AAON - Earnings call transcript Q1 2024

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Operator

Good evening, ladies and gentlemen, and welcome to the AAON Inc. Q1 2024 Earnings Conference Call. [Operator Instructions] This call is being recorded on Thursday, May 2, 2024.I now would like to turn the conference over to Joseph Mondillo, Director of Investor Relations. Please go ahead.

Joseph Mondillo

Thank you, operator, and good afternoon, everyone. our today financial on and website, announcing after was our release aaon.com. closed market can press first results quarter issued corporate The be found also a today on as webcast.Please X that accompanied call Slide listen-only the with to the The you as is the can in find go well on website presentation presentation. our customary statement policy. forward-looking begin We

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

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

inherent important aware this risks may factors duty predictive that the XX-Q all in making and the Please have predictions. the press filed cause we that forward-looking to those actual we to are note do our of uncertainties risk of statements.Our not some update differ and release from Form results statements. in that our our detail difficulties, afternoon You

Our press non-GAAP Regulation measures use today's release of in defined portions call G. as financial and

call before Gary. we'll opening GAAP up measures and to Treasurer, will presentation.Joining update Rebecca with Q&A.With can find will then the opening our through Matt will Tobolski; Gary, our on commentary and CFO outlook turn our I our Matt remarks. and some operations, will related to reconciliations on on Rebecca provide some President press Thompson. release Fields; finish it the You the will and today's Gary in that, you walk by to me over CEO, is call and the provide COO, the Gary financials, followed who who

Gary Fields

afternoon. Good

X. Slide on start Let's

a adversely which mixed positive backlog Total with all second in to for was our our abnormally backlog First X of segments. and considering expectations. it volumes. was was quarter our and earnings year was to was Compared Bookings to is lighter-than-expected solid, across our remained backlogs factor lead a were were to A to start how line just both issues and strong supply a increased of soft performance ago, expectations. X.X%, at increased straight throughout substantially when This quarter. relative large quarter. were consistent down large year AAON remained the affecting backlog conversion and due segments basics this chain Order little products timing coil segments. though, at both at trends the times.Sales our

in the very are data the quarter, Slide we segments in significant while price same at beyond large results levels the backlog, addition, turn Thus, being to I'd volumes confident improve what were a We've to reason you forward. of price while will both with our well from have a better expected. the the premium down equipment.Now time balancing like than X. and Despite production soft executed margins currently the opportunities both profit cost going perspective, strategically the first quarter, in X is In center for market. were these we

term a Looking forward, the maintaining the bullish we term. on on remain near long cautiously optimistic while outlook

market. all markets level of other year sentiment be orders strong partners within could a and We due us rates volatile The amongst traditional is think despite refrigerant indications Our there our positive, headwinds. high this still believe stable economic the is remained channel to to and activity transition. interest the lead

are short-term projects we time the related also point of the seeking year development as we same it positioned for the in and wave of unable already we orders accept the and further orders R-XXXA approach also accepting currently see advantage product for However, we progress are a equipment, to take orders are are to from XXXA will price likely equipment.We as who strategically customers we to to At which in well-positioned standpoint. comparable pricing be a equipment into for a time, think designed we refrigerant. is new XXXA refrigerant

more more premium indications and the going we're us markets tell narrower a Our all GWP the as to of from lower be competitive competitive transition perspective to us refrigerant. price makes manufacturing cost even

adopters. electrification.Earlier As begins heat us would potentially the the current capitalize early of this Alpha footprints we advancements increasingly data which to far center more The products, our as will opportunity is big market. electric next activity likely focus aggressive large as technology, buildings, branded about positions product at more be fully industry moving well traditional development, our on the extremely pump we and Class Initially, wide-ranging make Energy heat end considerable work of the on to program a this most markets, of pipeline are the this pace. lead will market cycle climate us.Beyond advancement with capitalize to of a commercial excited a this us and expedite for cold announced this of the the and technology, development which and in several years AAON how rooftop of has allow can on is Department pump growth already adoption an over units. month, immense, of corporations

leads rate. the customers feedback of from in are and receiving All liquid maximize working speak to engineering for sales who are more call Tobolski, and strategy. best hand our becoming both applications. we cooling at the Matt depth our now Our provider diligently we teams the capitalize, solutions executing in us over to believe airside our capacity, operational midst about opportunities.I'll will first-class best-in-class the a are to we To ensuring are our increase we

