flex, Nextracker's U.S. operations participated in the Flex cash pooling management programs intra-quarter; all outstanding positions were settled or scheduled for settlement as of each quarter end. Cash pooling activities during the period prior to the IPO were reflected under net transfers from Parent in the condensed consolidated statements of redeemable interest and stockholders' deficit /parent company equity (deficit), and the condensed consolidated statements of

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Nextracker Inc.
Notes to the unaudited condensed consolidated financial statements
cash flows. Subsequent to the IPO, Nextracker has the option to participate in the Flex cash pooling management programs.
Due to related parties relates to balances resulting from transactions between Nextracker and Flex subsidiaries that have historically been cash settled. Nextracker purchased certain components and services from other Flex affiliates of $29.6 million and $15.0 million for the three-month periods ended June 30, 2023, and July 1, 2022 respectively.
Flex also administers on behalf of Nextracker payments to certain freight providers as well as payrolls to certain employees based in the U.S. Nextracker’s average due to related parties balance was $7.4 million and $31.4 million for the three-month periods ended June 30, 2023, and July 1, 2022, respectively. All related cash flow activities were classified within net cash provided by operating activities in the condensed consolidated statement of cash flows.
9.Commitments and contingencies
Litigation and other legal matters
Nextracker has accrued for loss contingencies to the extent it believes that losses are probable and estimable. The amounts accrued are not material, but it is reasonably possible that actual losses could be in excess of Nextracker’s accrual. Any such excess loss could have a material adverse effect on Nextracker’s results of operations or cash flows for a particular period or on Nextracker’s financial condition. There were no additional accrual for loss contingencies during the three-month period ended June 30, 2023.
10.Income taxes
The Company follows the guidance under ASC 740-270, "Interim Reporting", which requires a company to calculate the income tax benefits relatedassociated with ordinary income using an estimated annual effective tax rate ("AETR"). At the end of each interim period, the Company applies the AETR to year-to-date (YTD) ordinary income (or loss) to arrive at the YTD income tax expense. The Company recorded the tax effect of discrete items in the quarter in which the discrete events occur.
The following table presents income tax expense recorded by the Company along with the respective consolidated effective tax rates for each period presented. For the three-month period ended June 30, 2023, the difference between the effective tax rate and the U.S. statutory corporate tax rate of 21% is primarily attributable to certain non-controlling interest in Nextracker LLC which is not taxable to Nextracker Inc. entering intoand its subsidiaries, partially offset by U.S. state and local income taxes and the Tax Receivable Agreement, includingjurisdictional mix of income between the U.S. and other operating jurisdictions. For the three-month period ended July 1, 2022 the effective tax benefits attributablerate differs from the U.S. statutory corporate tax rate of 21% primarily due to payments undera tax benefit related to foreign derived intangible income, partially offset by U.S. state and local income taxes and the Tax Receivable Agreement.jurisdictional mix of income between the U.S. and other operating jurisdictions.
Three-month periods ended
(In thousands)June 30, 2023July 1, 2022
Income tax9,1015,700
Effective tax rates12.5 %19.0 %
11.Segment reporting
Operating segments are defined as components of an enterprise for which separate financial information is available that is evaluated regularly by the Chief Operating Decision Maker (“CODM”), or a decision-making group,

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Brazil Umbrella AgreementTable of Contents
Nextracker Inc.
Notes to the unaudited condensed consolidated financial statements
in deciding how to allocate resources and in assessing performance. Resource allocation decisions and Nextracker’s performance are assessed by its Chief Executive Officer, identified as the CODM.
For all periods presented, Nextracker has one operating and reportable segment. The following table sets forth geographic information of revenue based on the locations to which the products are shipped:
Three-month periods ended
(In thousands)June 30, 2023July 1, 2022
Revenue:
U.S.$270,338$269,390
Rest of the World209,205133,840
Total$479,543$403,230
The United States is the principal country of domicile.
12.Subsequent events
The 2023 follow-on offering
On July 3, 2023, Nextracker Inc. completed a follow-on offering to its IPO, which was completed on February 13, 2023, and issued 15,631,562 shares of Class A common stock and received net proceeds of $551.0 million. The entire net proceeds were used by Nextracker to acquire 14,025,000 Nextracker LLC common units from Yuma, and 1,606,562 Nextracker LLC common units from TPG Rise. Simultaneously, 14,025,000 and 1,606,562 shares of Class B shares were surrendered by Flex and TPG, respectively, and cancelled.
As a result of this follow-on offering (referred to as the “Follow-on”), as of the closing date on July 3, 2023:
•The Company received net proceeds of $551.0 million (after underwriting discounts). Upon closing of the Follow-on, approximately $1.8 million of offering costs were paid by Flex.
•Immediately following the completion of the Follow-on, Flex (through Yuma and Yuma Sub), owned 74,432,619 shares of Class B common stock, representing approximately 51.47% of the total outstanding shares of the Company's outstanding common stock.
•Additionally, TPG owned 8,140,341 shares of Class B common stock representing approximately 5.63% of the total outstanding shares of the Company's outstanding common stock.
•Nextracker Inc. beneficially owned 62,053,870 LLC units, representing approximately 42.91% of the total units of Nextracker LLC.
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In February 2023, Nextracker Brasil Ltda., an indirect, wholly-owned subsidiary of Nextracker Inc., and Flextronics International Technologia Ltda., an affiliate of Flex, entered into an umbrella agreement (the “Umbrella Agreement”) that governs the terms, conditions and obligations of a strategic commercial relationship between Nextracker Inc. and Flex for the sale of the Company’s solar trackers in Brazil. The Umbrella Agreement is renewable automatically for successive
one-year
periods, unless a party provides written notice to the other parties that such party does not intend to renew within at least ninety days prior to the end of any term.

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ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Unless the context requires otherwise, requires, references in this Management’sManagement's Discussion and Analysis of Financial Condition and Results of Operations toOperation of “Nextracker”, the “Company”, “we”, “us” and “our” shall mean, prior to the IPO described in this Form 10-Q, both Nextracker LLC (formerly known as NEXTracker Inc.(the “LLC”), together with and its consolidated subsidiaries and with the operations that comprise the legacy solar tracker business of Flex Ltd. (“Flex”), which conducts all operations and all of the business operations of Nextracker Inc. (which was formed on December 19, 2022, for the purpose of completingfollowing the IPO and the related Transactions, as further describedtransactions completed in Note 1, “Description ofconnection with the business and summary of significant accounting policies,” and Note 4, “Subsequent events,” in the notesIPO, to the Nextracker Inc. unaudited condensed financial statement, and Note 1, “Organization of Nextracker,” and Note 10, “Subsequent events,” in the notes to the unaudited condensed combined financial statements included elsewhere in this quarterly report Form 10-Q (the “Quarterly Report”).its consolidated subsidiaries. References in this Management’s Discussion and Analysis of Financial Condition and Results of Operations 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.

This Management’s Discussion and Analysis of Financial Condition and Results of Operations is designed to provide a reader of our combinedcondensed consolidated financial statements with a narrative from the perspective of the Company’s management. YouThe following discussion and analysis of our financial condition and results of operations should be read the following discussion in conjunction with our unaudited condensed combinedconsolidated financial statements and related notes thereto included elsewhere in this Quarterly Report on Form 10-Q and our audited consolidated financial statements and the related notes and other information included elsewhere in this Quarterlyour Annual Report as well as our audited combined financial statements and related notes included in the prospectus dated February 8, 2023 that forms a part of Nextracker Inc.’s Registration Statement on Form S-1 (File No. 333-269238), as10-K for the year ended March 31, 2023, filed with the SEC pursuant to Rule 424(b)(4) promulgated under the Securities Act of 1933, as amended (the “Prospectus”).on June 9, 2023. In addition to historical financial information, the following discussion and analysis contains forward- looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such statements are based upon current expectations that involve risks, uncertainties and assumptions. Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. For example, the words “believes,” “anticipates,” “plans,” “expects,” “intends”"believes," "anticipates," "plans," "expects," "intends" and similar expressions are intended to identify forward-looking statements. Our actual results and timing of selected events may differ materially from those results anticipated and discussed in the forward-looking statements as a result of many factors, Factors that might cause such a discrepancy include, but are not limited to, those discussed under the sections entitled “Liquidity"Liquidity and Capital Resources”Resources" below and “Risk Factors”. All forward-looking statements in this document are based on information available to us as of the date of this Quarterly Report and we assume no obligation to update any such forward-looking statements.

