AAON - Earnings call transcript Q1 2022

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Operator

Welcome to the AAON Inc’s First Quarter 2022 Earnings Conference Call. [Operator Instructions]. I would like to turn this event over to your host, Mr. Joseph Mondillo, Director of Investor Relations. Mr. ahead. go please Mondillo,

Joseph Mondillo

was Good aaon.com. first thank website call. quarter our will on posted financial release operator. and be close us be also recording can A for the of for following announcing found results XXXX quarter AAON’s XXXX corporate first our after afternoon you, call. market you today website and our joining press issued A Thank on earnings call conference this

then our to the with current Prior President statement our through on today to her will along call results. Rebecca be Q&A. further Gary then Fields, to our quarter CEO; quarter policy. me that Thompson, the the and with outlook, we Joining though, customary call Gary CFO. handing are to our forward-looking and begin the Rebecca, go insight I’ll Shortly. first call we’ll provide on the off for and open up

any presented provisions is the as of During Harbor XXXX each of information Litigation and is the Safe Exchange considered XXXX, that historical Securities not Securities Act of Reform Act statement pursuant the and of Securities forward-looking amended. XXXX, Act call made to the dealing the with

occurrence of control such, is to to events those subject As could anticipated. outside of from it AAON’s cause materially many the that differ results AAON’s

You are statements. uncertainties all predictive aware of making the and inherent difficulties, in risks

call our that Rebecca. With we that we duty XX-Q I’ll the our our forward-looking update afternoon cause factors that Please this in Form results to the risk from that, have note, do and filed to details release statements. the turn press may predictions. those Our to over important actual not of differ some

Rebecca Thompson

ended XX.X% to mainly the XX.X% and our price I’d with backlog first three at begin versus million production from Solutions chain coming results strong approximately team. contributed of of XX.X% from drove beginning quarter, Joe. the XXXX. production million. from remainder increased comparative of Net volume easing to months the by $XXX.X reflect quarter growth net increases. you, rates supply volume contributed acquisition the discussing record XX, to BasX XX, March XXXX of robust $XXX.X Organic the Record the with sales like March Thank performance and the capacity rates along operational issues, greater the growth. production an A improved sales in

gross million. profit million $XX.X Our XX.X% to increased from $XX.X

percentage was XX.X% the a compared XX.X% gross As a benefited XXXX. of margin some of the million to our lives income $X.X sales, profit first equipment. the useful in Gross to related of noncash of quarter from extending

the multiple Excluding was gross improved XXXX, margin increases Compared this margin XXXX. the costs, issues chain adversely efficiencies. margin of XX.X%. gross a that operational affect impacted continue sequential to to wage basis, supply On item, along from fourth material higher with gross first quarter was and substantially quarter by of

$XX.X year. are to We XX.X% expectations, was first later quarter in administrative margins in $XX.X but this line target track not on achieving from and internal XXXX. where still we to our million we the are want and Selling, increased be, million expenses with general to

are of or XX.X% first million XX.X% points we basis As or down expenses, a a Including the in. XX.X% are sales expenses good environment XX.X% $XX.X ago. from quarter percentage XX.X% to job of in sales in inflationary million from operating from SG&A decreased at managing $XX our the increased year XXXX. Income sales, XXX X.X% XXXX. particularly operations of from Overall, BasX, sales, of a totaled SG&A in we of doing

annual XX.X%. $X.X stock low in XXXX due awards The approximately benefits to the to Diluted X.X% company’s excluding be current to XX.X% quarter per $XX.X first increased sales QX to million share. in the earnings or million Our XX.X% was to of expected Net is $X.XX effective from per per tax increased tax versus of rate quarter. tax of related rate, $X.X $XX.X share sales events, from or XX.X%. of income million XXXX million $X.XX of estimated XX% The to in to effective share rate effective XXXX. compared excess tax increased discrete unusually by

at working at you’ll million see balance March cash that December million XXXX. XX, XX, Looking XXXX. versus $X.X at the balance we sheet, $XXX.X million Unrestricted of a had capital $XXX.X totaled

ratio current X.X:X. approximately is Our

were expenditures capital quarter. million $XX for Our the

at for expenditures $XXX.X of expect We repurchases like to The $X.XX CEO we share XX, million. $X.XX approximately over had XXXX. Shareholders’ the to XXXX. call to ended million at compared expect is continue March Fields. and December be $X.X to equity during Gary stock – XX, company per the President, turn three March XX, XXXX, to now months diluted I’d capital year the our

