AAON - NASDAQ

Good afternoon, ladies and gentlemen, and welcome to the AAON, Inc. Fourth Quarter 2023 Earnings Conference Call. [Operator Instructions] This call is being recorded on Thursday, February 29, 2024. I would now like to turn the conference over to Joe Mondillo. 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 close 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 2. 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 as amended. As such, it is subject to the occurrence of many events outside of AAON's control that could cause AAON'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 10-K 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 Gary Fields, CEO; Matt Tobolski, 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 walk-through 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 3. 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 $1 billion 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 am very proud of how our team performed in the last calendar year. Please turn to Slide 4. 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 BASX segment realized a record quarter, both in sales and profits. Net sales in the segment were up 33.6%, and gross profit was up 70.3%. AAON Oklahoma also performed very well. Net sales in 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 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 5. 35 years ago, our founder, Norm Asbjornson, created AAON 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, AAON 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 Tobolski, who will speak more in depth about our operational strategy.

Thank you, Gary. If you turn to Slide 6, last November, we issued a press release announcing several changes to the management structure of the Company. It's been a couple of months since making those changes, and I wanted to start off by providing you with an update. Historically, AAON has had two locations, with the vast majority of sales being generated out of our flagship Tulsa location. We now have a location in Parkville, Missouri, and with the acquisition of BASX, a location in Redmond, Oregon. Over the last year or so, we began integrating common departments across all locations. The goal was to promote collaboration and the sharing of best practices with the intent of maximizing the operational sophistication of the Company. These recent organizational changes will accelerate this integration process, as well as improve our ability to manage the overall enterprise. Furthermore, the locations are beginning to overlap operationally. One notable example of this is allocating some BASX production to our Longview, Texas facility. This began last year, but it will escalate upon the completion of our Longview manufacturing expansion project, which is expected to be complete by the end of this year. These leadership changes will be a huge benefit as production across the locations further emerge. Two months into the change, I could not be more pleased with how things have progressed. In a short period of time, the teams have never been more collaborative and more energized. I'm confident that these changes will have a meaningful impact in the near-term under our current footprint. Although just as important, you should be aware that the intent of this is with long-term in mind. These changes will better position us in the future to grow out of the current footprint in the most efficient way possible. If you will, please turn to Slide 7. I want to touch on some of the main tranches of our operational strategy. As you can see, we have a multifaceted approach when it comes to driving growth. This includes investing profits back into the business, incrementally providing support to our sales channel, developing market-leading products, leveraging secular market trends, and focusing on expanding our parts business. We have several large capital outlays that we are currently in the process of making. Capacity is being increased across all four of our locations. The two main projects are at our Longview, Texas, and Redmond, Oregon facilities. In Longview, we're increasing manufacturing square footage by roughly 50%. This is slated to be finished by the end of this year. And at Redmond, square footage will increase by approximately 15%, with this expected to be finished by the end of third quarter. Both projects will yield much larger percentage increases in sales capacity due to expected increases in productivity. We have several other ongoing projects, and one that I'd like to highlight is the fact that we're building an additional training academy at our Tulsa location. This will be a state-of-the-art facility that will be utilized to train and certify our reps. This is expected to be finished in early 2025. Now, let's transition to our sales channel. As we've spoken to in the past, we have never been more aligned with our channel partners and have never provided them with as much support and resources as we do today. Building this new academy in Tulsa is a perfect example. Likewise, last year, we hosted the grand opening of our Exploration Center, a one-of-a-kind facility at our headquarters that showcases our products alongside market alternative equipment. This is a powerful resource for our sales reps to utilize to help sell the value proposition of AAON equipment, a value proposition that is apparent once a customer walks through that facility. Something that we've also beginning to focus on much more is what we call the complete customer experience. Historically, AAON was primarily a product development company solely focused on designing and manufacturing some of the best HVAC equipment in the world. We want to continue to hold true to that reputation, but we want to also be known for providing a premium customer experience from day one of the sales process through the entire lifecycle of the equipment, including installation, operation, and maintenance. This is an opportunity and one that we're now addressing and adding resources to take advantage of. We're also investing in sales and marketing. Marketing is something that AAON hasn't previously spent a lot of resources on. Although our premium equipment now offers the most compelling value than ever, AAON is still a small company in an industry with much larger players and brands. We think that small investments in marketing will go a long way for us. By getting our name and brand out there more and educating the market about the attractive value proposition of our premium equipment, we expect it will assist our sales rep's success in penetrating the market quicker. This is just another example of how we're incrementally providing support to our sales channel partners. Earlier, Gary mentioned that one of our core missions is to design and manufacture the best HVAC equipment in the world. As we enter 2024, we are leading the industry with two product developments. First, we have been accepting orders for new 454B refrigerant equipment since January 1. Most of the industry won't be offering new refrigerant equipment until the second half of this calendar year. Second, last year, we introduced our newly branded Alpha Class equipment. The Alpha Class is an air-source heat pump powered rooftop unit that is operable down to zero degrees Fahrenheit. No other competitor in the marketplace has such an offering. Most other air-source heat pumps on the market today are operable just down to 25 degrees Fahrenheit to 30 degrees Fahrenheit, giving us an advantage in this ever-increasing part of the market. Sales of this equipment still make up a small percentage of the total sales, but bookings in the second half of 2023 have nearly doubled when compared to the first half of the year for Alpha products, so there is solid momentum thus far. We expect our Alpha Class to fully leverage several secular trends that AAON has already been benefiting from. Again, with an increased focus on decarbonization, electrification, and energy efficiency, as well as the accelerated impact from government regulations, AAON's superior-performing, highly energy efficient equipment is well-positioned to take advantage of such trends. Lastly, I want to touch on AAON's parts and service. Normally, we don't talk much about service because AAON doesn't have a direct service business. However, our reps do provide service that we indirectly benefit from. As we touch on parts, our parts business will be one of AAON's fastest-growing business segments going forward. It will also be our most profitable business. Part sales grew 26.3% in 2023, and we anticipate a strong double-digit growth rate in 2024. We are making several investments to help support this growth. In 2023, parts made up 5.8% of total sales, and we think that we can double this portion of the business in three to four years, at which time it should represent closer to 10% of sales. Now, as we touch on service, as part of our initiative of improving the all-around customer experience, we intend to be much more focused on making sure our reps are providing a premium level of service to our customers. Like most OEM rep firms in any other industry, our reps know the equipment and their customer more than anyone else in the field. As such, to provide the best customer experience, we will instill upon them to provide the best service possible in this offering. In the end, our customers and reps, as well as our business and brand, will benefit substantially. Before handing it off to Rebecca, I will close with this. I'm extremely proud to be part of and help lead this organization. While the growth we've realized over the last two years has been incredible, there is still a lot of work to be done to realize the full potential of this organization. The team has never been more energized, and I look forward to continuing to build upon what we've already accomplished. And with that, I will hand it off to Rebecca, who will walk through financials.

