TULSA,
Okla., Nov. 6, 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 third quarter of 2023.
Gary Fields, President and CEO,
stated, "The third quarter was another strong quarter for
AAON. For a second straight quarter, we achieved both record
net sales and gross profits. All three segments performed
well. Our AAON Oklahoma and BASX segments both realized
robust double digit organic net sales growth along with record
gross profits, and our AAON Coil Products segment recorded its
highest profits over the last four quarters. Across all three
segments, improved productivity was a key factor to both production
output and gross profit margins. Our manufacturing teams did
a great job of improving the efficiency of our operations while
continuing to add production capacity. Gross profit margin of
37.2% reflects these productivity gains along with incremental
pricing. All in, our operations have never performed better
as reflected in the results."
Net sales for the third quarter of 2023 increased 28.6% to
$312.0 million from $242.6 million in the third quarter of 2022. This
marked the seventh straight quarter of record sales in the
Company's history. The Company had a healthy backlog entering
the quarter, which combined with improved operational efficiencies,
contributed to year over year organic volume growth of
approximately 11.9%. Supply chain disruptions continue to abate,
also aiding to the rising production
rates.
Gross profit margin in the quarter increased to 37.2%, up from
27.0% in the comparable quarter in 2022 and up from 33.1% in the
previous quarter. The drivers for the quarter-over-quarter
margin expansion were incremental pricing, improved operational
efficiencies and improved overhead absorption.
Net income for the quarter was $48.1
million, an increase of $20.6
million or 75.0% compared to the prior year quarter.
Earnings per diluted share for the three months
ended September 30, 2023, was $0.58, an increase of 70.6% from the third
quarter of 2022. Excluding the net impact of a one-time
settlement, non-GAAP adjusted net income and earnings per diluted
share were $53.2 million and
$0.64, respectively, an approximate
90% increase in both over the prior year period.
Financial
Highlights:
|
Three Months
Ended
September 30,
|
|
%
|
|
|
|
Nine Months
Ended
September
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
|
$
311,970
|
|
$
242,605
|
|
28.6 %
|
|
|
|
$
861,880
|
|
$
634,190
|
|
35.9 %
|
Gross profit
|
$
116,109
|
|
$ 65,591
|
|
77.0 %
|
|
|
|
$
287,281
|
|
$
159,031
|
|
80.6 %
|
Gross profit
margin
|
37.2 %
|
|
27.0 %
|
|
|
|
|
|
33.3 %
|
|
25.1 %
|
|
|
Operating
income
|
$ 64,664
|
|
$ 36,700
|
|
76.2 %
|
|
|
|
$
163,610
|
|
$ 80,163
|
|
104.1 %
|
Operating
margin
|
20.7 %
|
|
15.1 %
|
|
|
|
|
|
19.0 %
|
|
12.6 %
|
|
|
Net income
|
$ 48,078
|
|
$ 27,473
|
|
75.0 %
|
|
|
|
$
130,574
|
|
$ 61,478
|
|
112.4 %
|
Earnings per diluted
share1
|
$
0.58
|
|
$
0.34
|
|
70.6 %
|
|
|
|
$
1.57
|
|
$
0.76
|
|
106.6 %
|
Diluted average
shares1
|
83,393,054
|
|
80,938,074
|
|
3.0 %
|
|
|
|
83,275,208
|
|
80,882,798
|
|
3.0 %
|
1
Reflects three-for-two stock split effective August 16,
2023.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP
Measures
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP adjusted net
income2
|
$ 53,188
|
|
$ 27,473
|
|
93.6 %
|
|
|
|
$
136,082
|
|
$ 61,478
|
|
121.4 %
|
Non-GAAP earnings per
diluted share2
|
$
0.64
|
|
$
0.34
|
|
88.2 %
|
|
|
|
$
1.63
|
|
$
0.76
|
|
114.5 %
|
Adjusted
EBITDA2
|
$ 83,710
|
|
$ 46,078
|
|
81.7 %
|
|
|
|
$
204,169
|
|
$
106,082
|
|
92.5 %
|
Adjusted EBITDA
margin2
|
26.8 %
|
|
19.0 %
|
|
|
|
|
|
23.7 %
|
|
16.7 %
|
|
|
2 These are
non-GAAP measures. See "Use of Non-GAAP Financial Measures" below
for reconciliation to GAAP measures.
|
Backlog
September 30,
2023
|
|
June 30,
2023
|
|
September 30,
2022
|
(in
thousands)
|
$
490,591
|
|
$
526,209
|
|
$
514,735
|
Gains in production efficiency continued throughout the quarter
resulting in all time high production rates that have continued to
improve lead times. Bookings increased quarter over quarter,
but were intentionally outpaced by increases in production to draw
down backlog to more appropriate levels. The Company finished
the third quarter of 2023 with a backlog of $490.6 million, down 4.7% from $514.7 million a year ago, and down from
$526.2 million at the end of the
second quarter of 2023.
