AAON(US:AAON)2020-05-10 01:16Financial Data and Key Metrics Changes - Net sales increased by 20.8% to $137.5 million from $113.8 million year-over-year, primarily due to increased sheet metal production [6] - Gross profit rose by 68.9% to $42.9 million, with gross profit as a percentage of sales increasing to 31.2% from 22.3% [6] - Income from operations surged by 142.3% to $27.8 million, representing 20.2% of sales, compared to 10.1% in the previous year [7] - Net income increased to $21.9 million or 15.9% of sales, up from $8.8 million or 7.7% [7] - Diluted earnings per share rose by 141.2% to $0.41 from $0.17 [7] Business Line Data and Key Metrics Changes - Water-source heat pump sales were lower in Q1 compared to previous quarters due to growing pains and component issues, but bookings strengthened in April [10][12] - The company has been working on improving production efficiency and has added new machines to enhance output [21][22] Market Data and Key Metrics Changes - The healthcare market remains strong, with a notable increase in demand for temporary facilities due to the coronavirus [10][20] - The hospitality sector has been significantly impacted, with many projects on hold [17] - K-12 education market activity has been neutral to increasing, with some delays in project timelines [18] Company Strategy and Development Direction - The company aims to enhance its production capacity and reduce lead times, with a goal of achieving an eight-week lead time [22][54] - The Norman Asbjornson Innovation Center is being utilized more effectively to accelerate product development [14][15] - The company is focusing on hiring experienced personnel in the water-source heat pump segment to strengthen its strategic plan [12][13] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate the challenges posed by the coronavirus, noting that most projects have been delayed rather than canceled [16][19] - The company anticipates a stable order intake moving forward, with expectations that the market will recover as states reopen [44][45] - Management believes that the company is well-positioned for future growth, despite potential challenges from the ongoing pandemic [34][36] Other Important Information - The company reported a working capital balance of $132.8 million and unrestricted cash of $35.7 million [9] - Capital expenditures for the year are expected to be approximately $73.2 million, with stock repurchases totaling $5.1 million in Q1 [9] Q&A Session Summary Question: How does the company handle deferred orders? - Deferred orders were not in the backlog and were pending orders in the sales channel, with one small order canceled but quickly replaced [38][39] Question: What is the timing for new construction orders? - The timing varies, but typically orders are received around the time construction begins, with a process that can take 90 days from bid to order [41][42] Question: How does the company view its order intake in April? - Order intake in April is slightly below normal but improving as states reopen, with paperwork running behind schedule [44][45] Question: What is the expected contribution from hospital-related orders? - Traditionally, around 9% of revenue comes from hospitals, with specific projects contributing approximately $4 million [46][49] Question: What are the expectations for gross margins moving forward? - The company aims to maintain gross margins around 30%, balancing efficiency improvements with the need for additional staff for future growth [61][62]