Thank you, Matt. I'd like to begin by discussing the comparative results of the three months ended December 31, 2023, versus December 31, 2022. Please turn to Slide 8. Net sales were up 20.4% to $306.6 million from $254.6 million. Along with the healthy backlog that we entered the quarter with, increased productivity resulted in volume growth of 9.3%. Adjusting total sales for inflation on a per-day, per-production employee basis, sales in the fourth quarter were the best in over two years, reflecting the recognized productivity gains. Pricing was largely the other contributor to growth. On a per-segment basis, BASX net sales in the quarter grew 33.6%, AAON Oklahoma grew 23.4%, while AAON Coil Products declined 17.9%. Moving to Slide 9. Our gross profit increased 42.3% to $111.7 million from $78.5 million. As a percentage of sales, gross profit margin was 36.4% compared to 30.8% in 2022. The year-over-year improvement in gross profit margin was driven by incremental pricing, improved productivity, and higher volumes leveraging our fixed costs. Please turn to Slide 10. Selling, general, and administrative expenses increased 49.8% to $47.9 million from $31.9 million in 2022. As a percentage of sales, SG&A increased to 15.6% of total sales compared to 12.5% in the same period in 2022. The increase in SG&A was due to higher warranty expense and profit-sharing expenses from our increased sales and earnings. Other increases are a result of increased depreciation and amortization and consulting expenses related to investments we're making in back-office technology. Moving to Slide 11. Diluted earnings per share increased 19.1% to $0.56 per share from $0.47 per share. This marked the strongest fourth quarter of EPS in the Company's history. Turning to Slide 12. You'll see our balance sheet remains strong. Cash, cash equivalents, and restricted cash totaled $9 million at December 31, 2023, and outstanding debt on our revolver at the end of the quarter was $38.3 million. Within the quarter, we paid down approximately $40.1 million on our line of credit, lowering our leverage ratio to 0.15 from 0.33 at the end of the third quarter and down from 0.46 at the end of 2022. We had a working capital balance of $282.2 million at December 31, 2023 versus $203.5 million at December 31, 2022. Capital expenditures in 2023 were $104.3 million, up 93.1% from a year ago. As Matt addressed, we have several large capital projects that will increase production capacity, improve productivity, and support future growth. Several of the projects from 2023 will carry over into 2024. This will make for another heavy CapEx year. In 2024, we anticipate capital expenditures to be approximately $125 million. We consistently engage in a rigorous analysis of our capital projects. All the projects included in the budget will help our growth and generate very compelling returns. With that, I'd now like to turn the call back over to Gary.

