AAON (AAON) 2025 Investor Day June 10, 2025 09:00 AM ET Speaker0 All right. Good morning, everyone. My name is Joe Mondillo, Director of Investor Relations for those who don't know. Thank Thank you for all for coming. I know this takes a lot of time out of your day, so we appreciate it. Those on the webcast, we also appreciate your participation. So the last time we did one of these was 2023. A lot of people asked when when when is the next time you think you'll do one of these things? And at the time, I re ...

Investor Day June 10, 2025 Forward-looking statements and other references Certain statements and information set forth in this presentation contains "forward-looking statements" and "forward-looking information" within the meaning of the Private Securities Litigation Reform Act of 1995. Except for statements of historical fact, certain information contained herein constitutes forward-looking statements which include management's assessment of future plans and operations and are based on current internal ex ...

TULSA, Okla., May 16, 2025 /PRNewswire/ -- AAON, Inc. (NASDAQ: AAON) ("AAON" or the "Company"), a leading provider of high-performance, energy-efficient HVAC solutions, today announced today that its Board of Directors has increased the size of the Board from eight to nine members and appointed Matt J. Tobolski, PhD, as the new director to fill the vacancy, effective May 13, 2025.Dr. Tobolski, 41, also serves as President and CEO of the Company, effective May 13, 2025. Dr. Tobolski succeeds Gary D. Fields, ...

Group 1 - The article highlights AAON, Inc. (NASDAQ: AAON) as a notable stock, particularly after its strong Q1 results that exceeded expectations [2] - The Insiders Forum, which focuses on small and mid-cap stocks with significant insider purchases, manages a portfolio aimed at outperforming the Russell 2000 benchmark [2] - The portfolio consists of 12-25 top stocks across various sectors that are attractively valued [2]

Company Overview - AAON Inc. (NASDAQ: AAON) has experienced significant stock price volatility, doubling in price within a few months before subsequently declining by 50% [1] Analyst Profile - Tomas Riba, an economist and former CFO, focuses on investing in high-quality companies that can achieve double-digit cash flow growth. He has been active in financial markets since 2007 and has a background in accounting and finance [2] Investment Strategy - The investment approach emphasizes identifying companies with strong competitive advantages, operating in growing industries, expanding margins, low debt levels, and management alignment [2]

Financial Data and Key Metrics Changes - Total net sales increased by 22.9% year over year to $322.1 million from $262.1 million in Q1 2024, driven by a 374.8% increase in Basics branded equipment sales [15][9] - Gross profit decreased by 6.4% to $86.4 million, with gross margin at 26.8% compared to 35.2% in Q1 2024 [17][18] - Diluted earnings per share was $0.35, down 23.9% from a year ago, while adjusted earnings were $0.37, down 20% [21][22] - Total backlog reached a record level of $1 billion, up 83.9% year over year and 18.4% quarter over quarter [12][29] Business Line Data and Key Metrics Changes - Sales of Basics branded equipment were up 374.8%, while Aon branded equipment sales declined by 19.1% [9][16] - Gross margin at the Basics segment increased by 350 basis points to 24%, while Aon Coil Products gross margin rose by 100 basis points to 34.6% [26] - Aon Oklahoma segment sales decreased by 23%, primarily due to weak bookings and supply chain issues related to new refrigerants [16][27] Market Data and Key Metrics Changes - Backlog of Aon branded equipment was $44 million, up 44.9% year over year and 23.4% quarter over quarter [29] - Backlog of Basics branded equipment was $623 million, up 122.7% year over year and 15.4% quarter over quarter [33] Company Strategy and Development Direction - The company focuses on three strategic pillars: leading in innovation, driving sustainable organic growth, and being a best-in-class operator [6][7] - The development of heat pumps and custom air solutions is expected to drive market share gains at profitable levels [8] - The company aims to increase production rates significantly in the second quarter, leveraging a strong backlog [12][30] Management's Comments on Operating Environment and Future Outlook - Management noted that while the macroeconomic environment remains uncertain, the sentiment across the sales channel is relatively upbeat [31] - The company anticipates production and profitability improvements in the second quarter, driven by a strong backlog and abating supply chain issues [31][34] - The full-year outlook remains unchanged, with expectations for mid to high teens sales growth and gross margins similar to 2024 [36] Other Important Information - The company plans to host an Investor Day on June 10 in New York City [37] - Capital expenditures for 2025 are anticipated to be approximately $220 million [24] Q&A Session Summary Question: What does K-12 public bid data indicate about industry pricing? - Management indicated that Aon's price premium has contracted, allowing for increased market share [44] Question: What is the current market share for national accounts? - National accounts are currently low in Aon's portfolio, but there is noticeable acceleration in activity and adoption of Aon's products [46][48] Question: How did the rooftop business perform in terms of orders? - Management noted that pushouts from the previous quarter have rebounded, and there is a traditional strengthening of orders [56][60] Question: What is the outlook for the Oklahoma business? - The full-year revenue guidance remains unchanged, with uncertainty primarily in Q4 due to macroeconomic factors [102][104] Question: How is the company positioned regarding tariffs? - Aon is better positioned than competitors due to vertical integration and reliance on US manufacturing, though some tariff impacts are expected [92][94]

