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TULSA, Okla., June 17, 2024 /PRNewswire/ -- AAON, Inc. (NASDAQ:  AAON) ("AAON" or the "Company"), provided an update to the previously disclosed share repurchase programs authorized by our Board of Directors.  As of June 17, 2024, our repurchase activity under the programs is as follows:Effective Date Shares Repurchased Authorized and Repurchased $ Average Price Per Share $ Completion Date February 27, 2024 671,230 $50.0 million1 $74.49 June 4, 2024 June 4, 2024 682,334 $50.0 million2 $73.28 June 14, 202 ...

Core Viewpoint - AAON, Inc. has declared a quarterly cash dividend of $0.08 per share, amounting to $0.32 annually, payable on June 28, 2024, to stockholders of record as of June 7, 2024 [1] Company Overview - AAON, founded in 1988, is a leader in HVAC solutions for commercial and industrial indoor environments [2] - The company focuses on designing and manufacturing highly configurable equipment, enhancing efficiency, performance, and long-term value for customers [2] - AAON is headquartered in Tulsa, Oklahoma, featuring an innovation center and testing lab that supports continuous advancements in the industry [2]

Core Insights - AAON, Inc. is transitioning to the low Global Warming Potential refrigerant R-454B, aligning with upcoming regulations and reinforcing its leadership in sustainable HVAC solutions [1][2] - The company began accepting orders for R-454B units on January 1, 2024, ahead of the EPA's mandate, and is currently shipping these units to customers [1][3] - R-454B has a GWP of 466, representing a 78% reduction compared to R-410A, significantly reducing the environmental impact of refrigerants [1] Company Strategy - AAON aims to lead in engineering and manufacturing by staying ahead of regulatory changes and competitor capabilities while providing high performance and value [3] - The company will not increase prices for products using R-454B, ensuring economic accessibility for customers [3] - All AAON products will be available for configuration with R-454B by June 1, 2024, with normal lead times to avoid service disruptions [3] Safety Measures - Safety is prioritized in the design and manufacturing of R-454B units, with low burning velocity and stringent safety measures to mitigate risks associated with its mild flammability [2] - Units are equipped with refrigerant leak detection sensors for early leak detection and prompt intervention [2] Company Background - Founded in 1988, AAON is a leader in HVAC solutions for commercial and industrial environments, focusing on efficiency, performance, and long-term value [4]

Core Insights - AAON, Inc. emphasizes its commitment to sustainability through innovative HVAC solutions and aims to achieve long-term environmental goals [1][2] Sustainability Efforts - The company focuses on operational efficiency, research and development for industry innovation, and collaboration to sustain communities and natural resources [1] - AAON is dedicated to reducing scope 1 and 2 emissions, enhancing inclusion and diversity, and improving corporate governance [2] 2023 Sustainability Report Highlights - Introduction of AAON Alpha Class air-source heat pumps designed for higher efficiency and lower emissions [3] - Adoption of refrigerant R-454B with a Global Warming Potential of 466, replacing R-410A ahead of EPA mandates [3] - The Exploration Center, a net-zero facility, is recognized as one of the most sustainable buildings in Oklahoma [3] - Progress towards the goal of 80% of products being non-fossil fuel-consuming by 2030 [3] - Commitment to reducing GHG emissions by 10% by 2025 [3] - Approximately 36% of total energy consumption is currently derived from renewable sources [3] - Diversity metrics show 50% of the Board of Directors, 30% of Officers, and 66% of the total workforce are diverse [3] - Contributions of $1.2 million to nonprofit partners, serving over 100 nonprofits [3] Company Overview - Founded in 1988, AAON is a leader in HVAC solutions for commercial and industrial environments, focusing on efficiency and long-term value [4]