Mr. Fields concluded, "As we approach the end of this year, we
are enthusiastic with the outlook. We are optimistic the
fourth quarter and year end results will finish strong.
Looking into next year, while there are pockets of our end-markets
that are slowing, there are several that are very strong.
Furthermore, we anticipate upcoming new refrigerant regulations
will noticeably disrupt the industry in 2024, which we view as a
positive. AAON thrives on challenges like this and we view it
as another opportunity to take market share. Also, in
relation to factors such as inflation, supply chain disruptions,
workforce dynamics and internal leadership, we believe AAON is
entering a more predictable manufacturing environment than we've
seen in years, which will enable our productivity to further
increase. Our organization has made major enhancements in the
last few years, many of which have yet to be financially
recognized. We are highly optimistic about the future and are
excited to be able to create more value for all of our
stakeholders."
As of September 30, 2023, the Company had cash, cash
equivalents and restricted cash of $22.5
million and a balance of $78.4
million on the revolving credit facility. Rebecca Thompson, CFO, commented, "Our cash
flows are strengthening with our second straight quarter of cash
flows from operating activities exceeding our capital
expenditures. We also completed the repurchase of
approximately 403,000 shares for $25.0
million during the quarter. As construction ramps at
our Longview, Texas plant
expansion, we anticipate spending down our restricted cash balance
and using the funds to pay down our revolving line of credit.
Our balance sheet remains strong with a current ratio of 3.0 and a
leverage ratio of 0.33."
Conference Call
The Company will host a conference call and webcast today at
5:15 P.M. EST to discuss the third
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. To access the listen-only webcast, please
register at https://app.webinar.net/or1gZEMZANL. 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
September 30,
|
|
Nine Months
Ended
September 30,
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
|
(in thousands,
except share and per share data)
|
Net sales
|
$
311,970
|
|
$
242,605
|
|
$
861,880
|
|
$
634,190
|
Cost of
sales
|
195,861
|
|
177,014
|
|
574,599
|
|
475,159
|
Gross profit
|
116,109
|
|
65,591
|
|
287,281
|
|
159,031
|
Selling, general and
administrative expenses
|
51,470
|
|
28,891
|
|
123,684
|
|
78,880
|
Loss (gain) on disposal
of assets
|
(25)
|
|
—
|
|
(13)
|
|
(12)
|
Income from
operations
|
64,664
|
|
36,700
|
|
163,610
|
|
80,163
|
Interest expense,
net
|
(1,266)
|
|
(954)
|
|
(3,959)
|
|
(1,694)
|
Other income,
net
|
93
|
|
54
|
|
370
|
|
295
|
Income before
taxes
|
63,491
|
|
35,800
|
|
160,021
|
|
78,764
|
Income tax
provision
|
15,413
|
|
8,327
|
|
29,447
|
|
17,286
|
Net income
|
$
48,078
|
|
$
27,473
|
|
$
130,574
|
|
$
61,478
|
Earnings per
share:
|
|
|
|
|
|
|
|
Basic1
|
$
0.59
|
|
$
0.34
|
|
$
1.61
|
|
$
0.77
|
Diluted1
|
$
0.58
|
|
$
0.34
|
|
$
1.57
|
|
$
0.76
|
Cash dividends declared
per common share1:
|
$
0.08
|
|
$
—
|
|
$
0.24
|
|
$
0.13
|
Weighted average shares
outstanding:
|
|
|
|
|
|
|
|
Basic1
|
81,418,800
|
|
79,777,987
|
|
81,140,473
|
|
79,543,925
|
Diluted1
|
83,393,054
|
|
80,938,074
|
|
83,275,208
|
|
80,882,798
|
1
Reflects three-for-two stock split effective August 16,
2023.
