Core Viewpoint - AAON, Inc. is collaborating with the Department of Energy for the Better Buildings Commercial Building Heat Pump Accelerator, aiming to enhance the adoption of energy-efficient heat pump technology from 2024 to 2027 [1] Group 1: Collaboration and Initiatives - AAON will lead the production of high-performance Alpha Class air-source heat pumps under the DOE's Accelerator program, focusing on cold-climate commercial heat pump rooftop units [1] - The initiative aims to improve energy efficiency and promote the electrification of buildings [1] - AAON is transitioning to R-454B refrigerant ahead of EPA mandates, showcasing its commitment to sustainability [1] Group 2: Productivity and Growth - The company is enhancing operational efficiencies, investing in innovation, and implementing pricing strategies to boost productivity [3] - On October 18, 2023, AAON launched its advanced Alpha Class air-source heat pumps, setting a new performance standard in the industry [3] - The introduction of cleaner and more efficient technology is expected to drive the decarbonization movement [3] Group 3: Stock Performance - AAON shares increased by 51.7% over the past six months, outperforming the industry average growth of 27.6% [4] - The company is optimistic about 2024 and beyond due to rising bookings and a growing backlog [4]

Core Insights - AAON, Inc. has partnered with the Department of Energy on the Better Buildings Commercial Building Heat Pump Accelerator, aiming to enhance the development and adoption of cold climate commercial heat pump rooftop units from 2024 to 2027 [1] - The Alpha Class air-source heat pumps are designed for higher efficiency and lower emissions, featuring variable speed technology and the ability to operate reliably at lower ambient temperatures [2][3] Company Overview - AAON was founded in 1988 and is recognized as a leader in HVAC solutions for commercial and industrial environments, focusing on highly configurable equipment that enhances efficiency and long-term value [4] - The company is headquartered in Tulsa, Oklahoma, and has a dedicated innovation center and testing lab to advance its engineering capabilities [4] Product Features - The Alpha Class heat pumps are engineered to meet environmental and regulatory needs, utilizing low Global Warming Potential refrigerants and offering all-electric or dual-fuel options [2][3] - These heat pumps have been tested to operate effectively at ambient temperatures as low as zero degrees Fahrenheit, providing omni-climate performance [2] Environmental Commitment - AAON is proactive in environmental stewardship, adopting R-454B refrigerant with a low GWP of 466 to replace R-410A ahead of EPA mandates, showcasing its commitment to sustainability [3]

Core Viewpoint - The article discusses the potential of various companies to join the ranks of the 'Magnificent 7' stocks, highlighting their strong growth prospects and market positions. Group 1: Berkshire Hathaway (BRK-A, BRK-B) - Berkshire Hathaway is suggested as a candidate for the 'Magnificent 7' due to its prudent diversification across sectors, which provides stability and flexibility in turbulent times [2][3] - The company is expected to outperform broader markets and is projected to reach a $1 trillion valuation [3] Group 2: MercadoLibre (MELI) - MercadoLibre is compared to Amazon and is recognized as a leading e-commerce player in Latin America, with a 32% gain over the past year and a 143% surge from its June low [4][5] - Analysts forecast its EPS to increase from $33 to $226 over the next decade, with revenue growth projected from $17.7 billion to $72.3 billion [5] Group 3: Li Auto (LI) - Li Auto is highlighted for its rapid growth in the Chinese EV market, with total deliveries reaching 684,780 vehicles, a 22% year-over-year increase [6] - The company anticipates a 90-96% increase in first quarter 2024 deliveries compared to the previous year, while trading at 18x forward earnings [6] Group 4: FTAI Aviation (FTAI) - FTAI Aviation has gained 293% over the past five years and 139% in the last 12 months, driven by a strong business model focused on CFM56 commercial jet engines [7][8] - Analysts predict FTAI's EPS will triple from 2024 to 2027, with revenues expected to grow from $1.3 billion to $2.3 billion [8] Group 5: Elastic (ESTC) - Elastic operates in data analytics and has seen its stock rise 91% over the past year, with projected EPS growth from $1.2 in 2024 to $13.3 in 2033 [9][10] - Revenue is expected to quadruple over the same period, indicating strong growth potential despite a high valuation of around 90 times forward earnings [10] Group 6: Aaon (AAON) - Aaon is noted for its customizable HVAC solutions and has experienced over 20% revenue growth year-over-year in Q4, exceeding analyst estimates [11][12] - The stock has risen 36% over the past 12 months, with a favorable growth outlook due to increasing temperatures [12] Group 7: DoubleVerify (DV) - DoubleVerify operates in digital media measurement and analytics, with a 34% stock gain over the past year, despite a recent sell-off [13][14] - Analysts forecast over 20% revenue growth and 30%+ EPS expansion in 2024, positioning the company to benefit from the rebound in online ad spending [14]