Gary Fields

Good afternoon.

have performing. well sales, were like but level of definitely were the some, I’d highest of sales year production in results we the overall reflecting the with like in XX%. very company. This backlog the also excluding and but off, increases to I’m an I’d that as quarter’s definitely commend it’s the state rates strong general, First were the with with much first up with, organic performance. reflected history to our our entered happy very still Supply issue. our chain BasX internal are price eased And In expectations. the over the how operations we any team issues line quarter

on up saw production this but we headcount, they reflect considered internal fourth team ramping Sequentially, a record Margins which with in quarter down year-over-year, levels were considerable were we All how improvement. and line our also comes challenges. what well certainly indicated our our call. performing. with is expectations We’re

ago, XX%. to things positive and effect a material I be, freight of seeing the need volumes sequential was have later up we’re on sense, target is see from to other XX%. margins improvement a Considering in year. but In a what not where to track excluding this we material this still costs we’re aspect. up, cost, and were to you we’re costs, happy year organic our being our give volumes considered, our freight We’re gross with material margins. All would the if flat approximately up To words, returning very been

also doing at as a SG&A through. just expenses, We’re our job managing you walked good Rebecca

March from Orders in the in quarter $XXX.X $XX.X we the million year the acceleration the December it million, up at the were XX% XX% organically, was XXXX. XXX% year and growth growth up the backlog, in which end from backlog we million Organically, $XXX an ago. end fourth of was the of the first Now XXXX. XX, up at year-over-year that’s quarter represented a and from of XXX% quarter recognized the saw

this the two in the toughest definitely we’ve still in we’re was and is seen out, so recognize much we share. is comp acceleration year-over-year the Growth past greater fact, taking in market growing what market growth. quarter certainly than years, In significant

Let me tell you what’s enabling time. driver is that. lead Key

the by Our the best in far industry. are lead times

that are and a including a how the other Lead we’ve gains a handful times our is paying Another playing operations performing. the our plant both management, over off. equipment months Also testament improvements to All and XX labor factors of are and done share manufacturing seeing. well the the increasing big last to inventory capacity, work are productivity we’re with role. of factor

it’s channel very them The strong our us is ever of never Our and high sales quality at between a as sales performing level. been. as is has The been partners channel alliance better.

products than before. We’re supporting them ever services with more and

been in of with of best do have So, ever it’s this to there. history we’ve we a still been. bit the the our never aligned the work well sales it’s company, But channel little

a to little improve here every this, that on The lifting that day there. to working tweaking heavy do behind is We’re got sales we’ve and just channel. but

New bit well pumps. far. ambient talked have air of source source heat by about The Both the received so been a products pumps market water and heat we are factor. last very calls, a two low our

heat that. air a picked recall, out As pumps pumps. source you along compatible And pumps introduced heat nicely received, and in of we have may very decarbonization that to line heat those interest installed our It’s call were backwardly the second ProFit. with efforts source the cold we well redesigned moving large be base for there The capable climate replacement. with been up really water

is positively air strong. continue and Replacement very indoor environment quality macro trending demand be to is on continue the from focus factors. a be downturn So very to XXXX – Demand for us.

starting also drive dollars stimulus see to demand We’re accelerated vertical. within educational the

slow highest Institute according are to at has above New ABI and growth construction been including a after months, of projects XXXX. backlog an year. of which also latest the firms benchmark is all-time last for accelerating for high. reading of American the is And since May the demand architecture XX XX straight Architects, XX, the

as where demand new lead our That’s is construction times well. So are helping us improving.

with consistent recent verticals demand Overall of in Some to the broad-based about fast-track projects. we’ve these be past. continue fairly and for are the talked all what

up is although level Another not parts to sales the our business. quarter quarter backlog factor Parts driving were first the in of XX.X% history. any in company growth, highest our within first

is quarter usually begins we’re of last quarter. the line in with and we end for towards saw accelerate to quarterly soft three parts the But a First XXXX. in it quarter of the the quarters average

