AAON, Inc. Earnings Call: Mixed Results and Future Outlook

Aaon Inc ((AAON)) has held its Q1 earnings call. Read on for the main highlights of the call.

AAON, Inc. recently held its earnings call, reflecting a mixed performance for the company. While there were significant positives such as sales growth and a record backlog driven by BASX-branded equipment, challenges in the AAON-branded segment, including declining sales and supply chain issues, painted a cautious outlook. Despite operational efficiencies and new product introductions, increased SG&A expenses and lower EPS suggest financial strain.

Record Sales Growth

AAON, Inc. reported an impressive 22.9% year-over-year increase in total net sales, reaching $322.1 million. This growth was primarily fueled by a staggering 374.8% increase in sales of BASX-branded equipment, showcasing the strong market demand for these products.

Strong Backlog

The company achieved a record backlog of $1 billion, marking an 83.9% increase year-over-year and an 18.4% rise quarter-over-quarter. This robust backlog indicates strong future demand and potential revenue streams for AAON.

Operational Efficiency in BASX and AAON Coil Products

Operational efficiency improvements led to an expansion in gross margins by 350 basis points in the BASX segment and 100 basis points in the AAON Coil Products segment, highlighting the company’s efforts to optimize production processes.

Positive Booking Trends

Both AAON-branded and BASX-branded equipment bookings were strong, with the backlog of AAON-branded equipment increasing by 23.4% quarter-over-quarter, suggesting a positive trend in future sales.

Introduction of New Products

AAON introduced the next generation Alpha Class series heat pump, capable of operating down to negative 20 degrees Fahrenheit, meeting the DOE’s commercial heat pump challenge two years ahead of schedule, demonstrating the company’s innovation and commitment to product development.

Decline in AAON-branded Equipment Sales

Sales of AAON-branded equipment saw a decline of 19.1% year-over-year, primarily due to production constraints and weaker bookings in the fourth quarter, posing a challenge for the company.

Gross Margin Contraction

The total gross margin contracted by 840 basis points year-over-year, largely due to weak production volumes of AAON-branded rooftop units, impacting overall profitability.

Challenges with Refrigerant Transition

Supply chain issues related to the transition to the new R454B refrigerant affected production, leading to lower production volumes and presenting a significant operational challenge.

Increased SG&A Expenses

Selling, general, and administrative expenses rose by 13.3% to $51.3 million, contributing to the financial strain experienced by the company.

Lower Earnings Per Share

AAON reported a diluted earnings per share of $0.35, down 23.9% from the previous year, reflecting decreased production volumes and lower profits from AAON-branded equipment.

Forward-Looking Guidance

Looking ahead, AAON, Inc. maintained its full-year outlook, anticipating mid- to high-teens sales growth and capital expenditures of $220 million. Despite the challenges, the company aims to leverage its strong backlog and operational efficiencies to drive future growth.

In conclusion, AAON, Inc.’s earnings call highlighted a mixed performance with significant growth in BASX-branded equipment sales and a strong backlog, yet challenges remain in the AAON-branded segment. The company’s forward-looking guidance suggests a focus on sustaining growth while addressing operational hurdles.