Aaon Inc Q4 2024 Earnings Call Transcript

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

Question: Ryan Merkel - William Blair & Co. LLC - Analyst : Hey everyone, good morning. Thanks for the questions. I wanted to start with the first quarter outlook for the Oklahoma sales. I think you said flat sales versus what you just reported in 4Q. And is the reason that you're seeing that is it still pushouts because there's an inventory of R410 in the channel? Is that the main reason?

Question: Ryan Merkel - William Blair & Co. LLC - Analyst : Okay. And then in in the quarter, basic sales down year is a little bit of a surprise. I didn't catch the reason, why is that just given the big backlog.

Question: Ryan Merkel - William Blair & Co. LLC - Analyst : I got it. So yeah, you're saying basics as a whole if you include coil are still strong.

Question: Ryan Merkel - William Blair & Co. LLC - Analyst : Okay. One more and I'll pass it on. The outlook for mid-teens to high 10s growth in '25, that that's a little below what I was thinking. Can you just unpack some of the assumptions there? I was thinking, data centers, both Basics and coil could be up, 75-80%. Again, just given that backlog, and I think you mentioned you convert a lot of that. And then I was thinking then the Oklahoma side you'd be up low single digits, mid single digits. So correct me if you know what am I missing on that. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 27, 2025 / 2:00PM, AAON.OQ - Q4 2024 Aaon Inc Earnings Call

Question: Ryan Merkel - William Blair & Co. LLC - Analyst : And can we just put a finer point on that? I, maybe you don't want to give too much detail, but is the Oklahoma segment going to be more flat in 25?

Question: Ryan Merkel - William Blair & Co. LLC - Analyst : Got it. All right, thanks, I'll pass it on.

Question: Chris Moore - CJS Securities, Inc. - Analyst : Hey, good morning, guys. First, congratulations both to Gary and to Matt. Job well done. Maybe we can start on on data center. Obviously been some talk of bigger players, canceling or or downsizing data center construction. What are you hearing from customers, potential customers, on that front?

Question: Chris Moore - CJS Securities, Inc. - Analyst : Got it. That's helpful. And you mentioned a $1 billion dollar target. Is that a 3 to 4 year goal? Is that a 5 year goal just any way to frame that.

Question: Chris Moore - CJS Securities, Inc. - Analyst : Got it. That's helpful. And maybe just a question on on on rooftop on on pricing. So how much more expenses expensive is your R54b solution than the legacy 410A that's that's currently being sold? Just trying to get understanding if it's if if there's a big price delta or it has to do with, building code changes that that would. Influence people to continue to buy the R-410A for a while.

Question: Chris Moore - CJS Securities, Inc. - Analyst : Got it. No, I understood you're not selling the 410A anymore, but distributors can, and I'm just wondering if you were going up against the 410A when trying to sell the 454B is is really kind of what I was getting after.

Question: Chris Moore - CJS Securities, Inc. - Analyst : Very helpful. Maybe just one last on price. So you guys have much more pricing flexibility than than the average company on the 454b from a from a market standpoint, any sense in terms of where you're priced versus the other 454bs at this stage? Now you said you raise prices 3% in the year. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 27, 2025 / 2:00PM, AAON.OQ - Q4 2024 Aaon Inc Earnings Call

Question: Chris Moore - CJS Securities, Inc. - Analyst : Got it, very helpful. I'll jump back online. Thanks guys.

Question: Brent Thielman - D.A. Davidson & Company - Analyst : Hey, thanks, good morning, Gary or Matt, just on the potential kind of billion dollars in data center revenue here over the next few years, could you talk about the current capacity coupled with kind of Memphis coming online permit you to do that? Is there more you need to spend to get there? And then also just to refresh on the timeline that Memphis asset becomes available to you.

Question: Brent Thielman - D.A. Davidson & Company - Analyst : Got it, really helpful, Matt. Yeah, maybe just on basics I guess specific to the Oregon facility just sounds like you just essentially have some things to work through in efficiencies right now. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 27, 2025 / 2:00PM, AAON.OQ - Q4 2024 Aaon Inc Earnings Call

Question: Brent Thielman - D.A. Davidson & Company - Analyst : That business sort of returns to the margins you sort of expect out of it.

Question: Brent Thielman - D.A. Davidson & Company - Analyst : Got it. Just last one, Matt or Gary, I guess, we're sort of 2/3 of the way through the first quarter. I just want to come back to rooftop and.

Question: Brent Thielman - D.A. Davidson & Company - Analyst : Visibility you're starting to see for the new product? Is it still a wait and see in terms of that coming in, excuse me, the new refrigerant product? I'm just trying to get a sense since we're a good way to quarter.

Question: Brent Thielman - D.A. Davidson & Company - Analyst : But really helpful color. Thank you, guys.

Question: Alex Hantman - Sidoti & Company - Analyst : Good morning. This is Alex Hantman on for Julia. Thanks for taking questions. I know we spoke about, more efficient models driving more data center demand. But I was curious if you could talk a little bit about demand for denser data centers. I know those are, typically a little bit better suited to liquid cooling so I would just love to have your take on that.

Question: Alex Hantman - Sidoti & Company - Analyst : Great, thank you for the color. And I know we talked a little bit on the call about you know decarbonization and that sort of end market potential. Previously, I think you also mentioned you know clean rooms, so could we just get a little bit of an update on, the development of that end market? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 27, 2025 / 2:00PM, AAON.OQ - Q4 2024 Aaon Inc Earnings Call

Question: Alex Hantman - Sidoti & Company - Analyst : Great, appreciate the. Call there. We'll jump back into the queue.

Question: Timothy Wojs - Robert W. Baird & Co., Inc. - Analyst : Good morning, everybody, maybe just on, Gary, on pricing with the new R-454b system, it sounds like you took some pricing Q1 but really just to kind of offset inflation. So could you just kind of articulate where you are, in terms of the strategy around what you're going to do with price specifically for our 454b.

Question: Timothy Wojs - Robert W. Baird & Co., Inc. - Analyst : Okay, that's helpful and then I guess just from a, is there a way to kind of quantify. Any of the inefficiencies with some of the increased capacity at Longview and just some of the inefficiencies that you saw at basics like because they're up, is there a number that you can put on it in terms of what those costs were in the fourth quarter and in 2025?

Question: Timothy Wojs - Robert W. Baird & Co., Inc. - Analyst : Okay. Okay, that's helpful. And then I have two other ones. Just the first is what is the year over year increase in DNA going to be just given the CapEx and where does that kind of land? And then the second one is just given the data center reporting in terms of where the stuff is landing from a production perspective, I mean. I I think it's actually pretty difficult for investors to kind of follow what's going on so is is there a potential or a thought process about maybe just kind of having the rooftop business be a segment and then having data center be a segment because I think just some of the complexity of the reporting right now is is is kind of weighing a little bit on on what's happening.

Question: Timothy Wojs - Robert W. Baird & Co., Inc. - Analyst : Yeah, just what's the, because I think DNA in the like if you look at the, I think the DNA number was probably up $6 million or something like that, $7 million year every year. I guess what is that supposed to be up in '25 as you bring on Longview and Memphis, and just where does that land on the P&L in terms of SG&A or costs.

Question: Timothy Wojs - Robert W. Baird & Co., Inc. - Analyst : Okay, sounds good. I'll talk to you guys in a bit thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 27, 2025 / 2:00PM, AAON.OQ - Q4 2024 Aaon Inc Earnings Call