Financial Data and Key Metrics Changes - Total net sales increased by 22.9% year over year to $322.1 million, up from $262.1 million in Q1 2024 [16][10] - Gross profit decreased by 6.4% to $86.4 million, with gross margin at 26.8% compared to 35.2% in Q1 2024 [18][12] - Diluted earnings per share was $0.35, down 23.9% from a year ago, while adjusted earnings were $0.37, down 20% [22][18] - Cash flow used in operations was $9.2 million compared to cash flows provided by operations of $92.4 million in the same period last year [23] Business Line Data and Key Metrics Changes - Sales of Basics branded equipment surged by 374.8%, driven by strong demand for airside and liquid cooling solutions for data centers [11][25] - Aon branded equipment sales declined by 19.1%, primarily due to weak bookings and production issues related to rooftop units [11][17] - Gross margin at the Aon Oklahoma segment decreased by 1380 basis points to 23.5%, while gross margins at the Basics and Aon Coil Products segments improved by 350 and 100 basis points, respectively [19][26] Market Data and Key Metrics Changes - Total backlog reached a record level of $1 billion, up 83.9% year over year and 18.4% quarter over quarter [13][29] - Backlog of Aon branded equipment increased by 44.9% year over year and 23.4% quarter over quarter, indicating strong demand [29][14] - Backlog of Basics branded equipment rose by 122.7% year over year and 15.4% quarter over quarter, driven by robust bookings [33][14] Company Strategy and Development Direction - The company focuses on three strategic pillars: leading in innovation and custom solutions, driving sustainable organic growth, and being a best-in-class operator [7][9] - The development of heat pumps and liquid cooling solutions is a key part of the company's strategy to drive market share gains [10][8] - The company aims to enhance operational efficiencies and expand production capacity, particularly in the Basics and Aon Coil Products segments [34][26] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the recovery of production volumes and profitability in the second quarter, despite ongoing macroeconomic uncertainties [31][31] - The sentiment across the sales channel remains upbeat, with expectations of continued market share gains [32][31] - Management anticipates full-year sales growth in the mid to high teens, with gross margins similar to those realized in 2024 [36][36] Other Important Information - The company plans to host an Investor Day on June 10 in New York City [38] - Capital expenditures for 2025 are expected to be approximately $220 million [24] Q&A Session Summary Question: What does K to 12 public bid data indicate about industry pricing? - Management noted that the Aon price premium has contracted, allowing for increased competitiveness and market share [46] Question: What is the current market share in national accounts? - Management indicated that while current market share is low, there is significant acceleration in national account activity, particularly with the Alpha Class product line [48] Question: How did the rooftop business perform in terms of orders? - Management confirmed that pushouts from the previous quarter have rebounded, and there is a traditional strengthening of orders [60] Question: What is the outlook for the Oklahoma business? - Management stated that the guidance remains unchanged, with uncertainty primarily in Q4 due to macroeconomic factors [100] Question: How is the company positioned regarding tariffs? - Management expressed confidence in their vertical integration and reliance on US partners, which mitigates tariff impacts compared to competitors [92] Question: What is the diversification of customers within the Basics branded products? - Management emphasized ongoing efforts to diversify the customer base and reduce reliance on any single customer [95]

