EX-99.1 2 aaonq12023pressreleaseexs.htm EX-99.1 Document

Exhibit 99.1                        
aaona05.jpg

AAON REPORTS RECORD SALES & BACKLOG
FOR THE FIRST QUARTER OF 2023

TULSA, OK, May 4, 2023 - 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 first quarter of 2023.

Net sales for the first quarter of 2023 increased 45.5% to a record $266.0 million from $182.8 million in the first quarter of 2022. Organic volume growth and product mix contributed approximately 23.5% to year over year growth. Volume growth reflects the increased production output resulting from the Company's success in attracting and retaining employees along with continuously adapting our production in order to manage parts shortages. Additionally, we continue to realize more pricing each month with pricing comprising 22.0% of growth.

Gross profit margin in the quarter increased to 29.0%, up 380 basis points from the comparable quarter in 2022. Price increases implemented over the last year combined with moderating cost inflation were the driving factors to the gross profit margin expansion.

Earnings per diluted share in the first quarter of 2023 increased 103.0% to a record $0.67 from $0.33 in the first quarter of 2022. The increase in earnings was primarily due to robust volume growth and improved gross profit margin. As a percent of sales, SG&A expenses were 12.4%, down 20 basis points from the first quarter of 2022. Lastly, our stellar stock performance in the first quarter resulted in a large excess tax benefit of $3.8 million.

Financial Highlights:Three Months Ended 
 March 31,
%
20232022Change
(in thousands, except share and per share data)
GAAP Measures
Net sales$265,953 $182,771 45.5 %
Gross profit77,154 46,064 67.5 %
Gross profit margin29.0 %25.2 %
Operating income$44,206 $23,010 92.1 %
Operating margin16.6 %12.6 %
Net income36,814 18,059 103.9 %
Earnings per diluted share$0.67 $0.33 103.0 %
Diluted average shares55,240,63853,950,9952.4 %
Non-GAAP Measures
EBITDA1
$54,594 $30,107 81.3 %
EBITDA margin1
20.5 %16.5 %
1These are non-GAAP measures. See "Use of Non-GAAP Financial Measures" below for reconciliation to GAAP measures.







1


Backlog

March 31, 2023December 31, 2022March 31, 2022
(in thousands)
$599,912 $548,022 $461,400 

The Company finished the first quarter of 2023 with a record backlog of $599.9 million, up 30.0% from $461.4 million a year ago, and up 9.5% from $548.0 million at the end of the fourth quarter of 2022.

Gary Fields, President and CEO, stated, “The first quarter of 2023 was another excellent quarter for AAON. We posted a fifth straight quarter of record sales. At the same time, our backlog continued to grow to record levels. Our bookings are still very strong and continue to grow, even when excluding the impact of price increases. We achieved this while continuing to expand production output and capacity. We made further investments in plant and equipment and our total headcount was up 27.3% from a year ago and up 10.4% from the end of 2022.”

Mr. Fields continued, “Our gross profit margin of 29.0%, while down compared to the fourth quarter of 2022, was in line with our expectations. As we communicated on our previous conference call, we incurred certain one-time expenses this quarter as a result of improving some employee benefits. Clearly, these investments we are making in people are paying off as demonstrated in our ability to hire. As also stated on our previous call, we continue to expect gross profit margin will improve throughout the year, particularly in the second half when we anticipate more pricing and better productivity from the capacity investments we are making in the first half of the year.”

Mr. Fields concluded, “As we sit here in the early part of the year, we remain positive on the business. The profitability of the record backlog has never been better, positioning us extremely well through at least the third quarter. Bookings also continue to trend positively, which will help carry us through year-end. Furthermore, we recently closed on our second New Markets Tax Credit transaction related to expansion of our Longview, Texas facility, along with acquiring additional properties in Tulsa. These investments will create additional production capacity, warehouse space and office space needed to continue our growth trajectory.”

As of March 31, 2023, the Company had cash and cash equivalents of $2.5 million and total debt of $83.7 million. Rebecca Thompson, CFO, commented, “Capital expenditures in the quarter were up 106.2% to $28.9 million due to our continuous investment at all locations. This along with our quarterly dividend paid on March 31st resulted in net borrowings of $12.7 million on our line of credit. That said, our balance sheet remains strong. At the end of the first quarter, our leverage ratio was 0.47. As earnings improve throughout the year and working capital becomes a source of cash, we anticipate cash flows from operations will improve, allowing us to reduce our borrowings under the line of credit while making necessary capital investments for long-term growth.”