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 gigawatts (“GW”("GW") shipped globally from 2015 to 20212022 and in the U.S. from 2016 to 2021.2022. We delivered 18 GW, 15 GW 12 GW and over 1012 GW to our customers in fiscal years 2023, 2022 and 2021, and 2020, respectively. In addition, we delivered 13.2 GW during the nine-month period ended December 31, 2022 compared to approximately 10.7 GW during the nine-month period ended December 31, 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 a more optimized supply chain, and we intend to continue leveraging these learnings from Flex now that we are a standalonepublicly traded company. 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.

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We have shipped approximately 7580 GW of solar tracker systems as of December 31, 2022June 30, 2023 to projects on six continents. Our customers include engineering, procurement and construction firms (“EPCs”("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,

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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 EPCs, project owners, and developers in the world. We had revenues of $1.4$0.5 billion for the nine-monththree-month period ended December 31, 2022 June 30, 2023 and $1.5$1.9 billion in fiscal year 2022.

2023.

The following tables set forth geographic information of revenue based on the locations to which the products are shipped:

   Three-month periods ended  Nine-month periods ended 

(In thousands)

(Unaudited)

  December 31, 2022  December 31, 2021  December 31, 2022  December 31, 2021 

Revenue:

           

U.S.

  $327,548    64%  $161,703    48%  $908,361    66%  $605,743    60% 

Rest of the World

   185,822    36%   175,904    52%   475,381    34%   412,036    40% 
  

 

 

    

 

 

    

 

 

    

 

 

   

Total

  $513,370    $337,607    $1,383,742    $1,017,779   
  

 

 

    

 

 

    

 

 

    

 

 

   

Three-month periods ended
(In thousands)June 30, 2023July 1, 2022
Revenue:(Unaudited)
U.S.$270,33856%$269,39067%
Rest of the World209,20544%133,84033%
Total$479,543$403,230
The following table sets forth the revenue from customers that individually accounted for greater than 10% of our revenue during the periods included below:

   Three-month periods ended   Nine-month periods ended 

(In millions)

  December 31, 2022   December 31, 2021   December 31, 2022   December 31, 2021 

Customer A*

  $131.8   $35.4   $295.1   $140.6 

*

SOLV Energy

Three-month periods ended
(In millions)June 30, 2023July 1, 2022
Customer A*$25.6$42.1
*    SOLV Energy
Initial Public Offering

On February 8, 2023, Nextracker Inc.’s registration statement on Form S-1 relating to itsour initial public offering (“IPO”) was declared effective by the Securities and Exchange Commission (“SEC”) and the shares of our Class A common stock began trading on the Nasdaq Global Select Market on February 9, 2023. At the closing of the IPO on February 13, 2023, Nextracker Inc. issued and sold 30,590,000 shares of its Class A common stock (including 3,990,000 shares issued to the underwriters upon the exercise in full of their option to purchase additional shares) at a public offering price of $24.00 per share. Nextracker Inc. received net proceeds of $693.8 million, after deducting $40.4 million in underwriting discount. Nextracker Inc.discounts. We used all of the net proceeds from the offering to purchase 30,590,000 LLC Common Units from Yuma Inc., a Delaware corporation and indirect wholly-owned subsidiary of Flex Ltd. (“Yuma”) at a price per share of $22.68, or $24.00 less the underwriting discount. Upon closing of the IPO, approximately $8.3 million of offering costs were paid by Flex.
The 2023 follow-on offering
See further discussion of the Transactions relatedNote 12 to the IPO in Note 4, “Subsequent events,” in the notes to the Nextracker Inc. unaudited condensed consolidated financial statement, and, Note 10, “Subsequent events,” in the notes to the unaudited condensed combined financial statements included elsewhere in this Quarterly Report.

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statements.

Reverse Unit Split

The Board of Managers and the members of Nextracker LLC approved an amendment to the LLC Agreement in effect prior to the IPO, effecting a 1-for-2.1 reverse unit split of the units issued by the LLC. The reverse split was effected on January 30, 2023.

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 largely 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, but not limited to, 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:
•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.

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•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

We have historically operated as part of Flex and not as a separate, publicly-traded company.publicly traded company throughout the period preceding the IPO. Our unaudited condensed combinedconsolidated financial statements have beenfor the period preceding the Transactions were 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 arewere included as a component of the unaudited condensed combinedconsolidated financial statements. The unauditedFor the period preceding the IPO, the condensed combinedconsolidated 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 beenwere determined on what we believebelieved to be a reasonable basis; however, the amounts are not necessarily representative of the amounts that would have been reflected in the unaudited condensed combinedconsolidated financial statements had we been an entity that operated separately from Flex during these periodsthe relevant full period presented. Further, the historical condensed combinedconsolidated financial statements that include results prior to the IPO may not be reflective of what our final position, results of operations, or cash flows will be in the future
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as a separate public company. During the fourth quarter of fiscal year 2022, we entered into a transition service agreementTransition Service Agreement (“TSA”) 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. Related-party allocations, includingTSA.
For the method for such allocations, are discussed further in Note 6, “Relationship with parent and related parties” in the notesperiod prior to the unaudited condensed combined financial statements included elsewhere in this Quarterly Report.

For example,IPO, our historical condensed combinedconsolidated financial statements in this Quarterly Report include expense allocations for certain support functions that arewere 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. Since our IPO, we have incurred and will continue to incur additional costs as a public company. Under the transition service agreementTSA Flex willhas agreed to 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 have incurred and will continue to incur other costs to replace the services and resources that will not be provided by Flex. Since our IPO, we have incurred and will continue to 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 andand legal fees and Nasdaq fees, bank fees or other costs related to existing or future financing arrangements.

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

While we were fully integrated as a part of Flex prior to the IPO, we have beenwere 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 areduring the period preceding the IPO were accounted for through our “net parent investment” account and none of Flex’s debt at the corporate level has beenwas assigned to us in the financial statements. Historically, as we generated cash flows from operations, cash has beenwas swept by Flex into global cash accounts managed at the parent level. In March 2021,Since the U.S. cash pooling arrangement between us and Flex was terminated, and we executed a new cash pooling agreement. For as long asIPO, Nextracker is a controlled entity of Flex, Nextracker’s U.S. operations may continue to participatehas participated in the FlexFlex’s cash pooling management programs, intra-quarter, and all outstanding positions are settled or scheduled for settlement as of each quarter end.but we plan to discontinue doing so during our fiscal year 2024. 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.

28

Key businessCritical accounting policies 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 oursignificant management estimates

The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ materially from those estimates. Estimates are used by our management to measure our performance, identify trends impacting our businessin accounting for, among other things: impairment of goodwill, impairment of long-lived assets, allowance for doubtful accounts, reserve for excess or obsolete inventories, valuation of deferred tax assets, warranty reserves, contingencies, operation related accruals, and formulate projections. The primary operating metric we use to evaluate our sales performancefair values of stock options and to track market acceptancerestricted share unit awards granted under stock-based compensation plans. We periodically review estimates and assumptions, and the effects of our products from yearrevisions are reflected in the period they occur. We believe that these estimates and assumptions provide a reasonable basis for the fair presentation of the consolidated financial statements.
Refer to year is GW delivered generallythe critical accounting policies 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 analystssignificant management estimates under Item 7, “Management’s Discussion and competitorsAnalysis of Financial Condition and Results of Operations” in our industryAnnual Report on Form 10-K for
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the fiscal year ended March 31, 2023, where we discuss our more significant policies and can provide additional information to investors relatedestimates used in the preparation of the condensed consolidated financial statements. There have been no material changes to the relative size ofCompany’s critical accounting estimates since our operations as well as a basis to measure our market share. GWs is calculated specificallyAnnual Report on Form 10-K 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.