Core Insights - AAON, Inc. reported strong fourth-quarter 2023 results with earnings exceeding the Zacks Consensus Estimate and showing year-over-year growth [1] - The company achieved record net sales driven by improved productivity and operational efficiencies, reflected in a healthy backlog level [1][2] - Following the earnings announcement, AAON's shares increased by 1.4% in after-hours trading [1] Financial Performance - Quarterly earnings were reported at 56 cents per share, surpassing the Zacks Consensus Estimate of 53 cents by 5.7%, and up from 47 cents in the same quarter last year [2] - Net sales for the quarter reached $306.6 million, a 20.4% increase from $254.6 million year-over-year [2] - The backlog at the end of Q4 2023 was $510 million, down 6.9% year-over-year but up 4% sequentially due to increased bookings [2] Operating Metrics - Gross margin expanded by 560 basis points to 36.4% in Q4, while SG&A expenses as a percentage of sales increased by 310 basis points to 15.6% [3] - Operating margin improved by 250 basis points year-over-year to 20.8% [3] - Adjusted EBITDA rose by 37.1% to $77 million, with the adjusted EBITDA margin increasing by 300 basis points to 25.1% [3] Annual Overview - For the full year 2023, net sales grew by 31.5% to $1.17 billion compared to $888.8 million in 2022 [4] - Earnings per share for 2023 were $2.13, a 71.8% increase from $1.24 in 2022 [4] - The gross margin expanded by 740 basis points year-over-year to 34.1%, and the operating margin increased by 520 basis points to 19.5% [4] Cash Flow and Financial Position - As of December 31, 2023, cash and cash equivalents were $0.3 million, down from $5.5 million at the end of 2022 [5] - Net cash provided by operating activities for 2023 was $158.9 million, significantly up from $61.3 million in the prior year [5]

Group 1 - AAON, Inc. will participate in the Sidoti & Company Small Cap Virtual Conference on March 13, 2024, at 11:30 a.m. EDT [1] - The live webcast of the conference will be available on the AAON website, with an archive accessible after the event [1] - AAON is a leading producer of premium HVAC solutions, focusing on commercial and industrial indoor environments [2] Group 2 - Founded in 1988, AAON is headquartered in Tulsa, Oklahoma, and features a world-class innovation center and testing lab [2] - The company emphasizes designing and manufacturing highly configurable equipment to enhance efficiency, performance, and long-term value [2] - AAON aims to continuously push boundaries and advance the HVAC industry through its engineering efforts [2]