As I stated in my opening remarks, bookings in the fourth quarter improved sequentially for a second straight quarter and outpaced production in the fourth quarter. As a result, we realized a modest quarter-over-quarter increase in the backlog. Year-over-year, backlog was down modestly, but this was intentional to right-size lead times. For several months now, our lead times have been back to normal. Conversely, much of the industry still seems to be focused on bringing lead times down from elevated levels. Overall, the market environment seems to be resilient, despite what the headlines and some of the macroeconomic indicators have been signaling for some time now. Month-to-month, bookings have been steady, and sentiment amongst our sales channel remains positive. Furthermore, the pipeline of large projects, particularly at our BASX and AAON Coil Products segments is robust. Certain verticals, such as data centers, manufacturing, and education remain strong, while some of our traditional markets, such as office buildings and retail, are soft. The non-residential construction market seems to be slowing as a whole, but it's definitely bifurcated. In addition to a slowing construction market, there's the uncertainty of how the market, especially the replacement market, will behave related to the refrigerant transition. So far, two months into this year, this doesn't seem to have had an impact yet. That said, we still anticipate, for at least a short period of time in the middle part of the year, that some customers may choose to delay replacing their units, waiting for new refrigerant equipment. If this does happen, it will be a much bigger impact to the overall market than to us, as most of our equipment has been configurable with the new refrigerant since January 1 of this year. Given that, we are in an advantageous position if the market chooses to shift to new refrigerant equipment early in the year. There's also a possibility that much of that market overlooks the long-term maintenance cost of buying equipment with the old refrigerant, and we see a much more muted effect. Either way, we're prepared with respect to manufacturing capabilities and with respect to our supply chain of the new refrigerant components. All considered, we anticipate 2024 will be a slower growth year than we've experienced in the last couple of years. Not only do we have tougher comps that we are facing, but the economy and the non-residential construction sector is softer than a year ago. Turning to the outlook. Please turn to Slide 14. For 2024, we anticipate pricing will be a mid-single-digit contributor to sales growth, and we look for volume growth to be in the low single digits. We'd expect gross margin will be up year-over-year, mainly due to the favorable comp in the first quarter. For SG&A, as a percentage of sales, we look for these expenses to be modestly up compared to 2023. As Rebecca stated, CapEx will be in the $125 million range. I would also like to remind you of the seasonality that we typically see in the first quarter. We expect both sales and earnings in the first quarter will be down when compared to the fourth quarter of 2023. Year-over-year, we expect both sales and earnings in the first quarter to be up modestly. In closing, I want to finish by thanking all of our employees, sales channel partners, and customers. I also want to announce that we will be attending Sidoti & Company's Virtual Small-Cap Conference on March 13, Wolf Research's Small and Mid-Cap Conference in New York on June 4, and Wells Fargo's Industrials Conference in Chicago on June 12. I hope to see some of you at these events. Thank you, and I will now open up for Q&A.

[Operator Instructions] Your first question comes from the line of Chris Moore from CJS Securities. Please go ahead.

Hi, good afternoon, guys. Congratulations on another incredible quarter.

Thank you.

It looks like BASX is really hitting on all cylinders. I wonder if maybe we can focus on the data center market a little bit. So I know you had -- in the past, you had broken out addressable market, roughly $30 billion data center cooling being about $6.5 billion of that. AI is driving data center growth rapidly over the next five, 10 years. I wonder if Matt could just talk about -- a little bit about what you're seeing from -- on the AI front and what areas that you are especially well positioned for right now?

It's a fantastic question, Chris. And certainly data centers as a whole market is certainly driving a tremendous amount of growth within AAON. Just as a data point, just above 10% of our revenue in 2023 came from the data center market, where in that same period over 20% of our bookings for new orders came out of data centers. So strong demand being pushed from that marketplace within our business. And as we look forward, we're well-positioned from a product perspective and relationship perspective to really support the broad data center market. So we are actively involved in more traditional airside cooling solutions, but are also very, very actively engaged in liquid cooling applications, being driven by that high-density AI application. So as we look forward, a lot of the capital investment we talk about, a lot of the growth we talk about within the AAON Coil Products Group out of Longview is actually going to materialize in the midterm. It's going to materialize being primarily data center products. So we're making the investments across the fleet to really support this marketplace, as well as the product development efforts to really be well positioned from a solutions perspective.