   Three-month periods ended      Nine-month periods ended     
   December 31,
2022		   December 31,
2021		   Percent
change		  December 31,
2022		   December 31,
2021		   Percent
change		 

GW delivered

   5.2    3.8    37%   13.2    10.7    23% 

fiscal year ended March 31, 2023.

Key components of our results of operations

The following discussion describes certain line items in our combinedcondensed consolidated statements of operations and comprehensive income.

Revenue
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.

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.

29

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. We have incurred and expect to continue 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.

If the performance-based vesting condition for our equity-based compensation awards issued under the Restated 2022 Nextracker LLC Equity Incentive Plan had occurred on December 31, 2022, we would have recognized $10.4 million of equity-based compensation expense for the awards that had satisfied or partially satisfied the time-based vesting condition on that date and would have approximately $37.1 million of unrecognized compensation cost that represents the awards which have not met the time-based vesting condition as of December 31, 2022.

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 includeimprovements to our
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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.

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 stateThe provision for income taxes inprimarily represents the United States onLLC’s U.S. federal, state, and local income taxes as well as foreign income taxes payable by its subsidiaries. The LLC owns 100% of all foreign subsidiaries for which the income allocated to us from the LLC. In addition, while the majority of the LLCs taxable income will be from United States sources and will not be subject to LLC levelhas marked them as disregarded entities for U.S. income tax the LLC will have taxable income in some foreign subsidiaries that will be subjectpurposes. We expect to receive a tax at the level of the LLC. We may be entitled tobenefit for foreign tax credits in the United States for our sharedistributive shares of the foreign tax paid by the LLC.

30

paid.

RESULTS OF OPERATIONS

   Three-month periods ended      Nine-month periods ended     

(In thousands, except percentages)

(Unaudited)                                   

  December 31,
2022		  December 31,
2021		   % change  December 31,
2022		  December 31,
2021		   % change 

Condensed Combined Statement of Operations and Comprehensive Income Data:

        

Revenue

  $513,370  $337,607    52%  $1,383,742  $1,017,779    36% 

Cost of sales

   431,111   303,843    42   1,187,081   909,700    30 
  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

   

 

 

 

Gross profit

   82,259   33,764    144   196,661   108,079    82 

Selling, general and administrative expenses

   18,613   13,009    43   55,475   39,149    42 

Research and development

   4,984   3,649    37   13,283   10,600    25 
  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

   

 

 

 

Operating income

   58,662   17,106    243   127,903   58,330    119 

Interest and other (income) expense, net

   (2,366)   91    (2,700)   (1,118)   371    (401) 
  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

   

 

 

 

Income before income taxes

   61,028   17,015    259   129,021   57,959    123 

Provision for income taxes

   18,442   4,469    313   35,218   12,840    174 
  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

   

 

 

 

Net income and comprehensive income

  $42,586  $12,546    239%  $93,803  $45,119    108% 
  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

   

 

 

 

Three-month periods ended
(In thousands, except percentages)June 30, 2023July 1, 2022% change
Condensed Statement of Operations and Comprehensive Income Data:(Unaudited)
Revenue$479,543$403,23019%
Cost of sales365,799353,3674
Gross profit113,74449,863128
Selling, general and administrative expenses34,23516,117112
Research and development5,6293,97742
Operating income73,88029,769148
Interest and other (income) expense, net1,134(61)(1959)
Income before income taxes72,74629,830144
Provision for income taxes9,1015,70060
Net income and comprehensive income$63,645$24,130164%
Non-GAAP measures

We present Non-GAAP gross profit, Non-GAAP operating income, Non-GAAP net income, Adjusted EBITDA, Adjusted EBITDA Margin and Adjusted free cash flow as supplemental measures of our performance.performance and, with respect to Adjusted free cash flow, as a supplemental measure of our liquidity. We define Non-GAAP gross profit as gross profit plus stock-based compensation expense and intangible amortization. We define Non-GAAP operating income as operating income plus stock-based compensation expense and intangible amortization. We define Non-GAAP net income as net income (loss) plus stock-based compensation expense, intangible amortization, and certain nonrecurring legal costs and other discrete events as applicable, net of their tax effects. We define Adjusted EBITDA as net income (loss) plus (i) interest, net, (ii) provision for income taxes, (iii) depreciation expense, (iv) intangible amortization, (v) stock-based compensation expense, and (vi) certain nonrecurring legal costs and other discrete events as applicable. Future adjustments to net income related to the Tax Receivable Agreement may be added back to or subtracted from net income to calculate Adjusted EBITDA. We define Adjusted EBITDA Margin as the percentage derived from Adjusted EBITDA divided by revenue. We define Adjusted free cash flow as net cash provided by (used in) operating activities less cash used for purchases of property and equipment plus proceeds from the disposition of property and equipment.

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
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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.

31

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 financial measures 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.

   Three-month periods ended  Nine-month periods ended 

(In thousands, except percentages)

  December 31, 2022  December 31, 2021  December 31, 2022  December 31, 2021 

Other Financial Information:

     

Non-GAAP gross profit

  $82,672  $34,253  $197,954  $113,164 

Non-GAAP operating income

   59,665   18,489   133,279   68,476 

Non-GAAP net income

   43,396   13,772   97,196   52,763 

Adjusted EBITDA

   62,703   19,033   136,467   70,105 

Net income (% of revenue)

   8.3%   3.7%   6.8%   4.4% 

Adjusted EBITDA (% of revenue)

   12.2%   5.6%   9.9%   6.9% 

Adjusted free cash flow

   18,603   (76,239)   69,753   (110,698) 

business.

Three-month periods ended
(In thousands, except percentages)June 30, 2023July 1, 2022
Other Financial Information:
Non-GAAP gross profit$115,733$50,336
Non-GAAP operating income82,40331,315
Non-GAAP net income70,94324,755
Adjusted EBITDA83,67232,040
Net income (% of revenue)13.3%6.0%
Adjusted EBITDA (% of revenue)17.4%7.9%
Adjusted free cash flow225,0732,367
The following table provides a reconciliation of Non-GAAP gross profit to gross profit, Non-GAAP operating income to operating income, Non-GAAP net income to net income, Adjusted EBITDA to net income, and adjustedAdjusted free cash flow to net cash provided by (used in) operating activities for each period presented.

32

The Non-GAAP measures presented in the table are inclusive of redeemable non-controlling interests.
25

   Three-month periods ended  Nine-month periods ended 

(In thousands, except percentages)

  December 31,
2022		  December 31,
2021		  December 31,
2022		  December 31,
2021		 
              
   (Unaudited) 

Reconciliation of GAAP to Non-GAAP Financial Measures:

     

GAAP gross profit

  $82,259  $33,764  $196,661  $108,079 

Stock-based compensation expense

   350   426   1,105   1,105 

Intangible amortization

   63   63   188   3,980 
  

 

 

  

 

 

  

 

 

  

 

 

 

Non-GAAP gross profit

  $82,672  $34,253  $197,954  $113,164 
  

 

 

  

 

 

  

 

 

  

 

 

 

GAAP operating income

  $58,662  $17,106  $127,903  $58,330 

Stock-based compensation expense

   940   842   2,790   2,222 

Intangible amortization

   63   541   1,145   7,924 

Legal costs (1)

   —     —     1,528   —   

Other

   —     —     (87)   —   
  

 

 

  

 

 

  

 

 

  

 

 

 

Non-GAAP operating income

  $59,665  $18,489  $133,279  $68,476 
  

 

 

  

 

 

  

 

 

  

 

 

 