Financial Data and Key Metrics Changes - Net sales declined 1.4% to $262.1 million from $266 million, with volumes down 5.7% partially offset by a 4.3% contribution from pricing [19] - Gross profit increased 19.6% to $92.2 million, with gross profit margin improving to 35.2% from 29% in Q1 2023, driven by increased pricing and moderating material cost inflation [20] - Selling, general and administrative expenses rose 37.5% to $45.3 million, increasing as a percentage of sales to 17.3% from 12.4% due to lower volumes and increased employee compensation [20] - Diluted earnings per share was $0.46, slightly up from the previous year, aided by a net excess tax benefit of $4.4 million [21] - Cash flow from operations was $92.4 million, significantly up from $4.8 million in the same quarter last year [22] Business Line Data and Key Metrics Changes - The AAON coil products segment saw a total sales decline of 27.4%, while the basic segment experienced a 9.3% decline, primarily due to timing of backlog conversion [19] - The AAON Oklahoma segment reported a 4% increase in total sales, although volumes were down modestly due to a smaller backlog at the beginning of the quarter [19] Market Data and Key Metrics Changes - Total backlog increased for the second consecutive quarter, down only 6.9% year-over-year, indicating strong order trends across all segments [8] - The data center market is highlighted as a significant growth opportunity, with increased construction plans driven by semiconductor technology advancements and AI demand [13][12] Company Strategy and Development Direction - The company remains cautiously optimistic in the near term while maintaining a bullish long-term outlook, focusing on traditional markets and the data center sector [10] - Strategic positioning in pricing and product development is emphasized, particularly with advancements in fully electric heat pump technology [11] - The company is investing in capacity expansion, with projects underway to increase manufacturing square footage by approximately 15% [15] Management's Comments on Operating Environment and Future Outlook - Management acknowledges potential volatility in orders due to refrigerant transitions but expects a surge in orders as the cutoff date for R410A equipment approaches [10][33] - The company anticipates low single-digit volume declines for 2024, with expectations for improvement in the second half of the year [24] - Management expresses confidence in achieving long-term revenue growth targets of over 10% annually, driven by opportunities in the data center market [23] Other Important Information - The company has maintained a strong balance sheet with zero debt and cash equivalents totaling $28.4 million [22] - Capital expenditures increased by 33% to $38.7 million, reflecting ongoing investments in growth opportunities [22] Q&A Session Summary Question: What is the contribution of the basics segment to the backlog? - The basics segment contributed approximately 10% to overall revenue in 2023 but accounted for 20% of bookings, with expectations for increased relevance in future revenue [28][30] Question: When is the cutoff for ordering R410A refrigerant equipment? - The cutoff is expected around August, with a potential surge in orders as the deadline approaches [33] Question: What were the production issues this quarter? - Production issues were influenced by weather events and customer requests to slow down projects, particularly affecting the basics segment [37][38] Question: What is the outlook for the second quarter? - The second quarter is expected to be flat, with improvements anticipated in Q3 as backlog issues normalize [41] Question: How is the parts sales growth attributed? - Parts sales growth of 10% is attributed to increased demand and stabilization of the supply chain, rather than excess capacity from lower volumes in other segments [44] Question: What opportunities exist in the liquid cooling market? - The company is actively developing solutions for airside and liquid cooling, with substantial orders already in hand and optimistic prospects for future growth [50]

Q1 2024 Earnings Conference Call May 2, 2024 AAON Inc. 1 Forward-Looking Statements and Other References Certain statements and information set forth in this presentation contains “forward-looking statements” and “forward-looking information” within the meaning of the Private Securities Litigation Reform Act of 1995. Except for statements of historical fact, certain information contained herein constitutes forward-looking statements which include management’s assessment of future plans and operations and ar ...