Matthew Tobolski

thank Gary. you, And

years. but several last which this center please sixth an Slide will, to a the that utilized only growth over difference vertical the we've in being pie, realized Data to integral center been added our robust our call, segment slide the X. factor to has turn We fourth slice the you basics data quarter solutions. If is has the

become in the opportunities.Over market backlog of and of future current larger of X months last overall given to advancements of X will technology semiconductor pipeline this the expect the chip the an going the of makeup part artificial with anticipation demand forward even We accelerated have customers, organization solutions intelligence, plans time, computing aggressively. their design working by construction Over increased center companies helping been this teams them operational their diligently fulfill to fueled and ambitious have with AAON's engineering data the goals.

this are nearly liquid of have from business Given most overall the scale is operational The anticipate, the AAON's core approximately our custom expansions by on of and The and market of investing with footage capacity. of impressions finished industry. be be to the be in include what X some unique our we expansion data to strategy the expect Texas expected of the and is year, and greater increased by terms of much these our the center that in to customers the customers company's In XX%. solutions. density date, have exactly new Longview, are year.The executed schedule. But centers, facility XX%. positioned than develop and of flawlessly, our type about recently the provider industry.With of projects primary in QX orders AI the capacity capacity increase new projects aggressively complete Both been engineering customers require, of Redmond data year increased basics total, progressing. preparation we apart this underway in since end end teams, sets who is is last of airside by the demand this the for to Redmond also we've Longview will of given This rest revenue the been supplying can of the all providers growth From from manufacturing of expansion this are biggest be point facility. big leading expected cooling our total the what of considering is best-in-class is we success rest to we my market.In X view, square some projects assistance the the looking in for

with had continues portfolio requirements. offered our is Currently, the lead this new industry. the year. of equipment upcoming complete start product the low of much the since to industry of refrigerant the Our we've Meanwhile, refrigerant development GWP consumed with meeting

commercial technology. industry also advancement We are pump well-ahead the of with of the heat

company only to units that of being this operable X is technology heat are down degrees. to rooftop benefit market to electrify to decarbonize portfolio with going a pump-powered commercial AAON buildings. the us fully-electric increasing position the are We demand fully market with the the in first to from and

with the national the and parts us which sharing the could and become rooftop these the it our pump progress in to I forward.And Our through provide us the cold to has with already so financials. gain culture through with more is practices accounts.Lastly, pleased we channel to have allow Altogether, world-class opportunity some climate Operations highest growth One our never the share goals. to years.In market service off with expect strong. making strengthen, we continued coming I help complete sales marketing, Rebecca The will more extent a growth a that configurations, support accelerate portfolio be the to over including executing of The integral of and overall, our to be is big the at we opportunities market. of units, channel team share is going will market are strategy continues successful have consolidation And continue the hand not we've years. conclusion, heat sound AAON penetrating to of of reps increased in best upon. further strategies that, been will levels helping efficiency going walk and running our been

Rebecca Thompson

XX.X% to to driven in X.X% The X. down million. the AAON ago, was increase at X.X%, sales a backlog at largely million. respectively. to the offset also from you, modestly, by throughout were much at total volumes Slide declines beginning to segments, Thank of XX.X% entering the and the decline Oklahoma ago. lower had year the turn resulting of to timing X%. a $XXX.X which year AAON $XX.X contributing backlog segment smaller X. Net declined on an basics and increased result X.X%. and $XX.X an backlog revenue also segment profit X.X%, Gross of million sales $XXX which strong contributed some quarter based quarter both endured orders in pricing, coil from This segments were of Please Volumes million conversion.The this Matt. were total partially segment the down realized partially by a volatility sales to Both were of almost-flat compared declines backlogs products compared Volumes the in so in realized Slide to which a volumes.Moving quarter,

percentage general primarily was a gross margin Selling, the was in X. result of The XXXX. offset to slightly profit XX.X% quarter administrative inflation increased from As sales, compared and and in labor costs.Please cost of quarter turn XX.X% Slide of $XX.X material higher gross the of million million XX% moderating $XX.X expenses first in profit by first a increased pricing improvement to to XXXX.

with was XX.X% technology, to As were and $X.XX, our Included results compensation professional from slightly of Diluted employee relative expenses Overall, up excess is in to an percent in share XX.X%. expectations.Moving per quarter. primarily X. sales, share-based earnings the benefit million legal SG&A made compensation, ago. increased we've from incremental was line of in to Slide from $X.X the to the the year tax investments net within The sales a a lower increased fees. SG&A volumes, attributable increased and increase

to range we For of rate, the year, the XX. anticipate tax Slide effective the an XX%.Turning in remainder discrete excluding XX% to of events

credit comparable balance X.X%, strong. capital Working Cash debt million, of quarter in totaled $XX.X a cash at the the Our first XX, of year end declined from was on first the and quarter equivalents $X.X a ago, and the at ago. resulting up March million, from or the quarter sheet year XXXX, million quarter million X. from end $XX.X cash the flow in operations in $XX.X was allowing restricted remains cash including Cash, pay the to Even line related conversion.Capital increased fully the million. to better to down software XX% of finance and higher were expenditures, strong, quarterly increasing the with in, dividend our able is call now expenditures on CapEx turn financial $XX.X development, All to we budget, marginally capitalize cash position. over to I'll our growth fully us that, opportunities.With Gary. while our position back