GAAP net income

  $42,586  $12,546  $93,803  $45,119 

Stock-based compensation expense

   940   842   2,790   2,222 

Intangible amortization

   63   541   1,145   7,924 

Adjustment for taxes

   (193)   (157)   (1,983)   (2,502) 

Legal costs (1)

   —     —     1,528   —   

Other

   —     —     (87)   —   
  

 

 

  

 

 

  

 

 

  

 

 

 

Non-GAAP net income

  $43,396  $13,772  $97,196  $52,763 
  

 

 

  

 

 

  

 

 

  

 

 

 

Net income

  $42,586  $12,546  $93,803  $45,119 

Interest, net

   (215)   1   (380)   35 

Provision for income taxes

   18,442   4,469   35,218   12,840 

Depreciation expense

   887   634   2,450   1,965 

Intangible amortization

   63   541   1,145   7,924 

Stock-based compensation expense

   940   842   2,790   2,222 

Legal costs (1)

   —     —     1,528   —   

Other

   —     —     (87)   —   
  

 

 

  

 

 

  

 

 

  

 

 

 

Adjusted EBITDA

  $62,703  $19,033  $136,467  $70,105 
  

 

 

  

 

 

  

 

 

  

 

 

 

Net income (% of revenue)

   8.3%   3.7%   6.8%   4.4% 

Adjusted EBITDA (% of revenue)

   12.2%   5.6%   9.9%   6.9% 

Net cash provided by (used in) operating activities

  $19,921  $(74,555)  $72,382  $(105,742) 

Purchase of property and equipment

   (1,318)   (1,684)   (2,653)   (5,123) 

Proceeds from the disposition of property and equipment

   —     —     24   167 
  

 

 

  

 

 

  

 

 

  

 

 

 

Adjusted free cash flow

  $18,603  $(76,239)  $69,753  $(110,698) 
  

 

 

  

 

 

  

 

 

  

 

 

 

(1)Table of Contents

Represents additional charges incurred in relation to the litigation with Array Technologies, Inc (“ATI”), as further described in Note 7, “Commitments and contingencies” in the notes to the unaudited condensed combined financial statements included elsewhere in this Quarterly Report. The estimated net settlement and direct legal costs in 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.

33

Three-month periods ended
(In thousands, except percentages)June 30, 2023July 1, 2022
Reconciliation of GAAP to Non-GAAP Financial Measures:(Unaudited)
GAAP gross profit$113,744$49,863
Stock-based compensation expense1,926410
Intangible amortization6363
Non-GAAP gross profit$115,733$50,336
GAAP operating income$73,880$29,769
Stock-based compensation expense8,4601,005
Intangible amortization63541
Non-GAAP operating income$82,403$31,315
GAAP net income$63,645$24,130
Stock-based compensation expense8,4601,005
Intangible amortization63541
Adjustment for taxes(1,225)(921)
Non-GAAP net income$70,943$24,755
Net income$63,645$24,130
Interest, net1,420(64)
Provision for income taxes9,1015,700
Depreciation expense983728
Intangible amortization63541
Stock-based compensation expense8,4601,005
Adjusted EBITDA$83,672$32,040
Net income (% of revenue)13.3%6.0%
Adjusted EBITDA (% of revenue)17.4%7.9%
Net cash provided by operating activities$225,767$2,794
Purchase of property and equipment(694)(427)
Adjusted free cash flow$225,073$2,367

Comparison of the three-month periods ended December 31, 2022

The data below, and 2021

discussion that follows, represent our results from operations.

Revenue
Revenue

Revenue increased by $175.8$76.3 million, or 52%19%, for the three-month period ended December 31, 2022June 30, 2023 compared to the three-month period ended December 31, 2021. Approximately $130 million of the July 1, 2022. The increase was the result ofmainly driven by a 37%30% increase in gigawatts delivered as we delivered 5.2 GW for the three-month period ended December 31, 2022, compared to 3.8 GW for the three-month period ended December 31, 2021, coupled with a slight increase in our average sellingoffset by slightly lower sales price directly associated with higher freight and logistics costs included in our selling price compareddue to the prior year period.decline in logistics costs. Revenue increased approximately $165.8 million, or 103%,remained somewhat flat in the U.S. and $9.9while increasing $75.4 million or 6%56% in the Rest of the World for the three-month period ended December 31, 2022June 30, 2023 compared to the three-month period ended July 1, 2022. The growth from the Rest of the World was driven primarily from larger projects in Brazil, our largest market, and increased sales in Europe, Australia and Canada.

Cost of sales and gross profit
Cost of sales increased by $12.4 million, or 4%, for the three-month period ended June 30, 2023 compared to the three-month period ended December 31, 2021.

Cost of sales and gross profitJuly 1, 2022

Cost of sales increased by $127.3 million, or 42%, for the three-month period ended December 31, 2022 compared to the three-month period ended December 31, 2021 primarily due to the increase in sales noted above, partially offset by a substantial decrease in freight and logistics costs.costs as compared to the three-month period ended July 1, 2022. Freight and

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logistics costs as a percentage of cost of sales decreased by approximately 220over 1000 basis points for the three-month period ended December 31, 2022June 30, 2023 compared to the three-month period ended December 31, 2021.

July 1, 2022.

Gross profit increased by $48.5$63.9 million, or 144%128%, for the three-month period ended December 31, 2022June 30, 2023 compared to the three-month period ended December 31, 2021July 1, 2022 primarily resulting from the increase in sales noted above coupled with higher recovery oflower freight and logistics costs.

Selling, general and administrative expenses
Selling, general and administrative expensesexpe

Selling, general and administrative expenses increased $5.6nses was approximately$34.2 million, or 43%, to $18.6 million for 7.1% of revenue during the three-month period ended December 31, 2022,June 30, 2023, increasing $18.1 million from approximately $13.0$16.1 million, inor 4.0% of revenue during the three-month period ended December 31, 2021, while remaining somewhat flat at approximately 4% as a percent of revenue in both periods.July 1, 2022. The increase in selling, general and administrative expenses was primarily the result of an increase in stock-based compensation expense incurred in conjunction with our 2022 equity incentive plan, incremental costs related to our continued expansion of our sales organization in line with the growth in the global market.

market, and due to the growth of our supporting functions as a public company.

Research and development

Research and development expenses increased $1.3$1.7 million, or 37%42%, to $5.0$5.6 million for the three-month period ended December 31, 2022June 30, 2023 from approximately $3.6$4.0 million in the three-month period ended December 31, 2021July 1, 2022 as a result of continuousour commitment to product innovation and development including software enhancements.

Income tax expense

We accrue and pay the appropriate amount of

Provision for income taxes according to the laws and regulations of each jurisdiction in which we operate. The majoritytax
Most of our revenue and profits are generated in the United States with a statutory income tax rate of approximately 21% in the three-month periods ended December 31, 2022 June 30, 2023 and 2021.July 1, 2022. For the three-month periods ended December 31, June 30, 2023 and July 1, 2022, and 2021, we recorded total income tax expense of $18.4$9.1 million and $4.5$5.7 million, respectively, which reflected consolidated effective income tax rates of 30.2%12.5% and 26.3%19.1%, respectively. Theserespectively. The decrease in our effective tax rates differ from the U.S. domestic statutory income tax rate of 21% primarilyis mostly due to the U.S statecertain non-controlling interest in Nextracker LLC that is not taxable to Nextracker Inc. and localits subsidiaries. From time to time, we are subject to income taxes coupled with the jurisdictional mix of income between the U.S. and other operating jurisdictions. We maynon-income based tax audits in the future be subject to tax return audits and examinations by various taxing jurisdictions around the world, and there can be no assurance that the final determination of any tax examinations will not be materially different than that which is reflected in our income tax provisions and accruals. Should additional taxes be assessed as a result of a current or future examination, there could be a material adverse effect on our tax position, operating results, financial position and cash flows.

