AAON(AAON)2022-03-01 03:09Financial Data and Key Metrics Changes - Net sales increased by 16.8% to $136.3 million in Q4 2021 from $116.7 million in Q4 2020, primarily due to price increases contributing approximately 10% [6] - Gross profit decreased by 21.7% to $26.5 million, with gross profit as a percentage of sales dropping to 19.5% from 29.1% in the prior year, mainly due to supply chain issues and rising material costs [7] - Adjusted net income decreased by 35.5% to $9.5 million or 7% of sales, compared to $14.8 million or 12.7% of sales in the previous year [8] - For the full year 2021, net sales were up 3.9% to $534.5 million from $514.6 million in 2020, with adjusted net income decreasing by 17.1% to $62.1 million [9][13] Business Line Data and Key Metrics Changes - Selling, general and administrative (SG&A) expenses increased by 44.4% to $21.1 million in Q4 2021, with a year-over-year increase of 14.4% when excluding acquisition-related fees [8] - For the full year, SG&A expenses increased by 13.4% to $68.6 million, with SG&A as a percentage of sales increasing to 12% from 11.8% in 2020 [11][12] Market Data and Key Metrics Changes - Total backlog increased by 250% year-over-year and 43% quarter-over-quarter, with organic backlog up 201% year-over-year [28] - Organic bookings in Q4 were up 67% year-over-year, indicating strong demand [29] Company Strategy and Development Direction - The company aims for double-digit organic revenue growth over the next several years, supported by a strong backlog and strategic focus on high-performance energy-efficient HVAC equipment [21][30] - The acquisition of BasX Solutions is expected to generate accelerated growth and attractive returns for shareholders [37] Management's Comments on Operating Environment and Future Outlook - The management highlighted that the industry faced significant challenges over the past year, including rapid inflation and supply chain issues, but expressed optimism about emerging stronger from these challenges [22][27] - Management expects gross margins to recover to 30% or more by the second half of 2022, driven by price increases and improved production rates [53][76] Other Important Information - Capital expenditures for 2022 are expected to be $100.4 million, nearly double the previous year, with a focus on growth-related investments [17][49] - The company reported a working capital balance of $131.3 million and total debt of $40 million as of December 31, 2021 [14] Q&A Session Summary Question: What improvements have been seen in the supply chain? - Management noted significant improvements in supply chain conditions since October, allowing for increased production rates [58][60] Question: Will the company be able to run off the remaining lower-priced backlog in Q1? - Management indicated that a significant portion of production in January was based on higher-priced backlog, with expectations for continued improvement in Q1 [62][64] Question: How are organic order trends expected to change? - Management expressed confidence in strong organic order trends, with trailing 12-month bookings continuing to grow [70] Question: What is the expected impact of the recent price increase? - A 7% price increase was announced, expected to positively impact margins moving forward [71] Question: How has headcount changed in recent months? - Headcount increased by 11% in Oklahoma and 17% in Texas compared to the previous year, indicating growth in workforce [72][75] Question: What are the expectations for gross margins in 2022? - Management expects gross margins to strengthen throughout the year, aiming for a target of 30% or more by year-end [76]