Financial Performance - Net sales for Q1 2024 decreased by 1.4% to $262.1 million compared to $266.0 million in Q1 2023, driven by declines in AAON Coil Products and BASX segments[1] - Gross profit margin expanded to 35.2%, up from 29.0% in Q1 2023, primarily due to favorable pricing amid moderating cost inflation[2] - Earnings per diluted share for Q1 2024 was $0.46, a 4.5% increase from $0.44 in Q1 2023, benefiting from a $4.4 million excess tax benefit[3] - Net income for the three months ended March 31, 2024, was $39,016 thousand, an increase of 5.9% compared to $36,814 thousand for the same period in 2023[16] - EBITDA for the three months ended March 31, 2024, was $60,484 thousand, up 10.5% from $54,594 thousand in the same period last year[21] Cash Flow and Liquidity - Cash flow from operations was strong at $92.4 million, significantly up from $4.8 million in Q1 2023, indicating improved cash conversion[5] - The company had cash, cash equivalents, and restricted cash of $28.4 million as of March 31, 2024, with a zero balance on its revolving credit facility[5] - Cash and cash equivalents increased significantly to $28,367 thousand from $2,980 thousand, representing a substantial rise[16] - The company reported a net cash provided by operating activities of $92,370 thousand, a significant increase from $4,823 thousand in the same period last year[16] Backlog and Demand - The company finished Q1 2024 with a backlog of $558.4 million, up from $510.0 million in Q4 2023, but down 6.9% year-over-year from $599.9 million[4] - Bookings outpaced sales for the second consecutive quarter, indicating strong demand across all business segments[5] - The company anticipates improved results as production increases to meet growing backlog, particularly in the data center market[5] Expenses and Investments - SG&A expenses as a percentage of sales increased to 17.3% from 12.4% in Q1 2023, primarily due to higher professional fees and long-term investments[2] - Capital expenditures increased by 33.0% year-over-year to $38.7 million, reflecting ongoing investments in production capacity[5] - Capital expenditures for the three months ended March 31, 2024, were $34,688 thousand, compared to $28,935 thousand in the prior year[16] Asset and Liability Management - Total current assets decreased to $392,227 thousand from $408,954 thousand, a decline of approximately 4.1%[14] - Accounts receivable decreased to $109,662 thousand from $138,108 thousand, a reduction of approximately 20.6%[14] - Total liabilities decreased slightly to $168,143 thousand from $169,174 thousand, a decrease of about 0.6%[14] - Total stockholders' equity increased to $784,808 thousand from $735,224 thousand, reflecting a growth of approximately 6.7%[14] Tax Obligations - The company has recognized a new market tax credit obligation of $15,994 thousand, up from $12,194 thousand[14]

