AAON(US:AAON)2023-05-07 22:57Financial Data and Key Metrics Changes - Net sales increased by 45.5% to $266 million from $182.8 million, driven by organic volume growth of 23.5% and pricing contributing 22% [10] - Gross profit rose by 67.5% to $77.2 million, with a gross profit margin of 29% compared to 25.2% in Q1 2022 [10] - Income from operations increased by 92.1% to $44.2 million, with an operating margin expanding to 16.6% from 12.6% [11] - Diluted earnings per share increased by 103% to $0.67 from $0.33 [12] Business Line Data and Key Metrics Changes - Parts sales grew by 38.5% in the quarter, with a two-year stack increase of 88.6%, although it declined to 5.3% of total sales due to robust equipment sales growth [20] - The backlog continued to grow, marking the seventh consecutive quarter of record backlog, up 30% year-over-year and 9.5% sequentially [17] Market Data and Key Metrics Changes - Demand remains strong across various markets, including data centers, semiconductor markets, K-12 education, healthcare, and manufacturing [19] - Construction spending is now well beyond pre-pandemic levels, with construction starts at their strongest levels in years [20] Company Strategy and Development Direction - The company is focused on increasing production capacity and productivity, with capital expenditures expected to be approximately $135 million, representing over 150% year-over-year growth [13][22] - The company opened a new exploration center to support sales channel partners, enhancing customer understanding of AAON products [15] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the operating environment, noting that bookings trends are still on the rise and channel partners remain positive [7][19] - Supply chain issues are gradually improving, but challenges still exist, impacting productivity and output [14][56] - The company anticipates sales and earnings will improve sequentially through at least Q3, with gross margin expected to improve throughout the year [21] Other Important Information - The company reported a strong balance sheet with unrestricted cash of $2.5 million and total debt of $83.7 million [12] - Working capital increased to $246.3 million, up from $203.5 million at the end of 2022 [12] Q&A Session Summary Question: Can you discuss the underlying demand for both business lines and the strongest end market drivers? - Management noted brisk demand in both business lines, with strong bookings and a backlog that continues to accumulate [25] Question: Can AAON sustain market share gains as industry lead times normalize? - Management believes that the value of AAON equipment will sustain customer loyalty, even as lead times normalize [28] Question: What is the outlook for pricing for the remainder of the year? - The company paused price increases in May, believing that current pricing will support continued gross margin improvement [33] Question: How has the operating environment changed since the last call? - Management indicated that supply chain issues have begun to ease, with expectations for continued improvement throughout 2023 [56]