Financial Data and Key Metrics Changes - In 2023, net sales grew 31.5%, surpassing $1 billion for the first time in company history, with organic volume up 14.5% [6][7] - For Q4 2023, net sales increased by 20.4% to $306.6 million, with gross profit up 42.3% to $111.7 million, resulting in a gross profit margin of 36.4% [22][23] - Net income for the year grew over 75%, marking a second consecutive year of record earnings [6][7] - Diluted earnings per share for Q4 increased 19.1% to $0.56, the strongest fourth quarter in the company's history [24] Business Line Data and Key Metrics Changes - The BASX segment achieved record sales and profits, with net sales up 33.6% and gross profit up 70.3% in Q4 [7][22] - AAON Oklahoma's net sales increased by 23.4%, with gross profit up 45.3% [7][22] - AAON Coil Products experienced a decline in net sales by 17.9% [23] Market Data and Key Metrics Changes - Bookings in Q4 were the strongest since Q1 2022, leading to a quarter-over-quarter increase in backlog [7][28] - The data center market contributed over 10% of revenue in 2023, with more than 20% of new orders coming from this sector [36] Company Strategy and Development Direction - The company is focused on expanding its total addressable market through innovative manufacturing processes and responding to trends like decarbonization and electrification [9][18] - Significant capital investments are being made to increase production capacity, particularly in Longview, Texas, and Redmond, Oregon [13][14] - The company aims to enhance customer experience and service quality, alongside increasing marketing efforts to raise brand awareness [16][21] Management's Comments on Operating Environment and Future Outlook - Management anticipates 2024 will be a slower growth year compared to previous years, with expectations of mid-single-digit pricing contributions and low single-digit volume growth [30][31] - The non-residential construction market is showing signs of slowing, but the company remains optimistic about its position due to its readiness for the refrigerant transition [28][30] Other Important Information - The company plans to invest approximately $125 million in capital expenditures in 2024, focusing on projects that will support growth and productivity [25][31] - The parts business is expected to be one of the fastest-growing segments, with a growth rate of 26.3% in 2023 and plans to double its contribution to total sales in the next few years [20] Q&A Session Summary Question: Insights on the data center market and AI impact - The data center market is driving significant growth, with over 10% of revenue in 2023 coming from this sector, and strong demand is expected to continue [36][37] Question: Visibility on market conditions compared to last year - The market appears resilient despite macroeconomic indicators suggesting otherwise, with no major changes in the overall landscape noted in recent months [39][40] Question: Delivery timeline for new refrigerant equipment - Deliveries for new refrigerant equipment are expected to begin in Q2 2024, with substantial contributions anticipated in the latter half of the year [45][46] Question: Pricing strategy updates - The company has implemented price increases over the past months but currently has no immediate plans for further increases, maintaining gross margin targets [54][55] Question: Growth outlook for the Coil Products division - Growth from the Longview facility is expected to materialize more significantly in 2025, with 2024 showing moderate growth as investments are completed [63][64]

Sales and Market Performance - In 2023, foreign sales accounted for approximately $39.9 million, representing 3.4% of net sales, compared to $27.6 million (3.1%) in 2022 and $14.8 million (3.0%) in 2021[12] - Major customer Texas AirSystems accounted for approximately 13.8% of sales in 2023, with additional sales through affiliated groups contributing 2.3%[23] - The company has seen a shift in sales patterns, with sales becoming more constant throughout the year due to increased demand and backlog[33] Business Segments and Strategy - The company operates through three business segments: AAON Oklahoma, AAON Coil Products, and BASX, focusing on HVAC systems and solutions[9] - The company emphasizes a business strategy of mass semi-customization, leveraging flexible manufacturing systems to produce highly configurable HVAC equipment[11] - The integration of acquired businesses is a key strategy for realizing synergies and cost savings, contributing to overall financial performance[6] Product Performance and Innovation - The performance characteristics of products range in cooling capacity from 2 to 261 tons and heating capacity from 7,200 to 4,500,000 BTUs, with many products exceeding minimum efficiency standards[15] - The company’s products are engineered for performance and flexibility, with a focus on meeting evolving regulatory standards in the HVAC industry[29] - The company’s innovative ASHPs are capable of operating in ambient temperatures as low as zero degrees Fahrenheit, addressing the demand for building decarbonization[13] Research and Development - The company’s research and development efforts are focused on energy performance, durability, efficiency, and indoor air quality, ensuring compliance with various regulatory standards[12] - Research and development expenses were approximately $43.7 million in 2023, reflecting a commitment to product performance and innovation[29] - The company operates a unique research and development laboratory, the NAIC, which includes capabilities for testing large HVAC systems, enhancing its competitive edge in the industry[29] Sustainability and Environmental Responsibility - The company achieved Platinum level in the Sustainability Alliance Scor3card program in both 2023 and 2022, indicating high performance in sustainability metrics[36] - Approximately 36% of the company's energy portfolio is currently derived from renewable sources, with ongoing efforts to increase this percentage[36] - The company is committed to reducing greenhouse gas emissions and increasing the percentage of non-fossil fuel powered units produced[36] Employee and Operational Growth - The total number of employees increased to 3,856 as of February 20, 2024, up from 3,666 in 2023 and 2,881 in 2022[38] - The company offers competitive employee benefits, including a 401(k) plan with a 175% employer match and a profit-sharing bonus plan[38] - The company has a program to enhance service capabilities across its North America representative network, providing training and business plan assistance[20] Manufacturing and Supply Chain - The company has multiple suppliers for raw materials, ensuring adequate supply to meet manufacturing requirements for the foreseeable future[26] - The company’s controls division provides factory-developed control options that enhance the unique features of its HVAC products, ensuring compliance with safety and quality standards[15] Backlog and Order Fulfillment - The company's backlog as of February 1, 2024, was approximately $507.7 million, with lead times for fulfilling orders generally around 11 weeks[24] - The backlog as of February 1, 2024, was approximately $507.7 million, with lead times to fulfill orders generally around 11 weeks[24] Waste Management and Recycling - The company successfully diverted over 694 tons of waste from landfills in 2023 through partnerships with waste-to-energy facilities, compared to 668 tons in 2022 and 460 tons in 2021[36] - The company recycled over 13,678 tons of metal at its Tulsa and Longview facilities in 2023, compared to 14,928 tons in 2022 and 13,793 tons in 2021[36]