34

Comparison of the nine-month periods endedDecember 31, 2022and2021

Revenue

Revenue increased by $366.0 million, or 36%, for the nine-month period ended December 31, 2022 compared to the nine-month period ended December 31, 2021. Approximately $250 million of the increase was the result of a 23% increase in gigawatts delivered as we delivered 13.2 GW for the nine-month period ended December 31, 2022, compared to 10.7 GW for the nine-month period ended December 31, 2021. The remaining increase was a result of an approximate 9% increase in our average selling price directly associated with higher freight and logistics costs included in our selling price compared to the prior year period. Revenue increased approximately $302.6 million, or 50%, in the U.S. and $63.3 million or 15% in the Rest of the World for the nine-month period ended December 31, 2022 compared to the nine-month period ended December 31, 2021. The growth from the Rest of the World was driven primarily from larger projects in Brazil.

Cost of sales and gross profit

Cost of sales increased by $277.4 million, or 30%, for the nine-month period ended December 31, 2022 compared to the nine-month period ended December 31, 2021 primarily due to the increase in sales noted above, and to a lesser extent, an increase in freight and logistics costs. Freight and logistics costs as a percentage of cost of sales increased by approximately 190 basis points for the nine-month period ended December 31, 2022 compared to the nine-month period ended December 31, 2021.

Gross profit increased by $88.6 million, or 82%, for the nine-month period ended December 31, 2022 compared to the nine-month period ended December 31, 2021 primarily resulting from the increase in sales noted above coupled with improved pricing on contracts allowing higher recovery of freight and logistics costs.

Selling, general and administrative expenses

Selling, general and administrative expenses increased $16.3 million, or 42%, to $55.5 million for the nine-month period ended December 31, 2022, from approximately $39.1 million in the nine-month period ended December 31, 2021, while remaining somewhat flat at approximately 4% as a percent of revenue in both periods. The increase in selling, general and administrative expenses was primarily the result of our continued expansion of our sales organization in line with the growth in the global market.

Research and development

Research and development expenses increased $2.7 million, or 25%, to $13.3 million for the nine-month period ended December 31, 2022 from approximately $10.6 million in the nine-month period ended December 31, 2021 as a result of continuous product innovation and development, including software enhancements.

35

Income tax expense

We accrue and pay the appropriate amount of income taxes according to the laws and regulations of each jurisdiction in which we operate. The majoritycalculation of our revenue and profits are generatedtax liabilities involves dealing with uncertainties in the United States withapplication of complex tax rules and regulations in a statutory income tax ratenumber of approximately 21%jurisdictions. Due to such complexity of these uncertainties, the ultimate resolution may result in the nine-month periods ended December 31, 2022 and 2021. For the nine-month periods ended December 31, 2022 and 2021, we recorded total income tax expense of $35.2 million and $12.8 million, respectively, which reflected effective tax rates of 27.3% and 22.2%, respectively. These effective tax rates differ from the U.S. domestic statutory income tax rate of 21% primarily due to the U.S state and local income taxes coupled with the jurisdictional mix of income between the U.S. and other operating jurisdictions. We may in the future be subject to tax return audits and examinations by various taxing jurisdictions around the world, and there can be no assurancea payment or refund that the final determination of any tax examinations will not beis materially different than thatfrom our estimates.

On August 16, 2022, the Inflation Reduction Act of 2022 (“IRA”) was enacted into law, which is reflected in our incomeincludes a new corporate minimum tax, a stock repurchase excise tax, numerous green energy credits, other tax provisions, and accruals. Should additional taxes be assessed as a resultsignificantly increased enforcement resources. Detailed regulations on some aspects of a current or future examination, there could be a material adverse effectthe IRA are still outstanding and we are evaluating the effects the IRA will have on our tax position, operating results,consolidated financial position and cash flows.

statements.

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LIQUIDITY AND CAPITAL RESOURCES

We have historically financed our operations primarily with cash provided by operations and net parent contributions. Our principal uses of cash have been to fund our operations, and invest in research and development. Excessdevelopment and return capital to our parent. Prior to the IPO, cash has historically been distributedwas managed pursuant to a centralized cash management program administered by Flex. ForFlex, that included intra-quarter cash transfers to/from the parent pooling accounts and the balances being settled or scheduled for settlement, as long asof period ends. Since the IPO, Nextracker is a controlled entity of Flex, Nextracker’s U.S. operations will continue to participatehas participated in the Flex cash pooling management programs, intra-quarter and all outstanding positions are settled or scheduled for settlement as of each quarter end. On February 13, 2023,but we borrowed $150.0 million in term loan that we entered into in connection withplan to discontinue doing so during our fiscal year 2024. In the IPO. We used the proceedsabsence of the term loan, together with cash on hand,pooling program, we expect our credit facilities to make a distribution of $175.0 million to Flex (through Yuma and Yuma Subsidiary, Inc., a Delaware corporation and wholly-owned subsidiary of Yuma (“Yuma Sub”)) and TPG Rise Flash, L.P. (“TPG Rise”), an affiliate of the private equity firm TPG, (the “Distribution”) on February 13, 2023, immediately prior to the closing of the IPO. The revolving credit facility, which is available in U.S. dollars and euros on a revolving basis until the maturity date, will be available to fund working capital, capital expenditures and other general corporate purposes. See “provide adequate liquidity for our business.
Credit Facilities” below.

Credit Facilities

In connection with the IPO, Nextracker Inc. and the LLC, as the borrower, entered into a senior credit facility with a syndicate of banks (the “2023 Credit Agreement”) comprised of (i) a term loan in the aggregate principal amount of $150.0 million (the “Term Loan”), and (ii) a revolving credit facility in an aggregate principal amount of $500.0 million (the “RCF”). The LLC borrowed the Term Loan,RCF is available to fund working capital, capital expenditures and used the proceeds to finance, in part, the Distribution.

other general corporate purposes.

The RCF is available in U.S. dollars, euros and such currencies as mutually agreed on a revolving basis during the five-year period through February 11, 2028 and is available to fund working capital and other general corporate purposes.2028. A portion of the RCF not to exceed $300.0 million is available for the issuance of letters of credit. A portion of the RCF not to exceed $50.0 million is available for swing line loans. Subject to the satisfaction of certain conditions, the LLC will be permitted to incur incremental term loan facilities or increase the RCF commitment in an aggregate principal amount equal to $100.0 million plus an additional amount such that the secured net leverage ratio or total net leverage ratio, as applicable, is equal to or less than a specified threshold after giving pro forma effect to such incurrence.

The obligations of the LLC under the 2023 Credit Agreement and related loan documents are jointly and severally guaranteed by Nextracker Inc., certain other holding companies (collectively, the “Guarantors”) and, subject to certain exclusions, certain of the LLC’s existing and future direct and indirect wholly-owned domestic subsidiaries.

As of the closing of the 2023 Credit Agreement, all obligations of the LLC and the guarantors are secured by certain equity pledges by the LLC and the Guarantors. However, if the LLC’s total net leverage ratio exceeds a specified threshold, the collateral will include substantially all of the assets of the LLC and the Guarantors and, if the LLC meets certain investment grade conditions, such lien will be released.

The Term Loan requires quarterly principal payments beginning on June 30, 2024, in an amount equal to 0.625% of the original aggregate principal amount of the Term Loan. From June 30, 2025, the quarterly principal payment will increase to 1.25% of the original aggregate principal amount of the Term Loan. The remaining balance of the Term Loan and the outstanding balance of any RCF loans will be repayable on February 11, 2028. Borrowings under the 2023 Credit Agreement are prepayable and commitments subject to being reduced in each case at the LLC’s option without premium or penalty. The 2023 Credit Agreement contains certain mandatory prepayment provisions in the event that the LLC or its restricted subsidiaries incur certain types of indebtedness or, subject to certain reinvestment rights, receive net cash proceeds from certain asset sales or other dispositions of property.