Revenue and Sales Performance - Total revenue for the three months ended March 31, 2024, was $262.1 million, compared to $266.0 million for the same period in 2023, reflecting a decrease of 1.5%[29] - Rooftop units generated $191.3 million in sales for the three months ended March 31, 2024, an increase from $180.0 million in the same period of 2023, representing a growth of 6.8%[29] - Sales to affiliates increased to $2,196,000 for the three months ended March 31, 2024, compared to $1,145,000 for the same period in 2023, representing an increase of 92.1%[96] - External sales for AAON Oklahoma reached $210,140,000 for the three months ended March 31, 2024, up from $202,002,000 in the same period of 2023, reflecting a growth of 4.3%[101] - AAON Coil Products reported external sales of $24,247,000 for the three months ended March 31, 2024, down from $33,412,000 in the same period of 2023, a decline of 27.4%[101] - BASX external sales were $27,712,000 for the three months ended March 31, 2024, compared to $30,539,000 in the same period of 2023, a decrease of 9.3%[101] - Total net sales for the company were $262,099,000 for the three months ended March 31, 2024, slightly down from $265,953,000 in the same period of 2023, a decrease of 1.1%[101] Financial Position and Liabilities - The company reported a lease liability of $14.9 million long-term as of March 31, 2024, compared to $10.2 million at the end of 2023, indicating a 46.1% increase[38] - The company entered into a lease agreement for an additional 157,550 square feet in January 2024, supporting operations and parts distribution[37] - The discount rates used for lease payment present value calculations range from 1.3% to 6.6% as of March 31, 2024[37] - The company had no amounts outstanding under its $200 million revolving credit facility as of March 31, 2024, compared to $38.3 million outstanding as of December 31, 2023[52] - The leverage ratio was 0.01 to 1.0 as of March 31, 2024, well below the maximum requirement of 3 to 1[53] - Total long-lived assets increased to $407,260,000 as of March 31, 2024, compared to $381,721,000 as of December 31, 2023, an increase of 6.7%[101] Income and Earnings - Net income for the three months ended March 31, 2024, was $39,016,000, an increase from $36,814,000 in the same period of 2023, representing a 5.9% growth[79] - Basic earnings per share for the three months ended March 31, 2024, was $0.48, compared to $0.46 for the same period in 2023, reflecting a 4.3% increase[79] - The company reported earnings per share of $82.50 for the three months ended March 31, 2024, compared to $58.83 for the same period in 2023[82] Expenses and Costs - Payments to representatives for the three months ended March 31, 2024, were $10.8 million, down from $13.3 million in the same period of 2023, a decrease of 18.8%[34] - Total net inventories decreased to $196,252 thousand as of March 31, 2024, compared to $213,532 thousand on December 31, 2023, a reduction of 8.1%[42] - Warranty accrual increased to $21,349 thousand as of March 31, 2024, compared to $16,209 thousand on March 31, 2023, an increase of 31.5%[48] - Interest paid decreased to $395 thousand for the three months ended March 31, 2024, down from $1,121 thousand for the same period in 2023, a decline of 64.7%[46] - Current income tax provision increased to $8,532 thousand for the three months ended March 31, 2024, compared to $5,435 thousand for the same period in 2023, an increase of 56.5%[55] Stock and Compensation - The total intrinsic value of options exercised during the three months ended March 31, 2024, was $14.2 million, compared to $16.7 million for the same period in 2023[62] - The cash received from options exercised during the three months ended March 31, 2024, was $9.8 million, down from $15.9 million in 2023[62] - The total pre-tax compensation cost related to unvested stock options not yet recognized as of March 31, 2024, is $14.7 million, expected to be recognized over approximately 2.3 years[62] - The fair value of unvested restricted stock awards as of March 31, 2024, is approximately $7.6 million, expected to be recognized over a weighted average period of 2.1 years[63] - The company granted 46,699 performance restricted stock units (PSUs) during the three months ended March 31, 2024, with a weighted average grant date fair value of $106.24[67] - For the three months ended March 31, 2024, the total share-based compensation expense was $17,861,000, compared to $10,820,000 for the same period in 2023, reflecting a 65.5% increase[72] - The company’s share-based options compensation expense for the three months ended March 31, 2024, was $2,207,000, compared to $2,065,000 for the same period in 2023[72] Employee and Operational Metrics - The company has 36,860 employees as of March 31, 2024, compared to 17,509 employees a year earlier[82] - The company matched 175% of employee contributions to the 401(k) plan, resulting in contributions of $5,710,000 for the three months ended March 31, 2024, up from $5,259,000 in the same period of 2023[73] - Medical premium payments for the three months ended March 31, 2024, totaled $3,371,000, compared to $2,668,000 for the same period in 2023, indicating a 26.3% increase[77] - The discretionary profit-sharing bonus plan expense for the three months ended March 31, 2024, was $4,600,000, a decrease from $4,866,000 in the same period of 2023[75] Tax and Credits - The company reported an effective tax rate of approximately 25.6% for the year 2024, excluding discrete events[56] - As of March 31, 2024, the company has investment tax credit carryforwards of approximately $2.3 million, expiring between 2039 and 2043[56] Legal and Commitments - The company settled a litigation case with Havtech for $7.5 million, which has been included in accrued liabilities and selling, general, and administrative expenses[94] - The company executed a five-year purchase commitment for refrigerants, with estimated minimum future payments of $8.3 million, $9.1 million, $10.5 million, and $11.2 million for 2024, 2025, 2026, and 2027, respectively[95] Investments and Growth - The company received a $23.0 million New Markets Tax Credit allocation for the 2023 Project, facilitating the expansion of its Longview, Texas manufacturing operations[91] - The company provided approximately $16.7 million to the 2023 Investor in the form of a loan receivable, which was used to make a $23.8 million loan to a subsidiary[91] - The company issued 0.24 million shares in March 2024 related to the earn-out milestone for the year ended 2023, increasing additional paid-in capital by $6.4 million[88] Goodwill and Intangible Assets - The carrying amount of goodwill remained unchanged at $81.9 million as of March 31, 2024, consistent with the previous period[25] - Total intangible assets increased to $70,664 thousand as of March 31, 2024, up from $68,053 thousand on December 31, 2023, reflecting a growth of 3.8%[43] - Total future amortization expense for finite-lived intangible assets is estimated at $51,255 thousand[45] Credit and Losses - The allowance for credit losses increased to $435 thousand as of March 31, 2024, from $421 thousand on December 31, 2023, an increase of 3.3%[41]

Core Viewpoint - AAON, Inc. is set to announce its first quarter 2024 financial results on May 2, 2024, with a conference call scheduled for the same day at 5:15 p.m. EDT [1] Group 1 - AAON is a provider of premier, configurable HVAC solutions that deliver long-term value to customers and owners [2] - The company was founded in 1988 and is recognized as a global leader in HVAC solutions for commercial and industrial indoor environments [2] - AAON's headquarters is located in Tulsa, Oklahoma, where it features a world-class innovation center and testing lab [2]