|
AAON, Inc. and
Subsidiaries
|
Consolidated Balance
Sheets
|
(Unaudited)
|
|
September 30,
2023
|
|
December 31,
2022
|
Assets
|
(in thousands,
except share and per share data)
|
Current
assets:
|
|
|
|
Cash and cash
equivalents
|
$
212
|
|
$
5,451
|
Restricted
cash
|
22,323
|
|
498
|
Accounts receivable,
net of allowance for credit losses of $385 and $477,
respectively
|
160,108
|
|
127,158
|
Inventories,
net
|
214,507
|
|
198,939
|
Contract
assets
|
25,306
|
|
15,151
|
Prepaid expenses and
other
|
2,836
|
|
1,919
|
Total current
assets
|
425,292
|
|
349,116
|
Property, plant and
equipment:
|
|
|
|
Land
|
15,296
|
|
8,537
|
Buildings
|
193,684
|
|
169,156
|
Machinery and
equipment
|
381,271
|
|
342,045
|
Furniture and
fixtures
|
41,488
|
|
30,033
|
Total property, plant
and equipment
|
631,739
|
|
549,771
|
Less: Accumulated depreciation
|
274,909
|
|
245,026
|
Property, plant and
equipment, net
|
356,830
|
|
304,745
|
Intangible assets,
net
|
61,901
|
|
64,606
|
Goodwill
|
81,892
|
|
81,892
|
Right of use
assets
|
12,252
|
|
7,123
|
Other long-term
assets
|
6,376
|
|
6,421
|
Total assets
|
$
944,543
|
|
$
813,903
|
|
|
|
|
Liabilities and
Stockholders' Equity
|
|
|
|
Current
liabilities:
|
|
|
|
Accounts
payable
|
$
29,917
|
|
$
45,513
|
Accrued
liabilities
|
90,986
|
|
78,630
|
Contract
liabilities
|
19,576
|
|
21,424
|
Total current
liabilities
|
140,479
|
|
145,567
|
Revolving credit
facility, long-term
|
78,420
|
|
71,004
|
Deferred tax
liabilities
|
14,744
|
|
18,661
|
Other long-term
liabilities
|
16,247
|
|
11,508
|
New market tax credit
obligation
|
12,169
|
|
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, 81,231,513 and 80,137,776
issued and outstanding at September 30, 2023 and December 31,
2022, respectively1
|
325
|
|
322
|
Additional paid-in
capital
|
109,874
|
|
98,735
|
Retained
earnings1
|
572,285
|
|
461,657
|
Total stockholders'
equity
|
682,484
|
|
560,714
|
Total liabilities and
stockholders' equity
|
$
944,543
|
|
$
813,903
|
1
Reflects three-for-two stock split effective August 16,
2023.
|
|
|
|
AAON, Inc. and
Subsidiaries
|
Consolidated
Statements of Cash Flows
|
(Unaudited)
|
|
Nine Months
Ended
September 30,
|
|
2023
|
|
2022
|
Operating
Activities
|
(in
thousands)
|
Net income
|
$
130,574
|
|
$
61,478
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
Depreciation and
amortization
|
33,439
|
|
25,624
|
Amortization of debt
issuance cost
|
57
|
|
32
|
Amortization of right
of use assets
|
166
|
|
191
|
(Recoveries of)
provision for credit losses on
accounts receivable, net of adjustments
|
(92)
|
|
300
|
Provision for
excess and obsolete inventories, net of
write-offs
|
2,979
|
|
1,380
|
Share-based
compensation
|
12,102
|
|
10,229
|
Gain
on disposition of assets
|
(13)
|
|
(12)
|
Foreign currency
transaction loss
|
—
|
|
42
|
Interest income on
note receivable
|
(15)
|
|
(17)
|
Deferred income
taxes
|
(3,917)
|
|
(563)
|
Changes in assets and
liabilities:
|
|
|
|
Accounts
receivable
|
(32,040)
|
|
(63,593)
|
Income tax
receivable
|
(12,472)
|
|
3,782
|
Inventories
|
(18,547)
|
|
(47,998)
|
Contract
assets
|
(10,155)
|
|
(3,843)
|
Prepaid expenses and
other long-term assets
|
(896)
|
|
(70)
|
Accounts
payable
|
(15,631)
|
|
18,616
|
Contract
liabilities
|
(1,848)
|
|
24,249
|
Extended
warranties
|
2,049
|
|
730
|
Accrued liabilities
and other long-term liabilities
|
21,405
|
|
12,857
|
Net cash provided by
operating activities
|
107,145
|
|
43,414
|
Investing
Activities
|
|
|
|
Capital
expenditures
