AAON, Inc. (NASDAQ:AAON) reported a miss in its Q3 2023 earnings expectations during its earnings call, with an EPS of $0.00058 against the anticipated $0.55. Despite this, the company recorded record sales for the seventh consecutive quarter, driven by robust demand leading to an organic volume increase of 11.9% year-over-year and a 70.6% EPS growth to $0.58 per diluted share.
The operations team at AAON successfully ramped up production capacity to meet this demand, reducing lead times to normal levels. The market environment remains favorable for AAON's high-quality custom equipment that aligns with the market's focus on decarbonization and energy efficiency.
Several of AAON's markets including data centers, semiconductor manufacturing, general manufacturing, and education remain strong despite economic uncertainties and some softening in certain end markets. Net sales increased by 28.6% to $312 million from $242.6 million as a result of improved operational efficiencies and fewer supply chain disruptions.
Gross profit rose by 77% to $116.1 million from $65.6 million owing to increased pricing, improved operational efficiencies, and fixed cost absorption. However, selling, general, and administrative expenses increased 78.2% to $51.5 million from $28.9 million in Q3 2022 due to a one-time settlement fee of $7.5 million.
The company maintains a strong balance sheet with cash and cash equivalents totaling $22.5 million as of September 30, 2023, and debt at the end of the quarter totaling $78.4 million. Capital expenditures for the first nine months of the year were $82.9 million, marking an increase of 99.3% from a year ago.
Looking ahead to 2024, AAON anticipates another solid year of growth. All its equipment in the electronic catalog is already available with the new refrigerant in response to upcoming refrigerant regulations effective in 2025. The company also plans to continue its investment in sales and marketing efforts.
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