Financial Performance - Net sales for Q4 2023 increased 20.4% to a record $306.6 million, compared to $254.6 million in Q4 2022[2] - Gross profit for the quarter rose 42.3% to $111.7 million, representing a gross profit margin of 36.4%, up from 30.8% in the same period last year[3] - Earnings per diluted share in Q4 2023 increased 19.1% to $0.56, compared to $0.47 in Q4 2022[3] - Operating income for Q4 2023 increased 37.1% to $63.9 million, with an operating margin of 20.8%[4] - Net income for 2023 was $177,623 thousand, up from $100,376 thousand in 2022, representing a 77% increase[15] - Net income for December 2023 was $47,049 thousand, up from $38,898 thousand in December 2022, representing a growth of 21.7%[22] - EBITDA for 2023 was $224,091 thousand, up from $135,482 thousand in 2022, marking a 65% increase[19] - EBITDA for December 2023 reached $77,046 thousand, compared to $56,184 thousand in December 2022, reflecting an increase of 37.1%[22] - Adjusted net income for 2023 was $183,131 thousand, compared to $100,376 thousand in 2022, reflecting an increase of 83%[18] - Adjusted EBITDA for the year ended December 2023 was $281,215 thousand, significantly higher than $162,266 thousand for the previous year, marking a growth of 73.2%[22] Cash Flow and Assets - Cash flows from operating activities grew year-over-year by 189.0% in Q4 2023 and 159.1% for the full year, exceeding capital expenditures[6] - Current assets increased to $408,954 thousand in 2023 from $349,116 thousand in 2022, a growth of 17%[13] - Cash and cash equivalents at the end of the period rose to $9,023 thousand in 2023 from $5,949 thousand in 2022, an increase of 51%[15] - The company reported a net cash provided by operating activities of $158,895 thousand in 2023, compared to $61,318 thousand in 2022, a growth of 159%[15] Liabilities and Equity - Total liabilities decreased to $206,012 thousand in 2023 from $227,189 thousand in 2022, a reduction of 9%[13] - Total stockholders' equity increased to $735,224 thousand in 2023 from $560,714 thousand in 2022, a rise of 31%[13] Market Outlook and Strategy - The company anticipates sales and earnings growth in 2024, albeit at slower rates than in recent years, due to external market factors[6] - The company is focused on enhancing productivity and leveraging new refrigerant technology to gain market share[6] Inventory and Capital Expenditures - The company’s inventories increased to $213,532 thousand in 2023 from $198,939 thousand in 2022, a rise of 7%[13] - Capital expenditures for 2023 were $104,294 thousand, significantly higher than $54,024 thousand in 2022, indicating a 93% increase[15] Other Financial Metrics - Gross profit margin for the full year 2023 was 34.1%, up from 26.7% in 2022[4] - Depreciation and amortization expenses increased to $13,029 thousand in December 2023 from $9,482 thousand in December 2022, a rise of 37.0%[22] - Interest expense decreased slightly to $884 thousand in December 2023 from $933 thousand in December 2022, a decline of 5.3%[22] - Income tax expense rose to $16,084 thousand in December 2023, compared to $6,871 thousand in December 2022, an increase of 134.5%[22] - The company recorded a litigation settlement effect of $7,500 thousand for the year ended December 2023[22] - Profit sharing effect for the year ended December 2023 was $(750) thousand, indicating a negative impact on adjusted EBITDA[22] - The company continues to focus on enhancing its EBITDA performance through strategic initiatives and operational efficiencies[22] Backlog - Backlog at the end of Q4 2023 was $510.0 million, up 4.0% from $490.6 million at the end of Q3 2023, but down 6.9% from $548.0 million at the end of Q4 2022[5]