Borrowings in U.S. dollars under the 2023 Credit Agreement bear interest at a rate based on either (a) a term secured overnight financing rate (“SOFR”)-based based formula (including a credit spread adjustment of 10 basis points) plus a margin of 162.5 basis points to 200 basis points, depending on the LLC’s total net leverage ratio, or (b) a base rate formula plus a margin of 62.5 basis pointpoints to 100 basis points, depending on the LLC’s total net leverage ratio. Borrowings under the RCF in euros will bear interest based on the adjusted EURIBOR rate plus a margin of 162.5 basis points to 200 basis points, depending on the LLC’s total net leverage ratio. The LLC will also beis required to pay a quarterly commitment fee on the undrawn portion of the RCF commitments of 20 basis points to 35 basis points,
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depending on the LLC’s total net leverage ratio. The interest rate for the Term Loan is 5.12%was 6.82% (SOFR rate of 3.49%4.97% plus a margin of 1.63%1.85%).

as of June 30, 2023.

The 2023 Credit Agreement contains certain affirmative and negative covenants that, among other things and subject to certain exceptions, limit the ability of the LLC and its restricted subsidiaries to incur additional indebtedness or liens, to dispose of assets, change their fiscal year or lines of business, pay dividends and other restricted payments, make investments and other acquisitions, make optional payments of subordinated and junior lien debt, enter into transactions with affiliates and enter into restrictive agreements. In addition, the 2023 Credit Agreement requires the LLC to maintain a maximum consolidated total net leverage ratio.

ratio below a certain threshold. As of June 30, 2023, we were in compliance with all applicable covenants under the 2023 Credit Agreement, the Term Loan and the RCF.

Tax Receivable Agreement

In connection with the IPO, on February 13, 2023, Nextracker Inc. also entered into a Tax Receivable Agreement that provided for the payment by us to Yuma, Yuma Sub, TPG Rise, and the following affiliates of TPG Rise: TPG Rise Climate Flash Cl BDH, L.P., TPG Rise Climate BDH, L.P. and The Rise Fund II BDH, L.P. (or certain permitted transferees thereof) of 85% of the tax benefits, if any, that we are deemed to realize under certain circumstances, as more fully described in Note 4, “Subsequent events,” inour Annual Report on Form 10-K for the notes to the Nextracker Inc. unaudited condensed financial statement, and Note 10, “Subsequent events,” in the notes to the unaudited condensed combined financial statements included elsewhere in this Quarterly Report.fiscal year ended March 31, 2023. 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.

36

We believe that our cash provided by operations and other existing and committed sources of liquidity, including our revolving credit facility, will provide adequate liquidity for ongoing operations, planned capital expenditures and other investments, potential debt service requirements and payments under the Tax Receivable Agreement for at least the next 12 months. We did not retain the proceeds of the IPO.

Cash Flows Analysis

   Nine-month periods ended 

(In thousands)

  December 31, 2022   December 31, 2021 
         
   (Unaudited) 

Net cash provided by (used in) operating activities

  $72,382   $(105,742) 

Net cash used in investing activities

   (2,629)    (4,956) 

Net cash provided by (used in) financing activities

   1,258    (14,872) 

Nine-month

Three-month periods ended
(In thousands)June 30, 2023July 1, 2022
(Unaudited)
Net cash provided by operating activities$225,767$2,794
Net cash used in investing activities(694)(427)
Net cash used in financing activities—(309)
Three-month period ended December 31, 2022

June 30, 2023

Net cash provided by operating activities was $72.4$225.8 million during the nine-monththree-month period ended December 31, 2022.June 30, 2023. Total cash provided during the period was driven by net income of $93.8$63.6 million adjusted for non-cash charges of approximately $3.6$1.0 million related to depreciation and amortization. Cash from net income was decreasedincreased by the overall increasedecrease in our net operating assets and liabilities, primarily our net working capital accounts, resulting in an outflowinflow of approximately $25.0$161.1 million. Accounts receivable and contract assets in aggregate increaseddecreased approximately $93.7$26.4 million during the nine-monththree-month period ended December 31, 2022,June 30, 2023, resulting from longershorter billing and collection periods. Inventoryperiods and lower sequential revenue. Accounts payable increased approximately $82.1 million partially associated with timing and increase in our payment cycles. Deferred revenue increased approximately $74.3 million driven primarily by $79.0 million andincreased deposits on higher bookings during the quarter. Offsetting the cash inflows were increases in other assets increased by $24.0of $47.8 million primarily due to advance payments to suppliers to secure product with longer lead times and expansiondrive growth of supplier capacity in the United States, continued logistics constraints and increased operations. Offsetting the cash outflows were increases in deferred revenueour U.S. manufacturing footprint.
29
Table of approximately $88.4 million, primarily resulting from upfront funding of new contracts, increases in account payable of approximately $44.5 million directly associated with the increased inventory level, and increases in other liabilities of approximately $30.9 million.

Contents

Net cash used in investing activities was approximately $2.6$0.7 million and directly attributable to the purchase of property and equipment.

Net cash provided by financing activities was $1.3 million resulting from net cash transfers from Flex primarily pursuant to the centralized cash management function performed by Flex.

37

Nine-month period ended December 31, 2021

Net cash used in operating activities was $105.7 million during the nine-month period ended December 31, 2021. Net working capital and other was a net use of approximately $160.8 million. Cash used for inventory, accounts receivable and contract assets was approximately $234.9 million in the nine-month period ended December 31, 2021, as we funded increased operations and expansion of supplier capacity in the United States. Additionally, approximately $13.7 million in cash was used for other current and noncurrent assets during the nine-month period ended December 31, 2021, primarily due to increased advance payments made to suppliers for future procurement of inventory. This increase was offset by increased accounts payable of approximately $78.0 million directly associated with the increased inventory level, in addition to increased deferred revenue of approximately $19.2 million, primarily resulting from upfront funding of new contracts and timing of cash collections coupled with delays in projects as a result of logistics constraints. Further offsetting cash used for net working capital and other, net was net income of approximately $45.1 million adjusted for noncash charges of approximately $9.9 million related to depreciation and amortization.

Net cash used in investing activities was approximately $5.0 million and directly attributable to the purchase of property and equipment.

Net cash used in financing activities was $14.9 million resulting primarily from net cash transfers to Flex pursuant to the centralized cash management function performed by Flex.

Cash management and financing

We have

Prior to the IPO we were historically participatedparticipating in a centralized cash management program administered by Flex; disbursements arewere independently managed by us. The cash balance reflected in the combinedconsolidated balance sheets as of December 31, 2022June 30, 2023 and March 31, 2022 and 2021 consist2023 consists of the cash managed and controlled by us that is not part of the Flex centralized cash management pool. For as long as Nextracker is a controlled entity of Flex, Nextracker’s U.S. operations may continue to participatehas participated in the Flex cash pooling management programs intra-quarter and all outstanding positions are settled or scheduled for settlementduring our fiscal year 2023; this was discontinued as of each quarter end. “DueApril 1, 2023. In the absence of the cash pooling program, we expect our credit facilities and our cash position to provide adequate liquidity for our business. We have a total liquidity of $855 million as of June 30, 2023, of which $500 million is related parties” are balances resulting from transactions between usto unutilized amounts under our RCF and Flex subsidiaries that have historically been$355 million is related to our cash settled and are treatedcash equivalents balance as operating activities in the statement of cash flows. Flex intercompany balances resulting from transactions between us and Flex that have not been historically cash settled are reflected within net parent investment on the combined balance sheets as these are deemed to be internal financing transactions and accordingly are treated as financing activities in the statement of cash flows.

June 30, 2023.

Contractual obligations and commitments

As discussed

Information regarding our Credit Facilities, debt obligation, operating lease commitments and other commitments is provided in the “Credit Facilities” section above, we borrowed $150.0 million under the term loan in February 2023. There have been no other material changes to our contractual obligations and commitments from those disclosed inItem 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” set forthof our Annual Report on our Form 10-K for the fiscal year ended March 31, 2023.
There were no material changes in the Prospectus.

our contractual obligations and commitments as of June 30, 2023.