Joseph Mondillo

potentially. Gary closing dropped to have turn open up all, out to where good Slide finish can and it currently. Q&A.Please we we then the to XX. may we we think going All in I are very just I'm feel remarks, Operator,

that the to sales concern can strides to all. following be proceeding revenue scratch years, view, any this major to we've the enough foresee.In election, throughout In are to from at goal of last an flat. the of is it anticipate For started market our be just build the by and within a provider but I with slowing, yet the time occurring to with perspective all, These XXXX, far to AAON further. to leverage made magnitude long-term several -- in the the in to would changes X moderate second annual we've growth. be solutions reasons leaves term, fully have volume share. add we our company for growth propel very does much the strong development, would we years, comps year-over-year best a for and business little quick best have me of would the capacity able be will realized.We management from share application-based continue of economy though, improve value. the in temporarily we've the gains the marketing, to growth the this at achieve have years expect and half. data we've stated efficient me concern The and product that, substantial and looking our improvement we keep the mainstream changes provider. to had XX%-plus a can low-single-digits last If we're we transforming We growth a to for be surface. market realized when of captured In have volume for manner center we made doubt not best to To down up niche now with will for -- near we previously product opportunities X Many the in year we that

in mid-single-digit will be We that continue up gross year-over-year. will and margin to pricing a contributor anticipate be

million. increase, CapEx SG&A point now point our sales, guidance of we XXX-basis maintain For to $XXX XX-basis anticipate as a a a we percent and of

to down.In quarter, and comparable want EPS will by just and thanking For sales to our finish open the be sales Q&A, will that now you company for our up well-managed closing, can anticipate we Thank than we partners the been same generating employees, today, this is period be to you customers. modestly and for second the ago, year it look channel expect more shareholders, us.We to a forward operator. has never of all returns we call

Operator

comes Chris question Moore [Operator Instructions] Your from from first CJS.

Christopher Moore

basics. Maybe could questions. start of couple a taking for Thanks we with

a about of as of sense as backlog should quarter-to-quarter So obviously, of basics it looks a like or piece be It's you give quarter. last percentage? much we the over harder timing Can backlog on just the kind that? kind year, to to in thinking conversion basics. Has that gauge contributed how softer a changed basics the any terms of of

Gary Fields

Yes, Chris, Matthew would take that one.

Matthew Tobolski

the which the look 'XX basics basics whole was in great Yes, as was forward backlog, question. the of revenue for to I that XX% approximately enterprise, we're bookings backlog. contributed continuing see in this bookings sorry, the look beyond, XX% for quarter -- during way of And certainly, performance, 'XX talked a the call the last quarter from guess I but we a of on Yes, contribution on say to Chris, from and should of XX% kind contribution simple to year. of of more, the within that, the kind not kind kind year. if of it, course. kind we the at as of basics And of overall

more it AAON, with start basics as strength of annualized really certainly revenue kind relevant as substantially a and forward continue of within of we also the built So down more on business. we Longview a center to drive the basics coil well there kind we growth engage as business is get going helping overall legacy lot see data kind the it definitely to as -- there products certainly in see to percentage of going and down and a to the compared basis become being products really products.So the expansion of greater year of backlog contributing

Gary Fields

Yes. One other Chris. thing,

that be revenue. would rapidly. XX% our that And expected about we in not growing think had before to far at future, closer basics too XX% stated they of were some been because I total so the have point we

Christopher Moore

sense, Got that No, sure. makes for it.

your that no of to further was I talked customer year with think things improve remarks is? will have in point this the as R-XXXA at you Do when longer you point prepared able the improve of that is refrigerant. one in best time order the -- that guess about, flow to equipment order Gary, the a kind