Got it. Very helpful. And just -- I think Gary hit on this, but from just a general visibility standpoint, when you see where you are today versus this time last year, significantly different or similar and anything that has changed over the last three to four months that you're seeing now you might not have seen then?

Go ahead, Matt.

Yes. I was going to say just for me, what's changed over the last three to four months, the market dynamics, we certainly had plenty of conversation and macroeconomic indicators. And we've talked about in the last three to four months and really still see it today that a lot of the trends that some of the indicators are putting out there. Really, the market is a little bit stronger and basically resilient against some of those indicators. So we continue seeing -- we don't see the slowdown that some of those indicators are alluding to. We certainly see some softness in the marketplace, but really over the last three to four months compared to today, we're still seeing that kind of strength in the market. I would say, certainly as we talk about the data center market in particular, we certainly three to four months ago and really this compared to this time last year for sure are seeing an acceleration of investment. We definitely are seeing the amount of investment being made in that sector continuing to accelerate and really driving a lot of growth in the overall HVAC market as a whole, which, again, we're making the investments and ensuring that we have the products that really properly position us to be successful there. But I'd say no real major changes in the overall landscape in that last three to four month timeframe.

I'd like to add just one thing. AHRI furnishes data to us indicating what the overall market is and then what our market share is. The overall market has continued to soften just a little bit, but our market share continues to increase, and this has been many quarters in a row now.

That is terrific. Any specifics that you could add there or...

Well, I would say that they're in the mid-sized tonnages and larger for unit sizes. The two ton through five ton units is preponderance of all rooftop units manufactured as far as number of units. And we have a small percentage in that. Once you get up in above five tons, but particularly 20 tons to 40 tons, our market share becomes very, very substantial.

Terrific. I will leave it there. I really appreciate it, guys.

Thank you. And your next question comes from the line of Julio Romero from Sidoti & Company. Please proceed.

Hi, good afternoon, everyone. You mentioned you've already begun accepting orders for equipment that can use the new refrigerant as of January 1, I believe. Can you -- when do you expect to begin delivering those orders and how much of the sales guidance is driven by that new equipment that uses the new refrigerant?

Yes, from a quantity of orders received. We just opened up the opportunity to place orders at the beginning of January. So we have certainly started to see orders being placed with the new refrigerant. Those from a delivery perspective are going to be more in the end of Q2 timeframe, just from a component availability perspective. It's a little bit more extended lead time compared to 410A products, but those will start converting to shipments in that Q2 timeframe. Gary mentioned in the main narrative, the -- there's certainly a lot of uncertainty around exactly how the adoption or timing of adoption of the new refrigerant equipment is going to come into play throughout the calendar year. I think, though, again, to the point, we certainly see ourselves best positioned from an ability to deliver both the 410A and 454B products within that, I'll say, noisy period of middle of the year. And so while we do see potential for some noise to be in that midyear order trend driven by the changeover, we certainly have the product portfolio to support it. And we expect to see increasing sales conversion, obviously, as we progress through the year. But definitely in the latter half of the year, expect to see a substantial contribution from new refrigerant equipment orders.

I want to add just a little to that. Our extremely close relationship with our sales channel allows us a lot better view of what the customer is looking to do with regards to this refrigerant change. And so I feel like that we can pivot and respond very, very quickly and have the appropriate inventory of these components ready to go as a result of that.

Okay. Understood. So deliveries begin to Q -- the guide is expecting some delayed replacement happening in the back half of maybe orders accelerating. But that would benefit '25 from a delivery standpoint.

Yes. Certainly, '25 is -- it's that kind of lead-up in the second half. But to your point, we do expect to see that velocity really accelerating in the second half of the year from orders and really conversion to sales as well.

Okay. Got it. That's helpful. And Matt, you talked about the capital investments into Longview and Redmond. It should be finished by 4Q and 3Q of this year. Any way to help us conceptualize how much increased capacity results from those investments?

That's a great question, Julio. And I'll say it's a very product mix dependent answer to that. But the investments that are being made are being made with the ability to really capitalize on the large volume growth within data center sales. And so I would just leave it at with the product mix potential. In other words, low variability, high volume data center solutions. There is a substantial upside potential relative to the investment costs or relative to the capacity increase from a square footage perspective, given that product mix potential.