|
(82,900)
|
|
(41,586)
|
Cash paid for
building
|
—
|
|
(22,000)
|
Cash paid in business
combination, net of cash acquired
|
—
|
|
(249)
|
Proceeds from sale of
property, plant and equipment
|
129
|
|
12
|
Principal payments
from note receivable
|
39
|
|
41
|
Net cash used in
investing activities
|
(82,732)
|
|
(63,782)
|
Financing
Activities
|
|
|
|
Proceeds from
financing obligation, net of issuance costs
|
6,061
|
|
—
|
Payment related to
financing costs
|
(398)
|
|
—
|
Borrowings under
revolving credit facility
|
444,072
|
|
151,103
|
Payments under
revolving credit facility
|
(436,656)
|
|
(114,812)
|
Principal payments on
financing lease
|
—
|
|
(115)
|
Stock options
exercised
|
25,251
|
|
10,990
|
Repurchase of
stock
|
(25,009)
|
|
(7,943)
|
Employee taxes paid by
withholding shares
|
(1,202)
|
|
(978)
|
Cash dividends paid to
stockholders
|
(19,946)
|
|
(10,096)
|
Net cash (used in)
provided by financing activities
|
(7,827)
|
|
28,149
|
Net increase in
cash, cash equivalents and restricted cash
|
16,586
|
|
7,781
|
Cash, cash
equivalents and restricted cash, beginning of period
|
5,949
|
|
3,487
|
Cash, cash
equivalents and restricted cash, end of period
|
$
22,535
|
|
$
11,268
|
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.
Non-GAAP Adjusted Net Income
The Company defines non-GAAP adjusted net income as net income
adjusted for any one-time events, such as litigation settlements,
net of profit sharing and tax effect, in the periods presented.
The following table provides a reconciliation of net income
(GAAP) to non-GAAP adjusted net income for the periods
indicated:
|
Three Months
Ended
September 30,
|
|
Nine Months
Ended
September 30,
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
|
(in
thousands)
|
Net income, a GAAP
measure
|
$
48,078
|
|
$
27,473
|
|
$
130,574
|
|
$
61,478
|
Litigation
settlement
|
7,500
|
|
—
|
|
7,500
|
|
—
|
Profit sharing
effect
|
(750)
|
|
—
|
|
(750)
|
|
—
|
Tax effect
|
(1,640)
|
|
—
|
|
(1,242)
|
|
—
|
Non-GAAP adjusted net
income
|
$
53,188
|
|
$
27,473
|
|
$
136,082
|
|
$
61,478
|
Non-GAAP adjusted
earnings per diluted share1
|
$
0.64
|
|
$
0.34
|
|
$
1.63
|
|
$
0.76
|
1
Reflects three-for-two stock split effective August 16,
2023.
|
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.
Adjusted EBITDA is calculated as EBITDA adjusted by items in
non-GAAP adjusted net income, above, except for taxes, as taxes are
already excluded from EBITDA.
The following table provides a reconciliation of net income
(GAAP) to EBITDA (non-GAAP) and Adjusted EBITDA (non-GAAP) for the
periods indicated:
|
Three Months
Ended
September 30,
|
|
Nine Months
Ended
September 30,
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
|
(in
thousands)
|
Net income, a GAAP
measure
|
$
48,078
|
|
$
27,473
|
|
$
130,574
|
|
$
61,478
|
Depreciation and
amortization
|
12,203
|
|
9,324
|
|
33,439
|
|
25,624
|
Interest expense,
net
|
1,266
|
|
954
|
|
3,959
|
|
1,694
|
Income tax
expense
|
15,413
|
|
8,327
|
|
29,447
|
|
17,286
|
EBITDA, a non-GAAP
measure
|
$
76,960
|
|
$
46,078
|
|
$
197,419
|
|
$
106,082
|
Litigation
settlement
|
7,500
|
|
—
|
|
7,500
|
|
—
|
Profit sharing
effect1
|
(750)
|
|
—
|
|
(750)
|
|
—
|
Adjusted EBITDA, a
non-GAAP measure
|
$
83,710
|
|
$
46,078
|
|
$
204,169
|
|
$
106,082
|
Adjusted EBITDA
margin
|
26.8 %
|
|
19.0 %
|
|
23.7 %
|
|
16.7 %
|
1Profit
sharing effect of litigation settlement in the respective
period.
|
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SOURCE AAON