Off-Balance sheet arrangements

We did not have any off-balance sheet arrangements as of December 31, 2022.

CriticalJune 30, 2023.

Recently adopted accounting pronouncements
See Note 2 "Summary of accounting policies and significant management estimates

Our unaudited condensed combined financial statements and the related notes thereto included elsewhere in this Quarterly Report are prepared in accordance with GAAP. The preparation of condensed combined financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues, costs, and expenses during the reporting period. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. To the extent that there are differences between our estimates and actual results, our future financial statement presentation, financial condition, results of operations and cash flows will be affected.

38

Our critical- Recently issued accounting policies and significant management estimates are described under the heading “Management’s discussion and analysis of financial condition and results of operations—Critical accounting policies and significant management estimates” in the Prospectus and the notes to the audited combined financial statements appearing elsewhere in the Prospectus. During the three- and nine months ended December 31, 2022, there were no material changes to our critical accounting policies and significant management estimates from those discussed in our Prospectus, except for the estimated additional product warranty reserve of $8.7 million as discussed in Note 2, “Summary of accounting policies–Product warranty,”pronouncement" in the notes to our unaudited condensed combined financial statements included elsewhere in this Quarterly Report.

Recently adopted accounting pronouncements

See Note 2 “Summary of accounting policies - Recently issued accounting pronouncement” in the notes to our unaudited condensed combinedconsolidated financial statements included elsewhere in this Quarterly Report for recently adopted accounting pronouncements.

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to market risk in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. Our market risk exposure is primarily a result of fluctuations in commodity prices, such as steel and customer concentrations. We do not hold or issue financial instruments for trading purposes and had no outstanding indebtedness for borrowed money as of December 31, 2022. On February 13, 2023, we borrowed $150.0 million under the term loan. For more information, see note 10 “Subsequent events” in the notes to the unaudited condensed combined final statements in this Quarterly Report.

June 30, 2023.

There were no material changes in our exposure to market risks for changes in interest and foreign currency exchange rates for the nine-monththree-month period ended December 31, 2022 June 30, 2023 as compared to the fiscal year ended March 31, 2022.

2023.

Concentration of major customers

Our customer base consists primarily of EPC, as well as solar project owners and developers. We do not require collateral on our trade receivables. The loss of any one of our top five customers could have a materially adverse effect on the revenue and profits of the Company.

The following table sets forth the revenue from our customers that exceeded 10% of our total revenue and the total revenue from our five largest customers by percentage of our total revenue during the periods included below:

   Three-month periods ended  Nine-month periods ended 
   December 31, 2022  December 31, 2021  December 31, 2022  December 31, 2021 

Customer A*

   25.7%   10.5%   21.3%   13.8% 

Top five largest customers

   56.1%   41.4%   40.6%   37.6% 

*

SOLV Energy

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Three-month periods ended
June 30, 2023July 1, 2022
Customer A*5.3%10.5%
Top five largest customers35.0%38.6%
*    SOLV Energy
Our trade accounts receivables and contract assets are from companies within the solar industry and, as such, we are exposed to normal industry credit risks. We periodically evaluate our reserves for potential credit losses and establish reserves for such losses.

39

The following table sets forth the total accounts receivable, net of allowance for doubtful accounts and contract assets, from our largest customers that exceeded 10% of such total, and the total accounts receivable, net of allowance and contract assets, from our top five customers by percentage during the periods included below:

   As of 
   December 31, 2022  March 31, 2022 
   (Unaudited)    

Customer A*

   16.3%   10.3% 

Customer E

   —     13.0% 

Customer F

   10.0%   —   

Top five largest customers

   42.5%   45.5% 

*

SOLV Energy

As of
June 30, 2023March 31, 2023
(Unaudited)
Customer A*13.8%15.2%
Customer F8.2%14.0%
Top five largest customers37.5%43.5%
*    SOLV Energy
Commodity price risk

We are subject to risk from fluctuating market prices of certain commodity raw materials, such as steel, that are used in our products. Prices of these raw materials may be affected by supply restrictions or other market factors from time to time, and we do not enter into hedging arrangements to mitigate commodity risk. Significant price changes for these raw materials could reduce our operating margins if we are unable to recover such increases from our customers, and could harm our business, financial condition and results of operations.

In addition, we are subject to risk from fluctuating logistics costs. As a result of 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. These disruptiondisruptions have caused, and may continue toin the future cause, increased logistics costs and shipment delays affecting the timing of our project deliveries, the timing of our recognition of revenue and our profitability.

Foreign currency exchange risk

We transact business in various foreign countries and are, therefore, subject to risk of foreign currency exchange rate fluctuations. We have established a foreign currency risk management policy to manage this risk. We intend to manage our foreign currency exposure by evaluating and using non-financial techniques, such as currency of invoice, leading and lagging payments and receivables management.

Based on our overall currency rate exposures as of December 31, 2022June 30, 2023 and March 31, 2022,2023, including the derivative financial instruments intended to hedge the nonfunctional currency-denominated monetary assets, liabilities and cash flows, and other factors, a 10% appreciation or depreciation of the U.S. dollar from its cross-functional rates would not be expected, in the aggregate, to have a material effect on our financial position, results of operations and cash flows in the near-term.

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ITEM 4.CONTROLS AND PROCEDURES
a.

CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We maintain “disclosure controls and procedures,” as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that are designed to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and our Principal Financial Officer, to allow timely decisions regarding required disclosure. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that as of December 31, 2022, disclosure controls and procedures were effective as required by the Exchange Act. The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

40

Based on the results of its evaluation, management concluded that our disclosure controls and procedures were effective as of June 30, 2023.

Changeb.Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarter ended December 31, 2022June 30, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1.

LEGAL PROCEEDINGS

ITEM 1. LEGAL PROCEEDINGS
In the ordinary course of conducting our business, we have in the past and may in the future become involved in various legal actions and other claims. We may also become involved in other judicial, regulatory and arbitration proceedings concerning matters arising in connection with the conduct of our businesses. Some of these matters may involve claims of substantial amounts. In addition, from time to time, third parties may assert intellectual property infringement claims against us in the form of letters and other forms of communication. These legal proceedings may be subject to many uncertainties and there can be no assurance of the outcome of any individual proceedings. We do not believe that these matters, and we are not a party to any other legal proceedings that we believe, if determined adversely to us, would have a material adverse effect on our business, financial condition or results of operations.

For more information, see note 7 “Commitments9 "Commitments and contingencies”contingencies" in the notes to the unaudited condensed combinedconsolidated final statements included elsewhere in this Quarterly Report.

ITEM 1A.

RISK FACTORS

There

ITEM 1A. RISK FACTORS
As of the date of this report, there have been no material changes to our risk factors that we believe are material to our business, results of operations and financial condition, from the risk factors previously disclosed in the section entitled “Risk factors”"Risk factors" included in our Annual Report on our Form 10-K for the Prospectus.

fiscal year ended March 31, 2023. Any of these factors could result in a significant or material adverse effect on our result of operations or financial conditions. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations. We may disclose changes to such factors or disclose additional factors from time to time in our future filings with the SEC.
ITEM 2.

UNREGISTERED SALE OF EQUITY SECURITIES AND USE OF PROCEEDS

ITEM 2. UNREGISTERED SALE OF EQUITY SECURITIES AND USE OF PROCEEDS
32
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Recent Sales of Unregistered Securities; Purchases of Equity Securities by the Issuer or Affiliated Purchaser

On December 19, 2022, we issued 100 shares of common stock, par value $0.001 per share, to Yuma in exchange for $0.10, which shares were repurchased from Yuma and cancelled upon the filing our amended and restated certificate of incorporation and the completion of the Transactions. The issuance was exempt from registration under Section 4(a)(2) of the Securities Act, as a transaction by an issuer not involving any public offering.

41

Not applicable.

