• Net Sales: Increased 22.9% to $322.1 million from $262.1 million in Q1 2024.
• Basics Branded Equipment Sales: Grew 374.8% year-over-year.
• AAON Branded Equipment Sales: Declined 19.1% year-over-year.
• Gross Profit: Decreased 6.4% to $86.4 million; gross margin was 26.8% compared to 35.2% in Q1 2024.
• SG&A Expenses: Increased 13.3% to $51.3 million; as a percent of sales, decreased to 15.9% from 17.3%.
• Diluted Earnings Per Share: $0.35, down 23.9% from a year ago; adjusted earnings were $0.37, down 20%.
• Backlog: Reached a record level of $1 billion, up 83.9% year-over-year.
• Cash Equivalents and Restricted Cash: Totaled $2.4 million as of March 31, 2025.
• Debt: $252.4 million at the end of the quarter.
• Leverage Ratio: 0.95.
• Cash Flow from Operations: Used $9.2 million year-to-date compared to $92.4 million provided in the prior year.
• Capital Expenditures: Increased 30.2% to $50.4 million; anticipated to be $220 million for 2025.

• Warning! GuruFocus has detected 4 Warning Signs with AAON.

Release Date: May 01, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• AAON Inc (NASDAQ:AAON) reported a 22.9% year-over-year increase in net sales, driven by a significant 374.8% growth in Basics branded equipment sales.
• The company's total backlog reached a record level of $1 billion, up 83.9% year-over-year, indicating strong future demand.
• Operational efficiency improvements at AAON's Oregon and Texas facilities contributed to improved segment margins.
• AAON Inc (NASDAQ:AAON) is seeing strong demand for its heat pump configured rooftop units, with plans to expand this product line further.
• The company is making progress with its national account strategy, which is expected to have a meaningful impact on growth, particularly with its Alpha Class air source heat pumps.

Negative Points

• Sales of AAON branded equipment declined by 19.1% year-over-year, primarily due to weak bookings and supply chain issues related to new refrigerant components.
• Total gross margin contracted by 840 basis points compared to the same quarter last year, reflecting lower production volumes and operating leverage effects.
• The AAON Oklahoma segment experienced a significant gross margin decline of 1,380 basis points year-over-year.
• Diluted earnings per share decreased by 23.9% from the previous year, reflecting lower production volumes and profits of AAON branded equipment.
• The macroeconomic environment remains uncertain, creating potential challenges for the second half of the year, particularly in terms of bookings and production.

Q & A Highlights

Q: What are you seeing in terms of K-12 public bid data and AAON's pricing relative to the competition? A: Matthew Tobolski, President and COO, noted that feedback from sales channels and bid activity indicates that AAON's price premium has contracted, improving competitiveness. While not at parity, the price premium has closed by a percent or two, aiding market share gains and enhancing the value proposition of AAON products.

Q: Can you provide insights into AAON's market share with national accounts and the impact of heat pump technology? A: Tobolski explained that while AAON has some national accounts, they are mostly smaller scale. However, there is noticeable acceleration in national account activity, driven by the Alpha Class heat pump solution. This product offers flexibility for both cold and warm climates, and AAON expects significant impact from national accounts, particularly in 2026.

Q: How did the core rooftop business perform, and did you see a surge in orders before the surcharge implementation? A: Tobolski stated that the softness and pushouts from Q4 are largely behind, with strong bookings continuing in Q1. While there was some order activity ahead of the surcharge, AAON capped orders to prevent overwhelming operations. Post-surcharge, order cadence remains strong, indicating competitive pricing and market share gains.

Q: Can you clarify the Q2 guidance, especially regarding sales and margins? A: Tobolski reaffirmed the full-year guidance, noting that Q2 will see improved operating income despite a slower start due to lingering supply chain issues. Oklahoma segment margins are expected to recover, but higher interest expenses and a normalized tax rate will impact net income.

Q: What is the outlook for data center demand, and how does it affect AAON's visibility? A: Tobolski highlighted strong visibility into the data center pipeline, with projections extending three to seven years. Despite industry noise about cancellations, AAON's order book and customer engagement remain robust, providing confidence in continued growth through 2026.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.