Conference Call
The Company will host a conference call and webcast today at 5:15 P.M. ET to discuss the first quarter 2023 results and outlook. The conference call will be accessible via a dial-in for those who wish to participate in Q&A as well as a listen-only webcast. The dial-in is 1-877-550-1858 for domestic callers or 1-848-488-9160 for international callers, both accessible with the conference ID 1754341. To access the listen-only webcast, please register at https://app.webinar.net/v2AqQOrNY0L. 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.
2


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

3


AAON, Inc. and Subsidiaries
Consolidated Statements of Income
(Unaudited)
 Three Months Ended 
 March 31,
 20232022
(in thousands, except share and per share data)
Net sales$265,953 $182,771 
Cost of sales188,799 136,707 
Gross profit77,154 46,064 
Selling, general and administrative expenses32,942 23,056 
Loss (gain) on disposal of assets(2)
Income from operations44,206 23,010 
Interest expense, net(1,150)(190)
Other income, net114 21 
Income before taxes43,170 22,841 
Income tax provision6,356 4,782 
Net income$36,814 $18,059 
Earnings per share:  
Basic$0.69 $0.34 
Diluted$0.67 $0.33 
Cash dividends declared per common share:$0.12 $— 
Weighted average shares outstanding:  
Basic53,640,598 52,613,232 
Diluted55,240,638 53,950,995 



4


AAON, Inc. and Subsidiaries
Consolidated Balance Sheets
(Unaudited)
 March 31, 2023December 31, 2022
Assets(in thousands, except share and per share data)
Current assets:  
Cash and cash equivalents$2,515 $5,451 
Restricted cash465 498 
Accounts receivable, net of allowance for credit losses of $421 and $477, respectively
160,954 127,158 
Inventories, net199,579 198,939 
Contract assets15,126 15,151 
Prepaid expenses and other5,540 1,919 
Total current assets384,179 349,116 
Property, plant and equipment:  
Land8,904 8,537 
Buildings177,119 169,156 
Machinery and equipment360,628 342,045 
Furniture and fixtures31,868 30,033 
Total property, plant and equipment578,519 549,771 
Less:  Accumulated depreciation253,953 245,026 
Property, plant and equipment, net324,566 304,745 
Intangible assets, net63,704 64,606 
Goodwill81,892 81,892 
Right of use assets7,166 7,123 
Other long-term assets6,407 6,421 
Total assets$867,914 $813,903 
Liabilities and Stockholders' Equity  
Current liabilities:  
Accounts payable$29,561 $45,513 
Accrued liabilities86,173 78,630 
Contract liabilities22,137 21,424 
Total current liabilities137,871 145,567 
Revolving credit facility, long-term83,664 71,004 
Deferred tax liabilities19,582 18,661 
Other long-term liabilities10,923 11,508 
New market tax credit obligation6,460 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, 54,201,863 and 53,425,184 issued and outstanding at March 31, 2023 and December 31, 2022, respectively
217 214 
Additional paid-in capital117,077 98,735 
Retained earnings492,120 461,765 
Total stockholders' equity609,414 560,714 
Total liabilities and stockholders' equity$867,914 $813,903 
5


AAON, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
 Three Months Ended 
 March 31,
 20232022
Operating Activities(in thousands)
Net income$36,814 $18,059 
Adjustments to reconcile net income to net cash provided by operating activities:  
Depreciation and amortization10,274 7,076 
Amortization of debt issuance cost11 11 
Amortization of right of use assets29 67 
(Recoveries of) provision for credit losses on accounts receivable, net of adjustments(56)288 
Provision for excess and obsolete inventories, net of write-offs221 220 
Share-based compensation3,519 3,112 
Loss (gain) on disposition of assets(2)
Foreign currency transaction gain(2)(9)
Interest income on note receivable(6)(6)
Deferred income taxes921 973 
Changes in assets and liabilities:  
Accounts receivable(33,740)(43,244)
Income tax receivable5,262 3,631 
Inventories(861)(16,041)
Contract assets25 (4,252)
Prepaid expenses and other long-term assets(3,613)(3,588)
Accounts payable(16,318)6,325 
Contract liabilities713 17,998 
Extended warranties777 68 
Accrued liabilities and other long-term liabilities847 2,511 
Net cash provided by (used in) operating activities4,823 (6,803)
Investing Activities  
Capital expenditures(28,935)(14,031)
Cash paid in business combination, net of cash acquired— (249)
Proceeds from sale of property, plant and equipment102 
Principal payments from note receivable14 14 
Net cash used in investing activities(28,819)(14,264)
Financing Activities  
Borrowings under revolving credit facility105,172 25,000 
Payments under revolving credit facility(92,512)— 
Stock options exercised15,856 2,890 
Repurchase of stock— (3,278)
Employee taxes paid by withholding shares(1,030)(804)
Cash dividends paid to stockholders(6,459)— 
Net cash provided by financing activities21,027 23,808 
Net (decrease) increase in cash, cash equivalents and restricted cash(2,969)2,741 
Cash, cash equivalents and restricted cash, beginning of period5,949 3,487 
Cash, cash equivalents and restricted cash, end of period$2,980 $6,228 
6





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 
 March 31,
20232022
(in thousands)
Net income, a GAAP measure$36,814 $18,059 
Depreciation and amortization10,274 7,076 
Interest expense, net1,150 190 
Income tax expense6,356 4,782 
EBITDA, a non-GAAP measure$54,594 $30,107 
EBITDA margin20.5 %16.5 %
7