AAON, Inc. (NASDAQ:AAON) Q4 2022 Earnings Call Transcript

Matt Tobolski: Just adding a little more context as well. The — from a parts perspective, as Rebecca mentioned, there’s continuing maintenance that goes on from a product engineering and manufacturing perspective as we kind of see these constraints coming ahead of us. The team is extremely nimble and continues to be extremely nimble in assessing the impacts of potential shortages. And proactively, basically, looking at the equipment design and configurations and alternate sourcing options and is in a continuous mode of basically redesign and modification to essentially address some of the supply chain constraints that we’re experiencing. We also are very positively impacted by the fact that we are, as an organization, heavily integrated from a vertical perspective.

And so, items such as the manufacturing of coil is a big example, but extending that further the production of fans and fan assemblies is a huge differentiator for us in the marketplace. And so, as we look at motor, motor constraints, motor technology constraints, electronic component constraints that are impacting a lot of our other competition. Our team has been very good at assessing alternate technologies or basically looking at ultimate vendors, coupled with the fact that we are manufacturing fans as an example, to really mitigate the overall impact in our deliverability and costing.

Jean Ramirez: Thank you. And just regarding your 2023 model assumptions of gross profit margin, could you perhaps like talk about what leads us to improvement from Q4 of 2022. And circling back to, can you sustain this 28% to 32% gross margins through 2023? Thank you.

Rebecca Thompson: Go ahead, Matt.

Matt Tobolski: Yes, so we finished off Q4 just in the 30% range. But as we look at the backlog and the strength of the backlog from a gross profit margin perspective, we have an understanding of kind of the improving gross profit profile that exists inside of there. Coupling that with the, I’ll say, production and volatility in the supply chain side of things, obviously, not absolute reduction in volatility, but certainly waiting a bit, is providing some higher confidence as we continue monitoring overall cost inputs. With the continuing 1% price increases that Rebecca mentioned earlier, we have the ability to absorb some of the additional inflationary pressures without impacting margin on a high level. So, as we go forward, we see from a modeling perspective and from kind of the strength of our backlog and the inputs that we have a solid understanding of that we’ll continue to see some increase in overall margin as we progress throughout the year.

Jean Ramirez: Great. Thank you. I’ll hop back into the queue. Appreciate it.

Matt Tobolski: Thank you.

Operator: Your next question will come from Chris Moore with CJS Securities.

Chris Moore: Good afternoon guys. Thanks for taking questions. So yes, maybe back to the guide for a second. Obviously, volume was very strong, Any thoughts in terms of volume growth for 2023 with those comps in mind kind of a range?

Joseph Mondillo: Yes, hey Chris, this is Joe. So, we’re not giving volume guidance at this point in time. We gave you the price contribution to help you sort of narrow price out of the equation. And then where our backlog is and the trend of our volumes are, and you can sort of put two and two together, but at this point in time, we’re not providing volume guidance.

Chris Moore: Okay. And anything else that you could say on that front just in terms of maybe puts and takes. Why — I’m just not sure where to head at this moment, why low single-digit would make — wouldn’t make sense why just any other color there that you might be able to provide?