So we’re parts really our with off to business. a great start

of Lastly, BasX. our about to I talk acquisition want

bit acquisition, revenue six us, on we be backlog quicker progressed have thought. like and inflation, than with closing chain synergies now things and very trends to And are we far. well. since seem being the with supply they’re We’re thus a but challenged strong, and how months managing order are Their they’re almost progressing pleased issues overall, even

quarter. into optimistic second the We’re heading

In backlog benchmark, rising, back earnings improving. the a answers. I’d the Supply easing. open throughout are the with of production and year, quarter improve strong, bulk general, our to occurring foresee up chain questions sales the like is it cost and capacity in improvement issues first margins using Our and price to as half. is will we are rates

Operator

Thank Julio We question have – Instructions] first & you. caller, Romero Company] our [Operator [Sidoti

Gary Fields

Good afternoon, Julio.

Julio Romero

Gary Rebecca. Hey good afternoon, and

the is start, order growth to organic guess I So staggering.

about of that particular product lines the growth order Just the what seeing are talk and were surge? what drivers

Gary Fields

family product Well, broad-based it’s absolutely wise.

production the having product The facility be about run that $X amount quarter, Longview, million, higher to that’s ran beginning just than of million out month. So there now. we years. got that immense $X in an realize built that we’d in previous of that And capability finished $X month ever we the quarter we’re production to in million had – final we

time been that true. than sensitive And attractive, production Tulsa lead more Longview the and to product. very having capability, lead time we’ve down So was the pull that’s able to always that that said product proven I’ve

they some split a data – centers. time. like we We’re for that container of large AAON we at get to bit in modular These very in And four systems about very, getting Longview for. are orders tranches look a used build little those units orders shipping XX a

getting orders hundred we’re a of for Now, couple time. a at units

Tulsa, In deal. enough got to and been headcount. on our So deliver years. the idea we’ve we few the Julio. headcount, and give that, an with got you able that’s big last reliable for finally I’ll We being here building just be out a infrastructure materials

the legacy Our that business in the headcount we’ve is year-over-year. up in people That’s XX% added legacy business year-over-year. XXX

those large And on were so and the people floor. plant by

helping that’s times. with And us lead what’s so the

Now drivers. decarbonization are and indoor air big quality also

Operator

We Jean Davidson. D.A. have Ramirez, question another from

Gary Fields

Good afternoon Jean.

Brent Thielman

it’s Gary, Davidson. Hi Brent Thielman,

Gary Fields

Brent. Oh,

Okay.

Here you? we go. How are

Brent Thielman

wrapped – trying year? the to the thanks me this heads book the around business taking second the Hey you of ramp of about expect converting haven’t your course this of the the really of caught Gary, I of for before. business book we end up I head, over It’s How can of level guess this in rest my seen sort questions. that I’m you backlog just of to kind do get see year. we the our of get – half just commentary talk

Gary Fields

QX, we same that the that’s our Well, revenue. not growth constrained were sustainable We the didn’t I QX have That’s severely acceleration at what think quarter because in materials. to we percentage fourth rate. disrupted saw

we’ve substantially out have getting fairly those with I started flow built think materials. QX have pretty And could we each that. gotten if really in of We About revenue were a But it before, October considerable. would just started nice. stated I our materials. month November been falling rec a and mid-December, up

pace time it need be era, And we’ve are actually. much our on normal is double-digit would. to down. to obviously that. will still burn we’re pick will up going up I this lead to amazing, small things we production. where – backlog QX manage pandemic is backlog strong. well, pretty – We’ve that that pick times that the gotten what been for you another got further think accustomed lead said, weeks. It’s out this support running they have than in able normally that ordering Like was to pace said, your Orders the XX in they people Their to is double-digit a revenue pace

I’ll on that and do ahead. XX they until able attractive I’ll don’t ordering to enough a that. Well, got it, people And So it want couple of order priced weeks they’re are be pad projects weeks are put we’ve QX. to

people to we’re ship to actually So quick of project orders ability take our advantage of And check, times keep and our want placing lead needs. us to them. been able where that’s kind the we’ve allowed in some of best

that So that’s answers to up something me. – hopefully, if else need it, I cleared add for

