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AAON REPORTS RECORD SALES & EARNINGS FOR THE SECOND QUARTER OF 2023

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TULSA, Okla., Aug. 3, 2023 /PRNewswire/ -- AAON, INC. (NASDAQ-AAON), a provider of premier, configurable HVAC solutions that bring long-term value to customers and owners, today announced its results for the second quarter of 2023. 

Net sales for the second quarter of 2023 increased 36.0% to a record $284.0 million from $208.8 million in the second quarter of 2022. Organic volume growth contributed approximately 16.0% to year over year growth. Volume growth reflects the efficiencies gained from developing our workforce and lessening impacts of supply chain disruption. Additionally, pricing comprised 20.0% of growth.   

Gross profit margin in the quarter increased to 33.1%, up 1,040 basis points from the comparable quarter in 2022.  The primary driver for the higher profit margin was better pricing along with moderating cost inflation.  

As a percent of sales, SG&A expenses increased 90 basis points to 13.8%. The slight increase in SG&A expenses as a percent of sales is primarily due to our profit sharing expense that has increased due to our record earnings in the quarter.  Earnings per diluted share for the three months ended June 30, 2023, was $0.82, an increase of 173.3% from the second quarter of 2022.  The Company recognized a one-time income tax benefit of $3.1 million from the change in our valuation allowance during the current quarter that contributed to the increase to net income for the period. 

Financial Highlights:

Three Months Ended 
 June 30,


%




Six Months Ended 

 June 30,


%


2023


2022


Change




2023


2022


Change


(in thousands, except share and per share
data)




(in thousands, except share and per share
data)

GAAP Measures














Net sales

$    283,957


$    208,814


36.0 %




$    549,910


$    391,585


40.4 %

Gross profit

$      94,018


$      47,376


98.5 %




$    171,172


$      93,440


83.2 %

Gross profit margin

33.1 %


22.7 %






31.1 %


23.9 %



Operating income

$      54,740


$      20,453


167.6 %




$      98,946


$      43,463


127.7 %

Operating margin

19.3 %


9.8 %






18.0 %


11.1 %



Net income

$      45,682


$      15,946


186.5 %




$      82,496


$      34,005


142.6 %

Earnings per diluted share

$          0.82


$          0.30


173.3 %




$          1.48


$          0.63


134.9 %

Diluted average shares

55,646,387


53,661,876


3.7 %




55,652,332


53,944,616


3.2 %
























Non-GAAP Measures














EBITDA1

$      65,865


$      29,897


120.3 %




$    120,459


$      60,004


100.8 %

EBITDA margin1

23.2 %


14.3 %






21.9 %


15.3 %




1 These are non-GAAP measures. See "Use of Non-GAAP Financial Measures" below for reconciliation to GAAP measures.

Backlog

June 30, 2023


March 31, 2023


June 30, 2022

(in thousands)

$              526,209


$                      599,912


$              464,025

The Company finished the second quarter of 2023 with a backlog of $526.2 million, up 13.4% from $464.0 million a year ago, and down from $599.9 million at the end of the first quarter of 2023. 

Gary Fields, President and CEO, stated, "After investing in significant amounts of new manufacturing capacity over the previous two years, production output began to outpace bookings in the second quarter, allowing for the size of our backlog and the length of our lead times to start to normalize.  At June 30, 2023, backlog was down 12.3% from the end of the first quarter, ending a streak of nine straight quarters of backlog growth.  While the backlog size and lead times are still higher than we would like them to be, we are pleased at the progress we are making and anticipate further progress in the second half of the year.  This will enable us to be even more competitive with bookings as well as help improve operational efficiencies.  In the quarter, we held the grand opening of our new marketing building, in Tulsa, also known as the Exploration Center.  This facility will also help further our efforts of taking market share.  Overall, while there are pockets of softness amongst some of our end-markets, the pipeline of projects is solid and our sales channel remains positive."     

