Aaon Inc. Reports 4.9% Revenue Growth, Strong Net Income and Cash Flow in Q3 2024

AAON, Inc. reported a strong performance for the three and nine months ended September 30, 2024, with total net sales reaching $327.3 million for the quarter, a 4.9% increase from $312.0 million in the same period of 2023. For the nine months, total revenue was $902.9 million, up 4.8% from $861.9 million year-over-year. The growth was primarily driven by significant demand in the data center cooling solutions segment, which saw net sales increase by 90.1% for the quarter and 85.1% for the nine months.

Net income for the third quarter was $52.6 million, compared to $48.1 million in the prior year, while net income for the nine months was $143.9 million, up from $130.6 million in 2023. Basic earnings per share for the third quarter increased to $0.65 from $0.59, and for the nine months, it rose to $1.77 from $1.61.

Despite the revenue growth, gross profit for the third quarter slightly decreased to $114.2 million from $116.1 million, reflecting a gross profit margin of 34.9%, down from 37.2% in the previous year. The decline was attributed to increased costs of sales, which rose to $213.1 million, representing 65.1% of net sales, compared to 62.8% in the prior year. The company faced challenges with supply chain issues and a tight labor market, which impacted hiring and operational efficiency.

AAON's operating expenses also saw fluctuations, with selling, general, and administrative expenses increasing by $16.1 million for the nine months compared to the previous year. However, professional fees decreased significantly due to a prior litigation settlement. The company invested $113.8 million in capital expenditures and software development during the nine months, focusing on enhancing production capabilities.

The company’s cash flow from operations surged to $191.7 million, a 78.9% increase from $107.1 million in 2023. This was complemented by a notable increase in share repurchase activity, with 1.4 million shares repurchased for $107.5 million during the nine months, compared to 423,091 shares for $26.2 million in the same period last year.

As of September 30, 2024, AAON reported a backlog of $647.7 million, a 32.0% increase from $490.6 million a year earlier, indicating strong future demand. The company also recognized a decrease in raw material costs, with copper prices down 5.1% and galvanized steel down 13.2% compared to the previous year.

Strategically, AAON has expanded its operational footprint, including a new lease for a 787,000 square foot facility in Memphis, Tennessee, to support increased demand from the data center market. The company continues to navigate inflationary pressures and labor market challenges while focusing on growth in its core HVAC product lines.