Financial Performance - Net sales for Q1 2025 increased 22.9% to $322.1 million, up from $262.1 million in Q1 2024, driven by BASX and AAON Coil Products segments with growth of 138.9% and 287.8% respectively[3][6] - BASX-branded products net sales surged 374.8% year-over-year to $132.6 million, while AAON-branded products net sales declined 19.1% to $189.5 million[6] - Earnings per diluted share decreased 23.9% to $0.35 compared to $0.46 in Q1 2024[5][6] - Net income for Q1 2025 decreased to $29,292,000 from $39,016,000 in Q1 2024, representing a decline of approximately 25.0%[17] - Adjusted EBITDA for Q1 2025 was $56,698,000, down from $60,484,000 in Q1 2024, resulting in a decrease of about 6.0%[24] - Adjusted EBITDA margin for Q1 2025 was 17.6%, compared to 23.1% in Q1 2024, indicating a decline of approximately 5.5 percentage points[24] Backlog and Growth - Total backlog reached a record $1.0 billion, up 83.9% year-over-year, with AAON-branded backlog increasing 44.9% and BASX-branded backlog up 122.0%[3][7] - The COO expressed optimism about production volume increases and backlog conversion rates in the upcoming quarters despite macroeconomic uncertainties[7] Expenses and Profitability - Gross profit margin for Q1 2025 was 26.8%, down from 35.2% in Q1 2024, attributed to lower production volumes at the AAON Oklahoma segment[4][6] - SG&A expenses rose due to higher depreciation and technology-related consulting costs, impacting overall profitability[5][6] Cash and Assets - Cash and cash equivalents stood at $2.4 million with a revolving credit facility balance of $178.0 million as of March 31, 2025[7] - Total current assets increased to $571,744,000 as of March 31, 2025, up from $488,212,000 at the end of 2024, reflecting a growth of about 17.1%[15] - Total assets rose to $1,300,193,000 in Q1 2025, compared to $1,175,234,000 in Q4 2024, marking an increase of approximately 10.6%[15] - Cash, cash equivalents, and restricted cash at the end of Q1 2025 totaled $2,383,000, down from $28,367,000 at the end of Q1 2024, a decrease of about 91.6%[17] - Long-term debt increased to $236,417,000 in Q1 2025 from $138,891,000 in Q4 2024, reflecting a rise of approximately 70.3%[15] - The company reported a net cash used in operating activities of $9,214,000 for Q1 2025, a significant decrease from $92,370,000 provided in Q1 2024[17] - Accounts receivable increased to $164,977,000 in Q1 2025 from $147,434,000 in Q4 2024, representing a growth of about 11.9%[15] Capital Expenditures and Investments - The company plans to invest $220.0 million in 2025 for the new Memphis facility and improvements in existing operations[7] - The company incurred capital expenditures of $46,723,000 in Q1 2025, compared to $34,688,000 in Q1 2024, an increase of approximately 34.7%[17] Dividends - The company increased its dividend by 25.0% to $0.10 per share, reflecting confidence in future growth[7]

Q1 2025 Earnings Conference Call The Company's forward-looking statements involve significant risks and uncertainties (some of which are beyond the Company's control) and assumptions that could cause actual future results to differ materially from the Company's historical experience and its present expectations or projections. Important factors that could cause results to differ materially from those in the forward-looking statements include (1) the timing and extent of changes in raw materials and componen ...

