TULSA, Okla., May 4, 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 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 | % | |||
2023 | 2022 | Change | |||
(in thousands, except share and per share data) | |||||
GAAP Measures | |||||
Net sales | $ 265,953 | $ 182,771 | 45.5 % | ||
Gross profit | 77,154 | 46,064 | 67.5 % | ||
Gross profit margin | 29.0 % | 25.2 % | |||
Operating income | $ 44,206 | $ 23,010 | 92.1 % | ||
Operating margin | 16.6 % | 12.6 % | |||
Net income | 36,814 | 18,059 | 103.9 % | ||
Earnings per diluted share | $ 0.67 | $ 0.33 | 103.0 % | ||
Diluted average shares | 55,240,638 | 53,950,995 | 2.4 % | ||
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. | |||||
Backlog | ||||
March 31, 2023 | December 31, 2022 | March 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 31 st 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. 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: [email protected]
AAON, Inc. and Subsidiaries | |||
Consolidated Statements of Income | |||
(Unaudited) | |||
Three Months Ended | |||
2023 | 2022 | ||
(in thousands, except share and per share data) | |||
Net sales | $ 265,953 | $ 182,771 | |
Cost of sales | 188,799 | 136,707 | |
Gross profit | 77,154 | 46,064 | |
Selling, general and administrative expenses | 32,942 | 23,056 | |
Loss (gain) on disposal of assets | 6 | (2) | |
Income from operations | 44,206 | 23,010 | |
Interest expense, net | (1,150) | (190) | |
Other income, net | 114 | 21 | |
Income before taxes | 43,170 | 22,841 | |
Income tax provision | 6,356 | 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: | |||
Basic | 53,640,598 | 52,613,232 | |
Diluted | 55,240,638 | 53,950,995 | |
AAON, Inc. and Subsidiaries | |||
Consolidated Balance Sheets | |||
(Unaudited) | |||
March 31, 2023 | December 31, | ||
Assets | (in thousands, except share and per share | ||
Current assets: | |||
Cash and cash equivalents | $ 2,515 | $ 5,451 | |
Restricted cash | 465 | 498 | |
Accounts receivable, net of allowance for credit losses of $421 and $477, | 160,954 | 127,158 | |
Inventories, net | 199,579 | 198,939 | |
Contract assets | 15,126 | 15,151 | |
Prepaid expenses and other | 5,540 | 1,919 | |
Total current assets | 384,179 | 349,116 | |
Property, plant and equipment: | |||
Land | 8,904 | 8,537 | |
Buildings | 177,119 | 169,156 | |
Machinery and equipment | 360,628 | 342,045 | |
Furniture and fixtures | 31,868 | 30,033 | |
Total property, plant and equipment | 578,519 | 549,771 | |
Less: Accumulated depreciation | 253,953 | 245,026 | |
Property, plant and equipment, net | 324,566 | 304,745 | |
Intangible assets, net | 63,704 | 64,606 | |
Goodwill | 81,892 | 81,892 | |
Right of use assets | 7,166 | 7,123 | |
Other long-term assets | 6,407 | 6,421 | |
Total assets | $ 867,914 | $ 813,903 | |
Liabilities and Stockholders' Equity | |||
Current liabilities: | |||
Accounts payable | $ 29,561 | $ 45,513 | |
Accrued liabilities | 86,173 | 78,630 | |
Contract liabilities | 22,137 | 21,424 | |
Total current liabilities | 137,871 | 145,567 | |
Revolving credit facility, long-term | 83,664 | 71,004 | |
Deferred tax liabilities | 19,582 | 18,661 | |
Other long-term liabilities | 10,923 | 11,508 | |
New market tax credit obligation | 6,460 | 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 | 217 | 214 | |
Additional paid-in capital | 117,077 | 98,735 | |
Retained earnings | 492,120 | 461,765 | |
Total stockholders' equity | 609,414 | 560,714 | |
Total liabilities and stockholders' equity | $ 867,914 | $ 813,903 | |
AAON, Inc. and Subsidiaries | |||
Consolidated Statements of Cash Flows | |||
(Unaudited) | |||
Three Months Ended | |||
2023 | 2022 | ||
Operating Activities | (in thousands) | ||
Net income | $ 36,814 | $ 18,059 | |
Adjustments to reconcile net income to net cash provided by operating | |||
Depreciation and amortization | 10,274 | 7,076 | |
Amortization of debt issuance cost | 11 | 11 | |
Amortization of right of use assets | 29 | 67 | |
(Recoveries of) provision for credit losses on accounts receivable, net of | (56) | 288 | |
Provision for excess and obsolete inventories, net of write-offs | 221 | 220 | |
Share-based compensation | 3,519 | 3,112 | |
Loss (gain) on disposition of assets | 6 | (2) | |
Foreign currency transaction gain | (2) | (9) | |
Interest income on note receivable | (6) | (6) | |
Deferred income taxes | 921 | 973 | |
Changes in assets and liabilities: | |||
Accounts receivable | (33,740) | (43,244) | |
Income tax receivable | 5,262 | 3,631 | |
Inventories | (861) | (16,041) | |
Contract assets | 25 | (4,252) | |
Prepaid expenses and other long-term assets | (3,613) | (3,588) | |
Accounts payable | (16,318) | 6,325 | |
Contract liabilities | 713 | 17,998 | |
Extended warranties | 777 | 68 | |
Accrued liabilities and other long-term liabilities | 847 | 2,511 | |
Net cash provided by (used in) operating activities | 4,823 | (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 equipment | 102 | 2 | |
Principal payments from note receivable | 14 | 14 | |
Net cash used in investing activities | (28,819) | (14,264) | |
Financing Activities | |||
Borrowings under revolving credit facility | 105,172 | 25,000 | |
Payments under revolving credit facility | (92,512) | - | |
Principal payments on financing lease | - | - | |
Stock options exercised | 15,856 | 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 activities | 21,027 | 23,808 | |
Net (decrease) increase in cash, cash equivalents and restricted cash | (2,969) | 2,741 | |
Cash, cash equivalents and restricted cash, beginning of period | 5,949 | 3,487 | |
Cash, cash equivalents and restricted cash, end of period | $ 2,980 | $ 6,228 | |
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 | |||
2023 | 2022 | ||
(in thousands) | |||
Net income, a GAAP measure | $ 36,814 | $ 18,059 | |
Depreciation and amortization | 10,274 | 7,076 | |
Interest expense, net | 1,150 | 190 | |
Income tax expense | 6,356 | 4,782 | |
EBITDA, a non-GAAP measure | $ 54,594 | $ 30,107 | |
EBITDA margin | 20.5 % | 16.5 % | |
SOURCE AAON
