AAON, Inc.

Good evening, ladies and gentlemen, and welcome to the Aon Inc. Q1 2024 earnings conference call. At this time, all lines are in listen 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, May 2nd, 2024. I now would like to turn the conference over to Joseph Mondello, Director of Investor Relations. Please go ahead.

Thank you, operator, and good afternoon, everyone. The press release announcing our first 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 the website as well as on the listen-only webcast. Please go to slide two in the presentation. We begin 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, the Securities Act of 1933, and the Securities and Exchange Act of 1934, each as 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. You are all aware of the inherent difficulties, risks, and uncertainties in making predictive statements. Our press release and form 10Q that we filed this afternoon detail 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 our CEO, Gary Fields, our President and COO, Matt Tobolsky, and our CFO and Treasurer, Rebecca Thompson. Gary will provide some opening remarks. Matt will then provide some commentary on the operations, followed by Rebecca, who will walk through the financials. And we'll finish with Gary, who will update you on the outlook before opening it up to Q&A. With that, I will turn the call over to Gary.

Good afternoon. Let's start on slide three. First quarter performance was mixed relative to our expectations. Bookings remained strong and were in line with our expectations. This was consistent across all three of our segments. Total backlog increased for a second straight quarter. Compared to a year ago, it was down just 6.9%. which is positive considering how abnormally large backlog was when supply chain issues were adversely affecting our lead times. Sales and earnings were a little soft to start the year due to lighter than expected volumes. A large factor to this was timing of backlog conversion at our Aon coil products and basics segments. Order trends at both segments remained solid, though, and backlogs that both increased substantially throughout the quarter. In addition, beyond what is currently in the backlog, both have significant opportunities with the data center market. Thus, while these two segments were a large reason for the soft results in the first quarter, we are very confident both will improve going forward. Despite volumes and production levels being down in the quarter, profit margins were better than we expected. We've executed well from a price-cost perspective while at the same time strategically balancing the price premium of our equipment. Now I'd like you to turn to slide four. Looking forward, we remain cautiously optimistic on the near term while maintaining a bullish outlook on the long term. Our traditional markets remain stable despite high interest rates and other economic headwinds. The sentiment amongst our channel partners is positive and all indications lead us to believe there is strong level of activity within the market. We still think orders could be volatile this year due to the refrigerant transition. However, we also think as we progress further into the year and approach the point in time in which we will be unable to accept orders for R410A equipment, it is likely we see a short-term wave of orders related to projects already designed for 410A refrigerant. At the same time, we are well positioned to take advantage of customers who are seeking the new refrigerant equipment, as we are currently accepting orders for a comparable price to 410A equipment. We are also strategically positioned from a pricing and product development standpoint. Our narrower price premium makes us more competitive, and all indications tell us we're going to be even more competitive from a cost of manufacturing perspective as the markets transition to the lower GWP refrigerant. As far as product development, the advancements of our fully electric heat pump technology, alpha class branded products, positions us extremely well as the industry begins to focus more and more on electrification. Earlier this month, the Department Department of Energy announced a program to expedite development and adoption of cold climate commercial heat pump rooftop units. Aon already has a considerable lead in the advancement of this technology, which will allow us to capitalize on early adopters. Initially, this will most likely be large corporations with wide-ranging footprints of buildings, which would potentially make this a big opportunity for us. Beyond our traditional markets, we are increasingly excited about the data center market and how we can capitalize on the growth cycle of this end market. The pipeline of work over the next several years is immense, and current activity is moving at an aggressive pace. Our engineering and sales teams are executing at a first-class rate. All the feedback we are receiving from our customers leads us to believe we are in the midst of becoming the best-in-class solutions provider for both airside and liquid cooling applications. To best capitalize, we are working diligently to increase our capacity, ensuring we maximize our opportunities. I'll now hand over the call to Matt Tobolsky, who will speak more in depth about our operational strategies.