Brent Thielman

to and you’re I last from it draw Gary. things in here given years see you’re That’s it mean place comfortable necessarily No. great, support that mean with And this me level in take all that to seems comfortable backlog to I here you the the to me commentary don’t it. down. I few put

Gary Fields

it Well, want orders it I to to fact I draw just But not the see like I like down don’t draw door. that to getting in because revenue. the down would I’m from the

said, back that’s If was of rein And the going go or to when I a orders. well, in three you question. me quarters great guys two I asked ago, you one

a the now the much. what do the giving has I’m so so the know improved efforts, I’m us have Well, I’m we getting taken in in this, all gently The new spurs going not that’s production. I’m here in and It’s materials going preparations Horsemen’s with a us And rein this a our leader horsemen, good to Casey term. did for doing getting Fact, for no, the to to just while HR well. job production Kidwell, issue. to people were phenomenal biggest our retention though. use going You that the to very rates And been Brent. and lay a orders, door

difficulty stay then they to stay are time. the very stay first We to way, here way days he people down to can that six getting month, tend turnover here. in long things alone, XX here of him, you And prior tremendous get let some days. material Our having months, to if rates that’s a for very, people since brought to the because were XX

much basis. And has a that gone at plant by those produce become on And so mind. And this this it number measure every on the rate floor in down. efficient. day. people look and now Well, turnover more the we metric how people got they of We daily we’ve

been so number when production that per one day fairly dollars much we that of on And add that able more that’s keep people, our measures we efficiency to and our linear. And team linear uses, a basis. relatively add and they’ve get people

this we were so over today. going earlier And

because production floor. we and probably target that daily going in the this people Our hiring plant basis And locations people increase those XXX to XXX the is on spring later another two all throughout early summer. look hire for are a the linear to on

overhead any at add all. to looking not personnel We’re

Brent Thielman

so just Okay. the to course end that the especially of much with the there kind the Maybe increases experiencing The catches to to is if the back overriding of cost that XX% out next that sort over Really you of up now. in these by the on factor evidence helpful, out help the got factor you’ve realize few got to right me price back getting getting – should you of the level, business. there understand quarters you’re Gary. XX% And just margin going there that year. overriding then

Gary Fields

of the while stabilized. ability it have begun been have for to And inputs our debated historic way outputs things predictable. and outside forecast been. Yes. are they’re abnormal has But our challenged elevated, costs the things more the to with to that with they’re and makes that stabilize, considerably. best algorithm And box We’ve that

least that have, now stabilize, and our So feel then confident viewpoint, doing. at they’ve begun we’re in fairly they our to forecasting what in we

what And quarter with handle high know it that and which this got of then And where we’re level the got that’s our that’s exactly that We’re throughout We plant improvement going degree on each floor percentage cost. we’ve margin have year. because day. how we’ve know fairly is of we and a price with primarily to backlog on sequential this confidence. much going a

through we’ve algorithm. So that gone

to that confident going very improving. we’re be We’re

not target closer to get We’re to next going going we’re to but that get level to quarter, it.

of that around the want increase everything doing I the think we – get of team last But that a day-to-day how be still too. And of are part several rate some mind, deal bear second XX%, this the about in basis. in we’ve the last to of half months, we’re I has going that right and a potholes range. occurred the center year, anything about good with half barring done different to navigate units don’t there the that excited there for in we getting somewhere out the of can a job what’s the we’re because phenomenal challenges too learned that to doing production out door. to lot than feel and last just I the of XX% year. on

So a throughout yes, top on line, growth, good I’m number confident bottom we’re the line year. growth, solid

Brent Thielman

on advance little Last good SG&A, expect see that. up I appreciate to through dollars the you that ballpark? the here, I better a do the a guess, over this leverage sales pick especially year, as we XX.X-odd Yes. just one, percent

Gary Fields

No.

and some some holding about production believe we when had preliminary we’re not hard Like can. done got overhead it’s I to that get going that. and Rebecca occurs. figure going aspects that I we’re the the said, company I to discussion leverage fast overhead and she’s on to be workers. And exact an workers, we’re haven’t much because work add where of believe of we workers, production we we going think it I improve. that’s then to get we’ll a begin And But adding on that. that lever earlier, leverage some as as on on that