Mr. Fields continued, "Our sales channel has never been stronger and our new marketing efforts will help continue to strengthen market penetration.  In the third quarter of this year, we anticipate the sales and marketing roll out of our industry-leading class of air-source heat pumps, appropriately referred to as ALPHA Class. The AAON ALPHA Class was engineered to help accelerate the widespread adoption of cleaner, more-efficient heat pump technology – and will continue to set the standard for high-performance air-source heat pumps in the commercial and industrial HVAC industry."

Mr. Fields concluded, "The second quarter of 2023 was another excellent quarter for AAON as both sales and earnings were company records.  Volume growth of 16.0% was impressive considering the year ago comparable quarter also realized volume growth in the double digits.  As we've discussed for some time now, AAON has been very successful in hiring and retaining employees.  We've added the additional employees needed to increase our run rate and as more time goes by, we anticipate continued margin improvement created from a fully trained, more experienced workforce as well as better overhead absorption from additional production volume."      

As of June 30, 2023, the Company had cash, cash equivalents and restricted cash of $27.7 million and a balance of $78.5 million on the revolving credit facility. Rebecca Thompson, CFO, commented, "Higher earnings and collection of customer prepayments increased our cash provided by operating activities in the quarter to $55.1 million compared to $5.2 million in the second quarter of 2022.  The closing of our New Markets Tax Credit during the quarter generated cash of $6.1 million and we expect to release funds from restricted cash in the fourth quarter, which will accelerate the payments on our revolving credit facility.  Capital expenditures in the quarter were $31.7 million due to our continuous investment at all locations.  Our balance sheet remains strong with a current ratio of 2.8 and a leverage ratio of 0.37, creating a strong foundation for our future growth." 

Conference Call
The Company will host a conference call and webcast today at 5:15 P.M. ET to discuss the second quarter 2023 results and outlook. The conference call will be accessible via dial-in for those who wish to participate in Q&A as well as a listen-only webcast.  The dial-in is accessible at 1-877-550-1858 with the conference ID 1754341.  To access the listen-only webcast, please register at https://app.webinar.net/q12AjXYVoQ8. On the next business day following the call, a replay of the call will be available on the Company's website at https://AAON.com/Investors.

About AAON
Founded in 1988, AAON is a world leader in HVAC solutions for commercial and industrial indoor environments. The Company's industry-leading approach to designing and manufacturing highly configurable equipment to meet exact needs creates a premier ownership experience with greater efficiency, performance and long-term value. AAON is headquartered in Tulsa, Oklahoma, where its world-class innovation center and testing lab allows AAON engineers to continuously push boundaries and advance the industry. For more information, please visit www.AAON.com.

Forward-Looking Statements

This press release includes "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as "expects", "anticipates", "intends", "plans", "believes", "seeks", "estimates", "should", "will", and variations of such words and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions, which are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date on which they are made. We undertake no obligations to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise. Important factors that could cause results to differ materially from those in the forward-looking statements include (1) the timing and extent of changes in raw material and component prices, (2) the effects of fluctuations in the commercial/industrial new construction market, (3) the timing and extent of changes in interest rates, as well as other competitive factors during the year, and (4) general economic, market or business conditions.

Contact Information
Joseph Mondillo
Director of Investor Relations
Phone: (617) 877-6346
Email: joseph.mondillo@aaon.com

 

AAON, Inc. and Subsidiaries

Consolidated Statements of Income

(Unaudited)










Three Months Ended 
 June 30,


Six Months Ended 
 June 30,


2023


2022


2023


2022


(in thousands, except share and per share data)

Net sales

$                 283,957


$                 208,814


$            549,910


$            391,585

Cost of sales

189,939


161,438


378,738


298,145

Gross profit

94,018


47,376


171,172


93,440

Selling, general and administrative expenses

39,272


26,933


72,214


49,989

Loss (gain) on disposal of assets

6


(10)


12


(12)

