Financial Data and Key Metrics Changes - The company achieved 11% organic revenue growth, 130 basis points of adjusted EBITDA margin expansion, and 26% adjusted EPS growth in Q1 2025 [6][13][20] - Bookings increased by 4%, with a book-to-bill ratio of 113% for the enterprise and 100% or more across all segments [6][10] - The backlog increased by approximately $500 million from year-end 2024, including about $400 million in the Americas commercial HVAC business [6][10] Business Line Data and Key Metrics Changes - In the Americas segment, commercial HVAC bookings set a new quarterly record, with mid-teens growth in equipment and low-teens growth in services [9][10] - Residential bookings were up mid-teens, and revenues increased by high-teens [10] - Transport refrigeration bookings were down low single digits, but revenues were up mid single digits, outperforming a market decline of around 25% [10] - In the EMEA segment, commercial HVAC bookings were up mid-teens, with revenues up mid single digits [10] - In Asia Pacific, bookings and revenues in the rest of Asia were strong, up double digits and low 20s respectively, while in China, bookings and revenues were down low 30s and high 20s respectively [11] Market Data and Key Metrics Changes - The Americas commercial HVAC market showed broad-based strength across various verticals, including data centers, healthcare, and education [30][56] - The EMEA transport markets are expected to decline low single digits in 2025, while the Asia market outlook remains flat overall [19][19] Company Strategy and Development Direction - The company focuses on a purpose-driven strategy that emphasizes innovation for a sustainable world, aiming to deliver differentiated shareholder value [4][5] - The direct sales strategy allows the company to capture more market opportunities and consistently outperform end markets [7] - The company is targeting total Americas commercial HVAC three-year stacked revenue growth of approximately 50% for 2025 [16] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in delivering results towards the higher end of full-year revenue and EPS guidance ranges [8][20] - The company anticipates modest cost inflation but is well-prepared to manage it while minimizing customer impact [8][21] - The outlook for residential markets is expected to return to a GDP-plus framework in 2025, with no anticipated dip in volume due to pre-buy concerns [17][41] Other Important Information - The company deployed approximately $775 million through its balanced capital allocation strategy in Q1 2025, including $210 million to dividends and $550 million to share repurchases [24] - The Board of Directors approved a 12% dividend raise effective with the first quarter payment, with dividends having grown nearly 80% since the company's inception [24] Q&A Session Summary Question: Changes in commercial HVAC markets and demand - Management noted strong order rates in commercial HVAC, with broad-based strength across verticals such as data centers and healthcare, and a robust pipeline [30][31] Question: Pricing actions to offset tariff headwinds - Management explained that they are implementing price increases and surcharges to offset estimated tariff costs of $250 million to $275 million, while remaining flexible in pricing strategies [35][36] Question: Demand concentration in specific verticals - Management confirmed that growth is broad-based across 14 verticals, with no significant concentration in any one area [56] Question: European margins and investment cycle - Management indicated that significant reinvestment is ongoing in Europe, with strong order rates in commercial HVAC, and they expect margins to bounce back [92][93] Question: Impact of tariffs on pricing and guidance - Management clarified that tariff costs are not currently embedded in revenue guidance, and they will adjust guidance as more clarity on the tariff landscape emerges [112][114]

Financial Performance - Organic revenue increased by 11% in Q1 2025[9, 16], driven by strong volume growth, positive price realization, and productivity[16] - Adjusted EPS increased by 26% in Q1 2025[9, 16], reaching $245 compared to $194 in Q1 2024[16] - Adjusted EBITDA margin increased by 130 basis points in Q1 2025[9, 16], and adjusted operating margin increased by 100 basis points[16] Bookings and Backlog - The book-to-bill ratio was 113% in Q1 2025[9, 10], with organic bookings up by 4%[10] - The ending backlog reached $73 billion, up approximately $500 million or 8% from year-end 2024[9, 10] - Americas CHVAC experienced record quarterly bookings, with a book-to-bill ratio of 115% and backlog up approximately $400 million from