Core Viewpoint - AAON, Inc. is set to discuss its fourth quarter 2023 financial results in a conference call scheduled for February 28, 2024, at 5:15 p.m. EST, with results released after market close on the same day [1] Company Overview - AAON, founded in 1988, is a global leader in HVAC solutions for commercial and industrial indoor environments [2] - The company specializes in designing and manufacturing highly configurable and custom-made equipment, enhancing efficiency, performance, and long-term value for customers [2] - AAON is headquartered in Tulsa, Oklahoma, featuring a world-class innovation center and testing lab that supports continuous advancements in the HVAC industry [2]

Core Investment Insights - The article emphasizes the importance of selecting stocks that provide stable returns and regular income through dividends for retirement portfolios [1] - Companies with essential products, loyal customer bases, and strong balance sheets are identified as ideal candidates for long-term investment [1] PepsiCo (PEP) - PepsiCo is highlighted as a cornerstone stock for retirement portfolios, known for stable returns and a growing dividend stream [2][3] - The company reported nearly 7% year-over-year revenue growth and a 14% increase in profits, showcasing its resilience in turbulent market conditions [3] - PepsiCo has an impressive 87% gross margin and is recognized as a Dividend King with 52 consecutive years of dividend increases, currently yielding 3% [3][4] Caterpillar (CAT) - Caterpillar is recommended as a core long-term portfolio anchor due to its essential role in global infrastructure projects [5][6] - The company experienced a 12% year-over-year sales increase and a 37% jump in earnings per share, outperforming expectations [7] - Caterpillar has a strong dividend history with 29 consecutive years of increases, currently yielding 1.7% [7] FTAI Aviation (FTAI) - FTAI Aviation operates in the commercial aircraft engine leasing sector, providing a stable investment with growth potential [8][9] - The company has quadrupled its revenue over the last two years and its stock price has increased by over 260% since September 2022 [9] - FTAI currently offers a 2.2% dividend yield and is positioned well in the growing global travel market [10] McDonald's (MCD) - McDonald's is presented as a resilient investment, thriving during economic downturns and maintaining strong sales and profit growth [11][12] - The company reported a 14% year-over-year revenue increase and a 19% rise in earnings for Q3 2023 [11] - McDonald's has a robust share repurchase program and a 48-year history of dividend growth, currently yielding 2.3% [12] Itochu (ITOCF) - Itochu is noted for its diversified business model across various sectors, providing stability and resilience [13][14] - The company offers a secure 2.65% dividend yield, making it a solid choice for long-term investors [14] Airbus (EADSY) - Airbus is positioned to benefit from increasing demand for commercial air travel and is expected to grow revenue by 12% in 2023 [15][16] - The company has secured over $163 billion in new airplane orders, indicating a strong production pipeline [16] Aaon (AAON) - Aaon specializes in HVAC equipment, with a significant increase in demand due to climate change [17] - The company reported a 29% year-over-year sales increase and a 75% rise in profits, supported by a strong balance sheet [17][18]