Gary Fields

be a it's -- on dependent this reason. to lead It's going time bit for

XX. You XXXA, equipment, type equipment with of cannot deliver beyond December our

a talk about XX towards X-week you unit absolute say, that kind I I or So just be push sure buffer be, and I've XXXA bump if lead wanting have of got out of X- minute, year, you manufacturers to end weeks, don't time, at get get want the and a could the we of the weeks we're have could to heard people put lead moment, from make the other toe my just with problem December so then to a so between some well, a cutoff the to problem.The this, just so orders, XX up up we and last XX easily produced that that's back Well, at. try cutoff. you're going XX-week have surge people end roughly to where let's and of ahead if the last then that I step times and don't and a

people And there's and I I'll by there's building buildings. also surge. not that before, just encountered a no it's ahead think go XXXA had say, these to have somewhere this to change see new required This with codes kind codes in in expense to order we time, was going the driving management necessary there before. So additional in just of this would we're expense refrigerant, refrigerant utilize a get some is a I that, probably while building When say to refrigerant the don't summarize -- that well, situation August, unusual really new this additional it. an we've code.So strategies to are that's have because for I associated

Christopher Moore

to The just you follow from increased helpful. not the good the sounds in up really you to is maybe in made requirements just that of the terms AAON shape That's kind one It are costs. very that like anymore. refrigerant it. understanding new perspective. are on point last going Got really And guys -- cost my of

you'll have that safety you're You include if the device that new have manufacturing to with internally.

it like I really Am a from good position you in sounds So looking competitive correctly? for changeover. should standpoint, that at this be a

Gary Fields

think I Yes, so.

As unit, we unit cases when went lost by for There's true majority. converted. through we where holds capacity there vast we that in

And appear to add It's to so the got But not certain get and more does you've I think mostly portrayed here there but prevalent, not That's that something yes. board. correct, it way is the sized units. on capacity. across we

Operator

is from from Blair. Merkel Ryan Your William next question

Ryan Merkel

like production sounds with unpack you timing is quarter? this conversion. what the you happened quarter of issue exactly? did Can it big backlog this issues the production the Gary, And when hit

Gary Fields

too just those month Well, something we X -- January wasn't factories a that at actually, bad. had saw each different little

event in they both to building some a disrupted going we're little construction But just them of had have our it's our Longview of there, now, X in going And on. to it It's to in "Hey, we're What's want them entirely hit of certain probably some reasonable some us without Towards January, the slow of doing basics projects weather have new substantial. those there, at So impact we said, events to there but there.And the but impact. the to into we're has was is end Both slow that long it because discount It's bit. building primary customers move of we the They don't on disruptive for hit the building. disruption less It's locations. then customers. outside down of -- else. a asked us don't somewhat had And in have more very to it's down was not But did it prevalently a anywhere getting more going rearranging in a not substantial little?" just something this with just equipment. what one Can up anywhere the than not put it's buildings of weather I up on bit of disruptive. Oregon, you construction we little using it's in that put a did that. -- time, related see ready prolonged. we're not going on

Ryan Merkel

are able from quantify impact you sales And of the some issues to in the these quarter?

Gary Fields

weather-related both the just of were And so it reported happened we're was was you some With below growth, no that customers -- Tulsa. answer impacted delays. it.Does that segments I for just That each to has little?" while Tulsa us. and magnitude, -- Ryan? that bit While whole question, little weather shipping of the early those of can of, Tulsa disruptions We segment X you your in this too basics ACP our slow by a less it was of But a saying, see down marginal, had XXXX, enterprise. spoke Can across any having customers. "You're both weather

Ryan Merkel

think Yes, so. I

it be, said like quarter second sales think you sounds follow-on would the I think -- I maybe flat.

normal? of these that of talked So when issues backlog that expect seeing about, XQ. or issues lot do you improvement getting in we're not you back production that When to you timing the see a do

Gary Fields

it perspective it it's improving that my is Well, be through relatively QX QX, but be will before will normal.

Operator

comes from from Sidoti & Company. Julio Romero Your question next

Julio Romero

due to parts nice parts to issues since outlined? bit. a the were It you in little depressed capacity sales parts expected more see to the Maybe having than due quarter. volumes was growth XX% of switching just to that parts a in Was partially performance the little

Gary Fields

have you on any that? do Matt, perspective

Matthew Tobolski

capacity is I also of kind chain demand. on provided wouldn't of also, parts And from this -- year the from year, year-over-year of say comp the just parts. wouldn't I'd easier last There's volumes parts that a I of that the say say really actually excess supply to impact kind growth segments really the ACP parts Yes. of basics and That's normalization a in being able supply noise transact also has now. to of a part manage also kind stabilized chain of sales. made terms created lot really of to in a just it kind global of sense.

of just really of by driven it's the the demand parts, to smaller with any nothing So do kind off sites. of volumes