Brent Thielman

I on to Well, else. pass it taking much Thanks questions. for Okay. someone the so

Gary Fields

Certainly

Operator

Julio have Romero, Sidoti. We caller

Gary Fields

a lost Julio, while we Yes. ago. you

Julio Romero

don’t must Never It I queue know have I now. from left. I me guess. left. Jean, never I dropped dropped for the gone for

sheet. more improve good you got I supply worked further maybe you’ve to So any levers follow-up here. just improve a other qualify chain. and balance obviously there You’ve can to pull chain? know Are supply vendors a

in Just thinking it can about derisk how you future. the

Gary Fields

I’ll let just in we the gave entree. you to were Julio, – I me wondering perfect was going this here, fit how

So company, company. manufacturer down for there bought the BasX, is fan that or things XX XX we road history of years, from. a great miles that But we when was about of wheels. the BasX their own And a they’re did fan one here XX fan had wheels purchased manufacture the the

And process and looking our the not all It’s it’s we complex. very of within were so how wheelhouse at abilities. much that

them of over closed buy year I’d said, they before did that I’d from to I eventually, for numbers build documentation, last bit design for they said, to you ago, to documentation, I week. three them said the they for that you would even the all that us. the was And it, and bulk to we transaction There were don’t closed building build but themselves, that? these like maybe strictly and part the price I build two you, a or work you And only of on use the tooling, us. went so Acme rights fans. a like we else, from you BasX, purchase anyone

the the fan in And building XX,XXX wheels. a early year, QX, them. purchasing we I moving been think few we’re over our XX,XXX be production from growing. plant. is And of we’ve QX, our so will years, to that last late nearly you equipment wheels see XX,XXX to all transitioning, we will the somewhere course, And Well, be fan anticipation here

we And is the plus of product. is that so this just an of so the this product margin, not gain and one can that quality the expensive destiny place more control the delivery, forth

and vulnerability It that’s great someone of bottom thing it add assemble talking is not our else line. while was that it manufacture we the process of had thought the anything that, of no to help, just company will material we’re was But bit. we reason little in to units, to doubt a vertical that So we was supplying don’t abilities going they’re be a to wheelhouse to the something the units. main

Julio Romero

There than And you’ve that a and was more release, you exciting. initially on BasX are comment press Sounds just the better in revenue one at that for synergies learned expand estimated. me. Can all?

Gary Fields

I see wanted part them whole much that a were huge because looking in as they How And them the of to clients these of instance. is of now that grant with production, the they percentage Well, an from of kind much some risk order. not they larger foundation, of BasX. then how constraining they’re a it had they’re percentage that would for BasX a was enterprise, their part purchase of a annual at percentage as that

So history the they per ever volume company. the nearly have up company. already in as attained orders percentage order for much is, experienced they’d that their legacy is higher backlog anything our Fact same of than dollar the

almost here, is their by And year-over-year. count see way, XX% Let’s the up head year-over-year. XXX%

been of able they’ve too there produce. it. But to get aspect that and was So one people

that base. BasX land and legacy base and company that to the to were some The provided. the of BasX customer other customer was the provided company those work it equipment both AAON’s traditionally that and aspect legacy leverage was some And channel is in that people collaborate been able had new there entrees on sales relationships we’ve

that been as or clear others less that on I’m I to where significant that’s quite statement. And got we’ve not that and just where not we’ve instance. buys for hold going And steel thing. purchasing, Is had power the their steel of they were that’s there’s that a that? And But cost basis of legacy one some was tremendous that. me were we Then able until use at to amount looking is purchasing, we of a that are in improve So visible. able to with that leveraged purchasing company we steel, their them. sure

Julio Romero

very for taking thanks questions. does, the It much

Gary Fields

Certainly

Operator

other from At do not we any have point, this participants. questions

Gary Fields

Yes, Joe, ahead go for please. out close us, and it

Joseph Mondillo

for to If call. everyone with questions like in time. coming I’d look next myself. reach everyone and forward please And joining the any speaking weeks, days sorry. Thanks. today’s further out we I’m to to thank anyone has

Operator

concludes event. Thank today’s you. This

You And a may now disconnect. have great day.

AAON (AAON) 7 May 222022 Q1 Earnings call transcript