AAON, INC. Q1 FY2026 earnings call

Entered the second quarter with significant production momentum and a strong backlog. Focus remains on execution and delivering for customers. Near term, temporary cost pressures from outsourcing are transitory. Expect improving margins as operating leverage builds. For the year, anticipate sales growth of 40% to 45% at a gross margin of 27% to 28%, SG&A as a percentage of sales between 14% and 15%, and depreciation and amortization expenses in the $95 to $100 million range.

For Aon, Oklahoma, net sales increased 51% year-over-year to $244 million in the first quarter. Gross margin was 26.3 percent, with excluding overhead expenses associated with the Memphis facility, margins were 29.6 percent. Aeon Coil products sales were $117.6 million in the first quarter, an increase of 25% compared to the prior year period. Gross margin was 24.1%. Sales at the basics segment grew 104% in the first quarter to $135.4 million. ASIC segment gross margin was 23.9% essentially flat from the prior year period.

Expect sales growth of 40% to 45% for the year at a gross margin of 27% to 28%, SG&A as a percentage of sales between 14% and 15%, and depreciation and amortization expenses in the $95 to $100 million range. Full-year outlook reflects net improvement in top and bottom line despite gross margins reflecting intentional timing and ramp decisions.

Temporary cost pressures from outsourcing, Oklahoma segment has seasonality in Q4 and Q1 which may cause potential pullback in Q4.

Q: Ryan Merkle asked about Oklahoma margins and 2Q margins.

A: Oklahoma margin was impacted by Memphis overhead, expecting sequential improvement in Q2 and Q3 with some pullback in Q4.

Q: Asked about basics revenue beat.

A: Strong data center market demand and acceleration of production ramp drove basics revenue beat.

Q: Chris Moore asked about rooftop market and pricing.

A: Rooftop market has strength in alpha-class heat pumps, pricing strategy intact.

Q: Asked about basics capacity.

A: See capacity above $2 billion.

Q: Noah Kay asked about basics orders and outsourcing.

A: Orders from existing and new customers, outsourcing is temporary for short-term volume drive.

Q: Tim Weiss asked about gross margin and basics revenue.

A: Gross margin impacted by intentional volume acceleration and outsourcing, basics revenue target implies Aon branded in line.

Q: Julio Romero asked about Memphis revenue and CapEx.

A: Memphis saw Q4 to Q1 contribution step up, CapEx still around $119 million focused on Memphis