Aaon Inc Q1 2024 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Chris Moore - CJS Securities, Inc. - Analyst : Thanks, guys. Thanks for taking a couple of questions. Maybe we could start with BASX. So obviously, it looks like the timing of BASX's backlog conversion contributed to a softer quarter. It's hard to gauge kind of quarter to quarter on BASX. Can you give any sense in terms of BASX as a piece of the backlog, as a percentage? Has that changed much over the last year? Or just kind of how we should be thinking about that.

Question: Chris Moore - CJS Securities, Inc. - Analyst : Got it, that makes sense, for sure. I think one of the things you talked about, Gary, in your prepared remarks was that the order flow will improve -- further improve at the point in time this year that customer is no longer able to order equipment with the R410A refrigerant. You have kind of a best guess as to when that point is?

Question: Chris Moore - CJS Securities, Inc. - Analyst : Got it. That's very helpful. And maybe just a last one to kind of follow up on the point you just made in terms of the increased costs. It sounds like you guys are in really good shape from that perspective. My understanding is that the new refrigerant requirements are really not going to cost AAON any more. You have the new safety device that you'll have to include with it but you're manufacturing that internally. So it sounds like, from a competitive standpoint, you should be in really good position for this changeover. Am I looking at that correctly?

Question: Chris Moore - CJS Securities, Inc. - Analyst : Alright. I appreciate it, guys. I'll jump back in line.

Question: Ryan Merkel - William Blair & Company - Analyst : Thanks. Good afternoon. Gary, it sounds like the big issue this quarter is the timing of backlog conversion. Can you unpack what happened with production this quarter? And when did the production issues hit you exactly?

Question: Ryan Merkel - William Blair & Company - Analyst : And are you able to quantify the sales impact from some of these issues in the quarter?

Question: Ryan Merkel - William Blair & Company - Analyst : Yeah, I think so. I think maybe the follow on would be it sounds like, I think you said, second-quarter sales flat, so we're not seeing a lot of improvement in 2Q. When do you expect that these timing of backlog issues or the production issues that you talked about, when do you see that getting back to normal? without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. MAY 02, 2024 / 9:15PM, AAON.OQ - Q1 2024 Aaon Inc Earnings Call

Question: Ryan Merkel - William Blair & Company - Analyst : Got it. All right. Thanks.

Question: Julio Romero - Sidoti & Company, LLC - Analyst : Thanks, and good afternoon. Maybe switching to parts a little bit. It was nice to see the parts sales growth of 10% in the quarter. Was that performance in parts partially due to adding more-than-expected capacity parts since volumes were a little depressed due to the issues you just outlined?

Question: Julio Romero - Sidoti & Company, LLC - Analyst : Okay. Understood. And then maybe if we could talk about data centers. As you guys are assisting some of these data center customers and kind of being a hand holder of sorts, is there any opportunities to provide any sticky products or sticky solutions that can embed you with those data center customers for the longer term?

Question: Julio Romero - Sidoti & Company, LLC - Analyst : Excellent. I'll pass it on. Thanks very much.

Question: Brent Thielman - D.A.Davidson - Analyst : Hey, thanks. Good evening. Matt, actually, just kind of following up on that. Could you actually talk about the opportunity on the liquid cooling side for BASX? And are you beginning to see orders for that specific market?

Question: Brent Thielman - D.A.Davidson - Analyst : Awesome. And then a lot of the focus in the commentary has been just around some of the delays, I suppose, with Longview and BASX. I guess my question would be, was the core sort of AAON Oklahoma rooftop business what you would have expected this quarter, or were there some delays in timing there as well? without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. MAY 02, 2024 / 9:15PM, AAON.OQ - Q1 2024 Aaon Inc Earnings Call

Question: Brent Thielman - D.A.Davidson - Analyst : Okay. And then just some of the pent-up or built-up sort of orders here, I suppose with BASX, Longview, does that all start to flow into the second half? I mean, should we see a huge catch-up here? Or how do we think about that? I know you've got your expectations for the second quarter. It sounds like it won't happen. But when does that ultimately flow?

Question: Brent Thielman - D.A.Davidson - Analyst : Okay. Thanks, Matt. Appreciate it.