year-end 2024[10] Segment Results - Americas revenue increased by 13% organically[18] - EMEA revenue increased by 6% organically[18] - Asia Pacific revenue decreased by 3% organically[18] Guidance - The company expects organic revenue growth of 7% to 8% for FY 2025[9, 23] - The company expects adjusted EPS of $1270 to $1290 for FY 2025[9, 23] - The company anticipates approximately 8% organic revenue growth for Q2 2025, with adjusted EPS of approximately $375[23, 39] Capital Deployment - Approximately $775 million in capital was deployed YTD in April 2025, including approximately $210 million in dividends and approximately $550 million in share repurchases[31] - The company targets approximately $25 billion to $30 billion in total capital deployed for FY 2025[30, 31], including approximately $800 million in dividends and $150 million in debt retirement[31]

Financial Data and Key Metrics Changes - Net sales decreased by 2.9% to $297.7 million from $306.6 million, primarily driven by a 16.1% decline in the AAON Oklahoma segment, partially offset by a 129.9% growth in the AAON Coil Products segment [23][24] - Gross profit decreased by 30.5% to $77.6 million, with gross profit margin dropping to 26.1% from 36.4% in 2023, reflecting lower volumes and fixed cost deleveraging [24] - Diluted earnings per share fell by 46.4% to $0.30 from $0.56, influenced by a large excess tax benefit related to stock-based compensation [26] Business Line Data and Key Metrics Changes - The Basics brand saw a significant year, with net sales up 35.1% and data center equipment sales up approximately 85%, leading to a total backlog increase of 70% [15][18] - The AAON brand faced challenges, with sales down modestly in the low single digits, but bookings were up in the mid-teens, resulting in a backlog increase of approximately 20% [17][18] Market Data and Key Metrics Changes - Bookings in the fourth quarter were up approximately 62%, with year-end backlog reaching $867.1 million, driven by data center equipment bookings, including a large $200 million-plus order [18][19] - The AAON Oklahoma segment experienced a slowdown due to the transition to new refrigerants, impacting production and sales volumes [20][30] Company Strategy and Development Direction - The company aims to be an industry leader in innovation and customization, focusing on engineering capabilities and customized solutions [42][43] - The strategic priorities include driving sustainable organic growth, with expectations for the data center equipment business to grow to over $1 billion within a few years [47][48] - The company is reorganizing to efficiently manage growth and capacity expansion, with significant investments in new manufacturing facilities [50] Management's Comments on Operating Environment and Future Outlook - Management noted that 2024 was a year of challenges but also highlighted strong fundamentals for both AAON and Basics brands, anticipating a return to robust growth [52][54] - The outlook for 2025 includes sales growth in the mid to high teens, with expectations for gross margins similar to 2024 [57][58] Other Important Information - Capital expenditures in the fourth quarter were $99.3 million, up nearly fourfold from the previous year, primarily for the new Memphis facility [28] - The company plans to ramp up production in the Memphis facility, with expectations for significant contributions to financials by the end of 2025 [102] Q&A Session Summary Question: Outlook for Oklahoma sales in Q1 - Management indicated that flat sales are expected due to inventory of R410A affecting momentum, with a transition to R454B impacting the run rate [62][64] Question: Reasons for Basics sales decline - Management clarified that the decline is due to capacity limitations at the Redmond facility, despite strong demand and backlog for Basics branded products [66][68] Question: Growth expectations for 2025 - Management explained that while strong growth is anticipated in the data center segment, caution is warranted due to uncertainties in the Oklahoma segment [71][75] Question: Data center construction outlook - Management reported that the data center market remains strong, with capital expenditures increasing and a positive outlook for investments [82] Question: Pricing strategy for R454B - Management stated that they will monitor bookings before implementing any price increases related to R454B, focusing on strengthening demand first [126][130] Question: Capacity and efficiency at Longview and Basics - Management acknowledged inefficiencies during ramp-up phases but expects sequential improvement in margins throughout 2025 as production stabilizes [104][137]