Income from operations

54,740


20,453


98,946


43,463

Interest expense, net

(1,543)


(550)


(2,693)


(740)

Other income, net

163


220


277


241

Income before taxes

53,360


20,123


96,530


42,964

Income tax provision

7,678


4,177


14,034


8,959

Net income

$                   45,682


$                   15,946


$              82,496


$              34,005

Earnings per share:








Basic

$                       0.84


$                       0.30


$                  1.52


$                  0.64

Diluted

$                       0.82


$                       0.30


$                  1.48


$                  0.63

Cash dividends declared per common share:

$                       0.12


$                       0.19


$                  0.24


$                  0.19

Weighted average shares outstanding:








Basic

54,293,127


53,095,286


54,175,682


52,992,439

Diluted

55,646,387


53,661,876


55,652,332


53,944,616


 

AAON, Inc. and Subsidiaries

Consolidated Balance Sheets

(Unaudited)


June 30, 2023


December 31, 2022

Assets

(in thousands, except share and per share data)

Current assets:




Cash and cash equivalents

$                     5,237


$                          5,451

Restricted cash

22,428


498

Accounts receivable, net of allowance for credit losses of $306 and $477, respectively

154,111


127,158

Income tax receivable

2,699


Inventories, net

215,408


198,939

Contract assets

19,862


15,151

Prepaid expenses and other

4,466


1,919

Total current assets

424,211


349,116

Property, plant and equipment:




Land

15,291


8,537

Buildings

187,237


169,156

Machinery and equipment

370,414


342,045

Furniture and fixtures

38,344


30,033

Total property, plant and equipment

611,286


549,771

Less:  Accumulated depreciation

263,890


245,026

Property, plant and equipment, net

347,396


304,745

Intangible assets, net

62,803


64,606

Goodwill

81,892


81,892

Right of use assets

7,378


7,123

Other long-term assets

6,371


6,421

Total assets

$                 930,051


$                     813,903





Liabilities and Stockholders' Equity




Current liabilities:




Accounts payable

$                   32,210


$                        45,513

Accrued liabilities

101,201


78,630

Contract liabilities

20,262


21,424

Total current liabilities

153,673


145,567

Revolving credit facility, long-term

78,536


71,004

Deferred tax liabilities

14,223


18,661

Other long-term liabilities

11,364


11,508

New market tax credit obligation

12,144


6,449

Commitments and contingencies




Stockholders' equity:




Preferred stock, $.001 par value, 5,000,000 shares authorized, no shares issued


Common stock, $.004 par value, 100,000,000 shares authorized, 54,379,324 and 53,425,184 issued and outstanding at June 30, 2023 and December 31, 2022, respectively

218


214

Additional paid-in capital

128,636


98,735

Retained earnings

531,257


461,765

Total stockholders' equity

660,111


560,714

Total liabilities and stockholders' equity

$                 930,051


$                     813,903





 

AAON, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(Unaudited)


Six Months Ended 
 June 30,


2023


2022

Operating Activities

(in thousands)

Net income

$                   82,496


$                   34,005

Adjustments to reconcile net income to net cash provided by operating activities:




Depreciation and amortization

21,236


16,300

Amortization of debt issuance cost

32


21

Amortization of right of use assets

67


143

(Recoveries of) provision for credit losses on accounts receivable, net of adjustments

(171)


181

Provision for excess and obsolete inventories, net of write-offs

1,458


148

Share-based compensation

7,823


6,908

Loss (gain) on disposition of assets

12


(12)

Foreign currency transaction (gain) loss

(13)


9

Interest income on note receivable

(10)


(11)

Deferred income taxes

(4,438)


(127)

Changes in assets and liabilities:




Accounts receivable

(26,782)


(53,736)

Income tax receivable

(15,171)


(1,895)

Inventories

(17,927)


(33,879)

Contract assets

(4,711)


(2,820)

Prepaid expenses and other long-term assets

(2,502)


