AAON, Inc.

Good morning, ladies and gentlemen, and welcome to the AAON, Inc., fourth quarter 2004 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. For the call, or for this call, is being recorded on Thursday, February 27, 2025. I would now like to turn the conference over to Joseph Mondillo, Director of Investor Relations. Please go ahead.

Thank you, Operator, and good morning, everyone. The press release announcing our fourth quarter financial results was issued earlier this morning 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 go 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, 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 all are aware of the inherent difficulties, risks, and uncertainties in making predictive statements. Our press release in Form 10-K that we filed this morning 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 Tobolski, President and COO, and Rebecca Thompson, CFO and Treasurer. Gary will start off with some opening remarks. Rebecca will follow with a walkthrough of the quarterly results. Matt will then provide further details on the segments and about our operational strategy. And before taking questions, Gary will finish with our 2025 outlook and closing remarks. With that, I will turn the call over to Gary.

Prior to diving into the results, I want to briefly address the news that we announced last week related to CEO succession. As many of you know by now, I will be stepping down as CEO at our annual stockholders meeting on May 13th and Matt Tobolski will be taking over the role. I will remain on the board and I also will become a special advisor to the company to ensure a smooth transition. Years ago, I was very transparent that a part of my strategy with the company was to put together such a strong leadership team that my services as leader will not be required any further. We've reached that point. The team that we have put together over the last several years has been tested in many ways and has proven to be incredibly capable. I can confidently say this is the strongest leadership team this company has ever seen. Since the end of 2023, Matt has been leading the team and fully managing the day-to-day operations. Over this time, I took a step back from the day-to-day. I could not be happier how the team performed throughout this transition, giving me the utmost confidence that this is the right timing for this. Matt is an extremely talented individual with a huge skill set. His bandwidth is incredibly large, and he is a very effective leader. I have strong conviction he will be very successful, and that this transition will be extremely smooth. Now, please turn to slide three. As we look back on 2024, it was a year of both triumphs and obstacles. Early in the year, we were coming off of a two year stretch of extremely strong organic volume growth and share gains. We said at the time that in addition to the year over year comps being tough, that 2024 was going to be a slower year Due to uncertainties and challenges related to the refrigerant transition, along with weaker macroeconomic conditions in the traditional nonresidential construction market. While not everything went exactly how we expected, from an organic revenue standpoint, it was a flattish year, which was generally in line with our projections. Peeling back the onion, there were a lot of puts and takes. The Basics brand had a tremendous year, driven by robust demand from the data center market and strong execution from our engineering and sales teams. The brand made a significant impact on the data center market with the industry's first large-scale development and sale of a custom-designed liquid cooling solution. At the same time, sales of its airside data center cooling equipment maintained exceptional performance. Net sales of BASICS branded equipment for the year were up 35.1%. And within that, BASICS branded data center equipment sales were up approximately 85%. Bookings of BASICS branded equipment in 2024 were up approximately 100%. This performance led to the company's total backlog finishing the year up 70%. The Aon brand faced a more challenging year due to disruptions caused by the refrigerant transition and weaker non-residential construction activity. These headwinds resulted in softer demand and created challenges within production planning. Despite the obstacles, sales of Aon branded equipment were down just modestly in the low single digits. Bookings of Aon branded equipment was up in the mid-teens and backlog at the end of the year of Aon Branded Equipment was up approximately 20%. Considering the tough year-over-year comps combined with the headwinds, we deem the year to be a success.