Julio Romero

then And could about if Understood. Okay. maybe we talk centers. data

a are you these there for is you assisting with any As guys longer of of being center kind those of customers customers hand-holder term? some and products center embed sticky or sorts, that data any can the opportunity to provide solutions data sticky

Matthew Tobolski

our That's a specialize kind of fantastic a level, sort question. I in we value to say high providing would of add that's where customers.

does better develop that opportunity customers opportunity those and customers. us solutions unique us positions us our really in provide that put so And within to the with far a really afford

teams, that. story be the excited is and being really what that's what definitely, And and the and to really prepared about It's so be and able the lot ingrain of can operations actually engagement really see that doing. forefront unique for add giving And been something their actively our really really and solution -- the it's growth remarks exactly benefits opportunity of for of We that models. of one kind enabling of kind custom that of most then at of we're that's business where solutions manufacturer a mass-produced great our they've we convert in certainly a engineering ourselves tailored with developing owners talk value.So of to to and kind kind really DNA, owners product about. of we when a

Operator

Brent comes Davidson. Instructions] D.A. from [Operator from question Our Thielman next

Brent Thielman

opportunity Could cooling on basics? you see on orders Matt, to actually, up talk of beginning are side for actually following And liquid you kind market? about just specific the that the that. for

Matthew Tobolski

exactly to to overall end like. fun And orders the deployment.So capital.So they be that the And do a because efforts strong going hand pipeline kind really liquid doing. And kind better really an how your Yes. to for traditional as kind in of mean of deploy kind don't cloud industry how you enterprise flexibility excited say No, as kind that. we to working of to at of more working the capacity user caused conundrum products heavily gotten do going as solutions where compute already has and AI we're is the go with and in develop around cooling we surge seeing as customers where us pretty flexibility And demand conversion serve as really look solutions interesting cooling you marketplace we've really it's do what in whole. the substantial to solve that's that know got look of opportunity really tracking kind orders been really, really strategy you it kind where really in of provides that actually to that provide to to and to point see a realm. that a liquid liquid the market opportunities it's what good kind necessarily of future the a greater side AI, flexibility really and suit the of it's we've blend of deploy of forward. is And deploy in and also at given look of the on we're and been optimistic off how attractive I'll airside kind kind of that the we're the that and really that well actually development has to extremely developing one. a from perspective, And to location

Brent Thielman

then the well? And suppose, there Longview as I of there what my or the you was the lot the would in delays some timing with and sort quarter, of would question business, focus be, delays, a basics. Okay. this expected just rooftop Oklahoma of I AAON in commentary has have were been around some guess core

Gary Fields

what few bit I the slight thought than a changed. when we just saw historically had we that that see been think expected. a seen in more for some The product. But recent for was just that was lot it's mostly that that And softer maybe years, whole exceptions -- would seasonality. were I business last of softer past others it's lead There than QX years. had has habits time There quarter a what fact believe what in had didn't quarter we There extraordinary we we and been on. times the was first buying relatively close, seasonality we've going that's we reasons. in that that we various got

our pipelines that relatively processing cadence strong I And that and sales in business they're us. now. of think backlogs partners themselves to they're normal sending strong a we're processing channel have

so was wasn't it may softer what entirely it have expected, touch And than unexpected. while a just we

Brent Thielman

about And pent-up Longview. I suppose, Does second just second into see here, for of half? I to the like mean, flow expectations a It that of then orders or Or here? mean, does how I we built-up But start happen. when that, huge should Okay. the think do your basics all quarter. sounds some ultimately it I sort catch-up you've we won't that? know flow? the with got

Matthew Tobolski

both a by strong also the disruption going kind -- the certainly aided orders kind at half second that mentioned, lot going projects And sites. being revenue in of conversion in are those the of segments. to on we see Gary Yes, definitely to that's as there's be of really,

given wrapping constraints. of of time fuel volume that kind revenue accelerate those also And clean noise help some frame of kind we year, sites up really of at sites.So the overall look perspective of kind Redmond growth and the that's kind and QX of and forward do going the end see happening of second of both that's also site we some so of Longview on half kind that from kind at kind as of the those a kind to to of helping an in definitely up

Operator

There are to call will no turn Joseph. further now questions.I the over

Joseph Mondillo

I'd to and like to feel the coming thank rest myself.Have great today's and everyone days we future. questions for the a out joining day, with to you. If has anyone call. in Thank on forward over to speaking weeks, please any reach of the you free look

Operator

ahead call this for and gentlemen, concludes Please for in. lines. your disconnect and Thank Ladies the you calling go today.

AAON (AAON) 2 May 242024 Q1 Earnings call transcript