(3,066)

Accounts payable

(14,874)


6,490

Contract liabilities

(1,162)


22,217

Extended warranties

1,526


421

Accrued liabilities and other long-term liabilities

33,051


7,123

Net cash provided by (used in) operating activities

59,940


(1,580)

Investing Activities




Capital expenditures

(60,629)


(27,227)

Cash paid for building


(22,000)

Cash paid in business combination, net of cash acquired


(249)

Proceeds from sale of property, plant and equipment

104


12

Principal payments from note receivable

28


27

Net cash used in investing activities

(60,497)


(49,437)

Financing Activities




Proceeds from financing obligation, net of issuance costs

6,061


Payment related to financing costs

(398)


Borrowings under revolving credit facility

279,961


94,900

Payments under revolving credit facility

(272,429)


(28,651)

Principal payments on financing lease


(28)

Stock options exercised

23,244


6,385

Repurchase of stock


(5,912)

Employee taxes paid by withholding shares

(1,162)


(954)

Cash dividends paid to stockholders

(13,004)


Net cash provided by financing activities

22,273


65,740

Net increase in cash, cash equivalents and restricted cash

21,716


14,723

Cash, cash equivalents and restricted cash, beginning of period

5,949


3,487

Cash, cash equivalents and restricted cash, end of period

$                   27,665


$                   18,210

Use of Non-GAAP Financial Measures

To supplement the Company's consolidated financial statements presented in accordance with generally accepted accounting principles ("GAAP"), additional non-GAAP financial measures are provided and reconciled in the following tables. The Company believes that these non-GAAP financial measures, when considered together with the GAAP financial measures, provide information that is useful to investors in understanding period-over-period operating results. The Company believes that this non-GAAP financial measure enhances the ability of investors to analyze the Company's business trends and operating performance as they are used by management to better understand operating performance. Since EBITDA and EBITDA margin are non-GAAP measures and are susceptible to varying calculations, EBITDA and EBITDA margin, as presented, may not be directly comparable with other similarly titled measures used by other companies.

EBITDA

EBITDA (as defined below) is presented herein and reconciled from the GAAP measure of net income because of its wide acceptance by the investment community as a financial indicator of a company's ability to internally fund operations. The Company defines EBITDA as net income, plus (1) depreciation and amortization, (2) interest expense (income), net and (3) income tax expense. EBITDA is not a measure of net income or cash flows as determined by GAAP. EBITDA margin is defined as EBITDA as a percentage of net sales.

The Company's EBITDA measure provides additional information which may be used to better understand the Company's operations. EBITDA is one of several metrics that the Company uses as a supplemental financial measurement in the evaluation of its business and should not be considered as an alternative to, or more meaningful than, net income, as an indicator of operating performance. Certain items excluded from EBITDA are significant components in understanding and assessing a company's financial performance. EBITDA, as used by the Company, may not be comparable to similarly titled measures reported by other companies. The Company believes that EBITDA is a widely followed measure of operating performance and is one of many metrics used by the Company's management team and by other users of the Company's consolidated financial statements.

The following table provides a reconciliation of net income (GAAP) to EBITDA (non-GAAP) and for the periods indicated:


Three Months Ended 
 June 30,


Six Months Ended 
 June 30,


2023


2022


2023


2022


(in thousands)

Net income, a GAAP measure

$               45,682


$               15,946


$         82,496


$         34,005

Depreciation and amortization

10,962


9,224


21,236


16,300

Interest expense, net

1,543


550


2,693


740

Income tax expense

7,678


4,177


14,034


8,959

EBITDA, a non-GAAP measure

$               65,865


$               29,897


$       120,459


$         60,004

EBITDA margin

23.2 %


14.3 %


21.9 %


15.3 %

 

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SOURCE AAON

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Building Products & Equipment
Air-cond & Warm Air Heatg Equip & Comm & Indl Refrig Equip
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United States of America
TULSA