Got it. Very helpful. I'll pass it on. Thanks very much.

Thank you. And your next question comes from the line of Brent Thielman from D.A. Davidson. Please go ahead.

Hi, great. Thanks. Gary or Matt, can you just update us on the pricing strategy? I think you were out with 1% increases a month. Where you're at today and where you plan to go going forward?

Sure. I'll take that one real quick. So we began those -- let's see. I think it was October, October, November, December, January, February. Yes, we began those October 1 and we continued through February 1. And at this point in time, we don't have any direct intent of continuing. Now, we reserve the right to change our minds should something change in the world. But as we see it right now, we've secured the gross margin targets that we intend to maintain. And while our gross margin might vary a little because of volume and absorption of fixed cost, it's not -- we're not having any problems with labor or material costs beyond what we had already estimated recovering with those [5.1 per centers]. So at this point in time, I think we're good to go for a while.

Okay. Gary, any rough sense of where that kind of bridge is relative to the industry from a pricing perspective? I know you've talked about that in the past, but where does that sit today from where you can see?

Well, I don't have anything different than what I've been saying, that we used to be around 15%. As a result of the 2023 energy standard, everybody had to come up closer to us. We were still above that standard, but they had to come up very close to us. And there was cost associated with that. So that narrowed the gap to somewhere around 8% to 10%, probably closer to 10%. Now, we'll have some empirical evidence of that here very, very soon, because a lot of school districts will position their bid documents such that they'll say, Basis of Design, Base Bid is AAON. Give us an add or deduct for these other manufacturers. And that's one of the primary places that we pick up real empirical data on that. We get some other more subjective data from our reps. They'll say, well, we got this job, and the best that anybody could align with us was X. And this looks like what our premium was. But oftentimes, the bill of materials doesn't match really well. So, like I say, it's a bit subjective. But we're still thinking we're around 8% to 10%. Now, with the conversion to R-454B, or call it the new refrigerant, because Daikins use an R32 is my understanding. There are some manufacturers that have been very open about the fact that they're going to have to charge more money for that. We've been equally open about it that we don't see that in our materials cost or development cost or anything like that. So, at this point in time, we don't have any change in price to go from 410A to 454B. So, if these other manufacturers have additional cost to do that, that could narrow this gap just a bit more.

Okay. The mid-single-digit price expectation for this year is reflective of what you've done to date?

Yes.

Maybe there's upside if you decide to resume. Got it. Okay.

Yes.

And then back on BASX. Data centers looks like it's growing very nicely. It looks like the clean room system is a little slower, just parsing through the different product lines. Is that a function of you allocating more resources to the data center market right now, just given how strong it is? Is it just timing? And I guess, is there any line of sight with the CHIPS Act to see that part of the business accelerate?

Yes. We certainly saw the semiconductor clean room market conversion of the new facility construction be slower than was originally expected. So we've definitely seen that investment be a little bit slower out of the gate. But certainly, on the data center side, one of the advantages of data centers' ability to grow from a revenue perspective is the single design high repetition that allows us to really scale that production up faster. And so we're really able to optimize manufacturing processes and really drive efficiency and productivity with that product type. So that has really helped --the combination of those two factors has really helped the data center market really outpace the clean room market within the BASX segment from a growth perspective.

Got it. Thanks, Matt. And then just the last one, the Coil Products division or Longview, I think you've had maybe some inefficiencies there just as you're sort of implementing BASX. Obviously, you've got a huge expansion you're working on. I'm sure that's created a few things to work through. What's embedded in this outlook for this year just in terms of that division?

Yes. Just from a very valid point, from a standpoint of there's a lot of stuff going on down within the Longview facility itself, as we look at converting a lot of these investment efforts, they're definitely not a flip of switch. And so as we look at bringing online the new facility expansion and moving some more BASX production lines down to that facility, that really, from a 2024 perspective, is not going to materialize huge impacts in the numbers. That investment and that real growth is going to really materialize in 2025 revenue and sales. And so, really, the 2024 outlook, or at least the expectation out of Longview, is growth, but definitely not the dynamic growth we expect when a lot of that capacity comes online. And we can really start bringing some more production capacity in the data center market and meaningfully impact the results there.

Got it. Understood. Thank you.

Thank you. [Operator Instructions] There are no further questions at this time. Mr. Mondillo, please proceed.

All right. Thank you, everyone, for joining on today's call. If anyone has any questions over the coming days and weeks, please feel free to reach out to myself. Have a great rest of the day, and we look forward to speaking with you in the future. Thank you.