AAON, Inc.

Good afternoon, ladies and gentlemen, and welcome to the Aon Inc. Fourth Quarter 2023 Earnings Conference Call. At this time, online journalism only mode. Following the presentation, we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Thursday, February 29, 2024. I would now like to turn the conference over to Joe Monzillo. Thank you. Please go ahead.

Thank you, Operator, and good afternoon, everyone. The press release announcing our fourth quarter financial results was issued after market closed today and can be found on our corporate website, aaon.com. The call today is accompanied with a presentation that you can also find on our website as well as on the Listen Only webcast. Please turn to slide two. We begin with our customary forward-looking statement policy. During the call, any statement presented dealing with information that is not historical is considered forward-looking and made pursuant to the safe harbor provisions of the Securities Litigation Reform Act of 1995, Securities Act of 1933, and the Securities and Exchange Act of 1934. Each is amended. As such, it is subject to the occurrence of many events outside of AON's control that could cause AON's results to differ materially from those anticipated in You are all aware of the inherent difficulties, risks, and uncertainties in making predictive statements. Our press release in Form 10-K that we filed this afternoon details some of the important risk factors that may cause our actual results to differ from those in our predictions. Please note that we do not have the duty to update our forward-looking statements. Our press release and portions of today's call use non-GAAP financial measures as defined in Regulation G. You can find the related reconciliations to GAAP measures in our press release and presentation. Joining me on today's call is Gary Fields, CEO, Matt Tobolsky, President and COO, and Rebecca Thompson, CFO and Treasurer. Gary will start the call off with some opening remarks. Matt will then provide some details about our operations and market trends. Rebecca will follow with a walkthrough of the quarterly results. And before taking questions, Gary will finish with our 2024 outlook and closing remarks. With that, I will turn over the call to Gary.

Thanks, Joe. Thank you, everyone, for joining us on our call today. If you will, please turn with me to slide three. Overall, we're very pleased with our 2023 results. 2023 marked our 35th anniversary as a company, and it lined up with some outstanding achievements. Most notably, we surpassed a billion dollars of sales for the first time in company history. Net sales in the year grew 31.5%, which followed a year in 2022 when we recorded organic growth of 46.8%. Over the last two years, organic volume was up 46.6%, including being up 14.5% in 2023. This is incredible performance for this industry. Along with the strong sales growth, we recognized solid margin expansion in 2023. reflecting not only the operating leverage from the increased volume, but also significant enhancements in operational efficiencies. Net income for the year grew over 75%, resulting in a second straight year of record earnings. Since 2021, we have more than tripled net income. Altogether, I'm very proud of how our team performed in the last calendar year. Please turn to slide four. We finished the year with strong results. Organic net sales in the fourth quarter was up 20.4%, and gross profit was up 42.3%. Our basics segment realized a record quarter, both in sales and profits. Net sales at the segment were up 33.6%, and gross profit was up 70.3%. Aon, Oklahoma also performed very well. Net sales at this segment were up 23.4%, and gross profit was up 45.3%. Gross profit margin for the company came in at 36.4%, up year over year nearly 560 basis points and down only modestly from the seasonally strong third quarter. Despite the impact that holidays had on productivity in the fourth quarter, we were able to to further improve operational efficiencies on top of the gains we recognized in the third quarter. This resulted in our strongest fourth quarter of earnings in company history. Bookings and backlog also trended positively in the quarter. Bookings were up quarter over quarter for the second straight quarter and were the strongest since the first quarter of 2022. Bookings also outpaced production resulting in a quarter-over-quarter increase in backlog. All around, it was a strong finish to the year. Please turn to slide five. Thirty-five years ago, our founder, Norm Isbjornsson, created Aon with one mission, to manufacture the best HVAC equipment in the world for the best value. At the time, The total addressable market for premium semi-custom equipment was very small, as much of the market consisted of basic equipment. This wasn't because the commercial real estate market was not interested in more sophisticated equipment. It was because of the exorbitant price that premium equipment carried. To be competitive, Norm determined it required a revolutionary engineering and manufacturing process compared to common industry practices at the time. It has taken the company decades to perfect this unique way of manufacturing. Currently, our equipment is the most price competitive than it's ever been. At the same time, we continue to lead in innovation, performance, and quality. This progression has expanded our total addressable market across the HVAC industry immensely. Secular trends such as decarbonization, Electrification, driven by market demand shifts and new regulations, has expanded our total addressable market even more. Not too long ago, Aon was known as a niche player in this industry. Being competitive on price has led to us being a mainstream solution. As I previously mentioned, Norm's mission 35 years ago was to provide the best HVAC equipment in the world for the best value. That mission remains true today, and the value of the equipment has never been more compelling. I'll now hand over the call to Matt Tobolsky, who will speak more in depth about our operational strategy.