Financial Performance - For the three months ended March 31, 2025, total revenue was $322.1 million, compared to $262.1 million for the same period in 2024, representing a 22.9% increase[35]. - Consolidated gross profit for the three months ended March 31, 2025, was $86.364 million, compared to $92.242 million for the same period in 2024[131]. - The net income for the three months ended March 31, 2025, was $29,292,000, a decrease of 25.0% from $39,016,000 in the same period of 2024[101]. - Basic earnings per share for the three months ended March 31, 2025, was $0.36, down from $0.48 in the same period of 2024, representing a decline of 25.0%[101]. Revenue and Sales - AAON Oklahoma reported external sales of $161.838 million for the three months ended March 31, 2025, down from $210.140 million in 2024[131]. - AAON Coil Products experienced a significant increase in external sales, reaching $94.023 million in 2025 compared to $24.247 million in 2024[131]. - BASX's external sales increased to $66.193 million in 2025 from $27.712 million in 2024[131]. Costs and Expenses - Costs incurred on uncompleted contracts for the three months ended March 31, 2025, were $157.1 million, up from $106.4 million in 2024, indicating a 47.5% increase[45]. - The profit-sharing bonus plan paid out $3,297,000 for the three months ended March 31, 2025, compared to $4,600,000 in the same period of 2024, indicating a decrease of approximately 28.4%[97]. - The total pre-tax compensation cost related to unvested stock options not yet recognized as of March 31, 2025, is $17.0 million, expected to be recognized over approximately 2.4 years[82]. Assets and Liabilities - Contract assets increased to $188.7 million as of March 31, 2025, from $135.4 million as of December 31, 2024, reflecting increased production and demand for BASX branded products[44]. - Accounts receivable as of March 31, 2025, is $166,103,000, reflecting a net total of $164,977,000 after an allowance for credit losses of $1,126,000[52]. - Inventories as of March 31, 2025, total $204,101,000, with a net total of $198,852,000 after accounting for an allowance for excess and obsolete inventories of $5,249,000[53]. - Total accrued liabilities as of March 31, 2025, amount to $97,041,000, a decrease from $99,347,000 as of December 31, 2024[62]. Taxation - The income tax provision for the three months ended March 31, 2025, was $3.2 million, compared to $7.8 million for the same period in 2024, reflecting a decrease of approximately 59%[70]. - The effective tax rate for the three months ended March 31, 2025, was 9.8%, down from 16.6% in the same period of 2024[71]. - The company recorded an excess tax benefit of $7.2 million for the three months ended March 31, 2025, compared to $4.4 million in the same period of 2024[71]. Debt and Financing - The company has a total of $74,436,000 in term loans as of March 31, 2025, with $16,000,000 classified as short-term[65]. - The available borrowings under the revolving credit facility as of March 31, 2025, is $21,365,000, after accounting for outstanding borrowings of $177,981,000[64]. - The company has an outstanding debt balance of $252.6 million as of March 31, 2025, with a potential annual income decrease of approximately $2.5 million for each 1% increase in interest rates[196]. Employee Compensation - The Company awarded annual merit raises resulting in a 4.0% increase to wages in March 2025, following a 3.3% increase in March 2024[29]. - The total share-based compensation expense for the three months ended March 31, 2025, was $4,021,000, compared to $3,957,000 for the same period in 2024, reflecting an increase of approximately 1.6%[89]. - At March 31, 2025, unrecognized compensation cost related to unvested restricted stock awards was approximately $8.7 million, expected to be recognized over approximately 2.3 years[84]. Future Commitments and Risks - The Company has lease agreements with expiration dates ranging from April 2025 to November 2033, with a weighted average remaining term of 6.4 years[46]. - The company is exposed to commodity price volatility and manages this risk through cancellable and non-cancellable contracts with suppliers for periods of six to 18 months[195]. - Labor market tightening poses challenges for hiring employees necessary for continued growth[197]. - The timing of new product introductions and market acceptance is critical for future performance[197]. Goodwill and Intangible Assets - Goodwill as of March 31, 2025, is expected to be tax deductible in future periods, representing the excess of consideration paid over the fair value of acquired businesses[32]. - Total intangible assets net value as of March 31, 2025, is $78,721,000, with an amortization expense of $2,075,000 for the three months ended March 31, 2025[55][56]. - The company has estimated future amortization expense for finite-lived intangible assets totaling $49,523,000[57].