Release Date: November 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- AAON Inc (AAON, Financial) reported a 4.9% year-over-year increase in total revenue for the third quarter of 2024.
- Diluted earnings per share rose by 8.6%, showcasing strong financial performance.
- The company achieved a record backlog of $647.7 million, up 32% from the previous year.
- AAON Inc (AAON) is becoming a leading player in the data center cooling market, with significant orders and a robust pipeline.
- The company is expanding production capacity with projects in Texas and Oregon, and a new facility in Tennessee to meet growing demand.
Negative Points
- Gross margin contracted by 230 basis points compared to the same quarter last year.
- Sales at the AAON Oklahoma segment declined by 7.1% year-over-year due to tough comparisons and refrigerant transition disruptions.
- The traditional HVAC business is facing headwinds from the refrigerant transition, interest rates, and a softening construction market.
- There is an anticipated near-term lull in demand for the Oklahoma segment, with potential softening in the fourth and first quarters.
- Capital expenditures for 2024 have been revised upwards to $215 million, indicating increased spending requirements.
Q & A Highlights
Q: Should we expect revenue in the Oklahoma segment to be down more than the 7% we saw this quarter?
A: Gary Fields, CEO, explained that while there could be slight softening in Q4 and Q1 due to backlog reduction, the pipeline remains strong. Factors like the refrigerant transition, election, and interest rates have impacted the segment, but improvements are expected as these issues resolve.
Q: Will Q1 '25 earnings be down year-over-year due to the Oklahoma business or data centers?
A: Gary Fields, CEO, clarified that while data centers remain robust, the Longview facility is just coming online, which may cause a quarter-over-quarter decline from Q4 to Q1, but year-over-year growth is expected.
Q: Why was the $175 million data center order so large, and was it a new customer?
A: Matthew Tobolski, COO, stated it was an existing customer but the first exposure to liquid cooling. The order supports a large-scale AI capacity build-out across the customer's enterprise, showcasing AAON's value in liquid cooling.
Q: Have all states passed the necessary legislation for new refrigerants?
A: Matthew Tobolski, COO, confirmed that regulations are in place for the refrigerant transition, with states prepared for the January 1 cutover date.
Q: What is the expected contribution of the new Tennessee facility on an annualized basis?
A: Matthew Tobolski, COO, indicated that the facility will roughly double the available square footage for data center products, significantly impacting AAON's revenue potential.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
