#USA #AAON #BASX #Tulsa #HVAC

AAON Reports Fourth Quarter and Full Year 2024 Results

On February 27, 2025, AAON, Inc. (NASDAQ: AAON), a prominent producer in the HVAC solutions market, unveiled its financial results for the fourth quarter and the entire year of 2024. The report highlights various growth achievements, particularly focusing on the BASX brand's impact in the data center sector.

Key Highlights

CEO Gary Fields expressed mixed feelings regarding AAON's performance throughout the year, remarking how 2024 presented both victories and hurdles. Notably, the BASX brand made a noteworthy entrance into the data center market with the first large-scale development and sale of a custom-designed liquid cooling solution. This initiative, coupled with a robust demand for BASX's air-cooling equipment for data centers, contributed to a remarkable 70% increase in the company's total backlog compared to the end of 2023.

Moreover, AAON has bolstered its production capabilities in response to a growing demand pipeline. This included the completion of a 245,000 square-foot expansion at the Longview, Texas facility and the acquisition of a new 787,000 square-foot building in Memphis, Tennessee.

Conversely, the AAON brand faced significant challenges, notably the industry-mandated refrigerant transition and declining non-residential construction activity. Despite these obstacles, AAON's equipment sales saw only a modest decline in 2024, with bookings maintaining a year-over-year growth in the mid-to-high teens.

Financial Performance

In Q4 2024, AAON reported net sales of $297.7 million, marking a 2.9% decrease from $306.6 million in the same period of 2023. This decrease was primarily attributed to the AAON Oklahoma segment, which experienced a 16.1% drop year-over-year due to adverse macroeconomic conditions and the ongoing refrigerant transition issues.

Despite these setbacks, the AAON Coil Products segment saw a remarkable sales boost of 129.9%, fuelled by the production of BASX-branded liquid cooling data center equipment and robust growth in AAON-branded split systems.

The gross profit for Q4 2024 fell by 30.5% to $77.6 million, representing a margin of 26.1%. The decrease in gross margin was due to lower volumes and fixed cost challenges within the AAON Oklahoma segment. Additionally, investments in growth segments resulted in temporary negative impacts on gross profits.

Earnings per diluted share saw a significant decline of 46.4%, dropping from $0.56 a year ago to $0.30 in the latest quarter.

Looking Ahead

As 2025 unfolds, Gary Fields expressed optimism about the company overcoming the temporary slowdown noted since early last year. He anticipated that the adverse impacts from the refrigerant transition would diminish by the second quarter and proposed that demand would accelerate thereafter. The backlog for BASX-branded equipment entering 2025 was substantially higher than the previous year, with robust future order pipelines still intact.

Financial Health

As of year-end 2024, AAON reported $6.5 million in cash and cash equivalents, balanced against $154.9 million in total debt. CFO Rebecca Thompson highlighted that cash flows were influenced by lower net income and increased investments in working capital. In light of the significant backlog, inventory purchases were made to ensure smooth production at the beginning of 2025, leading the company to borrow $20.8 million during the quarter.

Additionally, AAON's Board of Directors approved a $100 million share repurchase plan, showcasing their confidence in the company's fundamentals despite the current headwinds.

In conclusion, while AAON navigated through a year filled with challenges in 2024, its strategic expansions and positive reception in niche markets lay a framework for future growth and resilience. The upcoming year aims to rectify past setbacks and optimize operations, maintaining the company's trajectory towards enhanced revenue and margin restoration.

For further details, AAON plans to host a conference call and webcast to discuss its results and outlook in more detail on February 27, 2025.