Use of Proceeds

On February 13, 2023, the Company closed the IPO and issued 30,590,000 shares of its Class A common stock to the purchaser of the offering (including 3,990,000 shares of Class A common stock issued to the underwriters upon exercise in full of their option to purchase such additional shares), at a public offering price of $24.00 per share. The Company received net proceeds of $693.8 million, after deducting $40.4 million in underwriting discount, and before offering expenses. The estimated total expenses for the IPO were $8.3 million which were paid by Flex. The underwriters agreed to pay a portion of the expenses incurred in the IPO.

The Company used all of the net proceeds from the IPO as consideration for Yuma’s transfer to the Company of 30,590,000 LLC common units at a price per unit equal to $22.68, representing the initial public offering price per share of Class A common stock, less the underwriting discount. Yuma is an indirect, wholly-owned subsidiary of Flex Ltd. which owns through one or more subsidiaries 60.91% of the Company’s total outstanding shares of Class A common stock. J.P. Morgan Securities LLC, BofA Securities, Inc., Citigroup Global Markets Inc. and Barclays Capital Inc. acted as joint book-running managers in the IPO.

For additional details on the IPO, refer to the section “The Initial Public Offering” in Note 1, “Organization of Nextracker,” and to the section “The Transactions” in Note 10 “Subsequent events” in the notes to the unaudited condensed combined financial statements included elsewhere in this Quarterly Report.

Dividend Restrictions

Restrictions Relating to the 2023 Credit Agreement

The 2023 Credit Agreement includes covenants limiting our ability to pay dividends or make distributions on our capital stock if a default exists under the 2023 Credit Agreement or would be caused by giving effect to such dividend.

Restrictions Relating to the Separation Agreement

Pursuant to the Second Amended and Restated Separation Agreement by and among Flex, the Company, the LLC, and Flextronics International USA, Inc., the Company may not declare or pay any dividend on Nextracker securities without the prior written consent of Flex unless expressly authorized by the Company’s governing documents in effect as of February 1, 2022.

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES

ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.

ITEM 4.

MINE SAFETY DISCLOSURES

ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.

ITEM 5.

OTHER INFORMATION

ITEM 5. OTHER INFORMATION
None.

ITEM 6.

EXHIBITS

         Incorporated by reference

Exhibit

Number

  Description  Filed
Herewith		  Form  File No.  Exhibit  Filing Date

    3.1

  Amended and Restated Certificate of Incorporation of Nextracker Inc.  x        

    3.2

  Restated Bylaws of Nextracker Inc.  x        

  10.1

  Form of Third Amended and Restated Limited Liability Company Agreement of Nextracker LLC.    S-1/A  333-269238  10.1  February 1, 2023

  10.2

  Form of Exchange Agreement.    S-1  333-269238  10.2  January 13, 2023

  10.3

  Form of Tax Receivable Agreement.    S-1/A  333-269238  10.3  January 24, 2023

  10.4

  Form of Letter Agreement.    S-1/A  333-269238  10.4  January 24, 2023

42

ITEM 6. EXHIBITS
33

  10.5

  Form of Amended and Restated Separation Agreement by and among Flex Ltd., Nextracker LLC, Nextracker Inc. and Flextronics International USA, Inc.    S-1/A  333-269238  10.5  February 1, 2023

  10.6

  Form of Amendment to the Transition Services Agreement.    S-1  333-269238  10.7  January 13, 2023

  10.7

  Form of Registration Rights Agreement.    S-1  333-269238  10.9  January 13, 2023

  10.8

  Form of Second Amended and Restated 2022 Nextracker Inc. Equity Incentive Plan.    S-1/A  333-269238  10.10  February 1, 2023

  10.9

  Form of Restricted Incentive Unit Award Agreement under the 2022 Equity Incentive Plan for time-based vesting awards (Executive).    S-1  333-269238  10.11  January 13, 2023

  10.10

  Form of Restricted Incentive Unit Award Agreement under the 2022 Equity Incentive Plan for performance-based vesting awards (Executive).    S-1  333-269238  10.12  January 13, 2023

  10.11

  Form of Unit Option Award Agreement under the 2022 Equity Incentive Plan for time-based vesting awards (Executive).    S-1  333-269238  10.13  January 13, 2023

  10.12

  Form of Indemnification Agreement.    S-1  333-269238  10.15  January 13, 2023

  10.13

  Form of Agreement and Plan of Merger, by and among Flex Ltd., Yuma, Inc., Nextracker Inc., and Yuma Acquisition Corp.    S-1/A  333-269238  10.16  January 24, 2023

  10.14

  Form of Credit Agreement by and among Nextracker Inc., the Other Holding Entities Party Thereto, Nextracker LLC, the Lenders Party Thereto, JPMorgan Chase Bank, N.A., as Administrative Agent, and Sumitomo Mitsui Banking Corporation, United Bank AG, New York Branch and U.S. Bank National. Association, as Co-Documentation Agents.    S-1/A  333-269238  10.22  February 1, 2023

  31.1

  Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.  x        

43

Table of Contents

Incorporated by reference
Exhibit NumberDescriptionFiled HerewithFormFile No.ExhibitFiling Date
3.1Amended and Restated Certificate of Incorporation of Nextracker Inc.
10-Q001-416173.1March 9, 2023
3.2Restated Bylaws of Nextracker Inc.10-Q001-416173.1March 9, 2023
10.1†
Form of Restricted Stock Unit Award Agreement under the 2022 Nextracker Inc. Equity Incentive Plan for time-based vesting awards (Executive)x
10.2†
Form of Restricted Stock Unit Award Agreement under the 2022 Nextracker Inc. Equity Incentive Plan (Director)x
10.3†
Form of Performance Stock Unit Award Agreement under the 2022 Nextracker Inc. Equity Incentive Plan (Executive)x
10.4†
Form of Stock Option Award Agreement under the 2022 Nextracker Inc. Equity Incentive Plan for time-based vesting awards (Executive)x
Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.x
31.2∗
Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.x
Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.x
Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.x
101The following financial statements from Nextracker Inc.’s Quarterly Report on Form 10-Q for the three months ended June 30, 2023, filed with the Securities and Exchange Commission on August [8] 2023, formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) the Unaudited Condensed Consolidated Balance Sheets, (ii) the Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income (Loss), (iii) the Unaudited Condensed Consolidated Statements of Redeemable Interest and Stockholders' Deficit / Parent Company Equity (Deficit), (iv) the Unaudited Condensed Consolidated Statements of Cash Flows, and (v) the Notes to the Unaudited Condensed Consolidated Financial Statements.x
104Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101).x
† Management contract or compensatory plan or arrangement
∗ The certifications furnished in Exhibits 32.1 and 32.2 hereto are deemed to accompany this Form 10-Q and are not deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, nor shall they be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act.

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  31.2

Certification of Principal Financial Officer Pursuant to Rules 13a-14(a)Table of Contents and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.4x

  32.1

Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.x

  32.2*

Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.x

101

The following financial statements from Nextracker Inc.’s Quarterly Report on Form 10-Q for the nine months ended December 31, 2022, filed with the Securities and Exchange Commission on March 8 2023, formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) the Unaudited condensed combined balance sheets, (ii) the Unaudited condensed combined statements of operations and comprehensive income (Loss), (iii) the Unaudited condensed combined statements of parent company equity (deficit) and redeemable preferred units, (iv) the Unaudited condensed combined statements of cash flows, and (v) the Notes to the Unaudited condensed Combined Financial Statements.x

104

Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101).x

*

The certifications furnished in Exhibits 32.1 and 32.2 hereto are deemed to accompany this Form 10-Q and are not deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, nor shall they be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act.

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SIGNATURES

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Nextracker Inc.
Date:August 9, 2023By:Nextracker Inc./s/ David Bennet
Date: March 8, 2023By:

/s/ David Bennett

Bennet

David Bennett

Chief Financial Officer

Chief Financial Officer

(Principal Financial and Accounting Officer)

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