AAON (AAON) Q3 2024 earnings summary

Executive summary

• Net sales for Q3 2024 reached $327.3 million, up 4.9% year-over-year, led by BASX (up 58.8%) and AAON Coil Products (up 36.7%), while AAON Oklahoma declined 7.1%.

• Backlog surged 32% year-over-year to $647.7 million, with a majority related to data center equipment for 2025 delivery.

• EPS was $0.63, up 8.6% year-over-year, with net income for Q3 2024 at $52.6 million, up 9.5%.

• Data center equipment demand drove significant growth, with bookings nearly doubling year-to-date and a $174.5 million order received post-quarter.

• Major capacity expansions and a new Memphis facility are underway to support data center growth and operational efficiency.

Financial highlights

• Gross margin for Q3 2024 was 34.9%, down from 37.2% a year ago, with gross profit at $114.2 million.

• Adjusted EBITDA margin was 25.3% in Q3 2024, compared to 26.8% in Q3 2023.

• SG&A as a percent of sales decreased to 14.9%, benefiting from the absence of a $7.5 million litigation settlement in Q3 2023.

• Cash flow from operations for the nine months ended September 30, 2024, was $191.7 million, up from $107.1 million in the prior year.

• Operating margin for Q3 2024 was 20.0%; nine-month operating income was $179.7 million.

Outlook and guidance

• 2024 volume expected to be flat, with mid-single-digit pricing contribution and gross margin up year-over-year; Q4 to reflect seasonal softness.

• Capital expenditures for 2024 forecast at $215 million, focused on production capacity, technology, and the Memphis project.

• Q1 2025 sales and earnings expected to be modestly down sequentially from Q4, but up year-over-year; acceleration anticipated through the rest of 2025.

• Majority of backlog to be delivered in 2025, with continued strong demand for data center cooling solutions.

• Estimated annual 2024 effective tax rate, excluding discrete events, is approximately 24.9%.