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 2022.
Net sales for the second quarter of 2022
increased 45.1% to $208.8 million from $143.9 million in the second
quarter of 2021. The additional sales from BasX of $24.6 million is
the largest contributing factor to our year over year growth.
Revenue synergies from this acquisition have materialized faster
than expected. Subsequent to quarter end, we have already received
an order for $16.2 million of BasX equipment that we plan to
build in our Longview, TX facility in order to free up capacity at
our Redmond, OR facility for the overwhelming demand BasX is
experiencing. The legacy business also had strong organic volume
growth of 10.3% during the quarter.
Gross profit margin for the quarter decreased
due to increased material, component, labor and freight costs.
Similar to the first quarter of 2022, the second quarter was
impacted by lower priced orders in our backlog. However, gross
profit margin improved materially throughout the second quarter, a
trend we expect will continue through the second half of the year
as higher priced orders in our backlog hit the production
floor.
Earnings per diluted share for the second
quarter of 2022 declined 21.1% to $0.30 from $0.38 in the second
quarter of 2021. The decline in earnings was primarily due to the
contraction in gross profit. As a percent of sales, SG&A
expenses, excluding BasX, were down 20 basis points from a year
ago.
Financial
Highlights: |
Three Months Ended June
30, |
|
% |
|
|
Six Months Ended June
30, |
|
% |
|
|
2022 |
|
|
|
2021 |
|
|
Change |
|
|
|
2022 |
|
|
|
2021 |
|
|
Change |
|
(in thousands, except share and per share data) |
|
|
(in thousands, except share and per share data) |
GAAP
Measures |
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
$ |
208,814 |
|
|
$ |
143,876 |
|
|
45.1 |
% |
|
|
$ |
391,585 |
|
|
$ |
259,664 |
|
|
50.8 |
% |
Gross profit |
|
47,376 |
|
|
|
42,107 |
|
|
12.5 |
% |
|
|
$ |
93,440 |
|
|
$ |
75,264 |
|
|
24.1 |
% |
Gross profit margin |
|
22.7 |
% |
|
|
29.3 |
% |
|
|
|
|
|
23.9 |
% |
|
|
29.0 |
% |
|
|
Operating income |
$ |
20,453 |
|
|
$ |
25,212 |
|
|
(18.9 |
)% |
|
|
$ |
43,463 |
|
|
$ |
43,673 |
|
|
(0.5 |
)% |
Operating margin |
|
9.8 |
% |
|
|
17.5 |
% |
|
|
|
|
|
|
11.1 |
% |
|
|
16.8 |
% |
|
|
|
Net income |
|
15,946 |
|
|
|
20,615 |
|
|
(22.6 |
)% |
|
|
$ |
34,005 |
|
|
$ |
36,991 |
|
|
(8.1 |
)% |
Earnings per diluted share |
$ |
0.30 |
|
|
$ |
0.38 |
|
|
(21.1 |
)% |
|
|
$ |
0.63 |
|
|
$ |
0.69 |
|
|
(8.7 |
)% |
Diluted average shares |
|
53,661,876 |
|
|
|
53,603,932 |
|
|
0.1 |
% |
|
|
|
53,944,616 |
|
|
|
53,736,134 |
|
|
0.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP
Measures |
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA1 |
$ |
29,897 |
|
|
$ |
32,777 |
|
|
(8.8 |
)% |
|
|
$ |
60,004 |
|
|
$ |
58,653 |
|
|
2.3 |
% |
EBITDA margin1 |
|
14.3 |
% |
|
|
22.8 |
% |
|
|
|
|
|
15.3 |
% |
|
|
22.6 |
% |
|
|
1These are
non-GAAP measures. See "Use of Non-GAAP Financial Measures" below
for reconciliation to GAAP measures. |
|
Backlog
June 30, 2022 |
|
March 31, 2022 |
|
December 31, 2021 |
|
June 30, 2021 |
(in thousands) |
$ |
464,025 |
|
$ |
461,400 |
|
$ |
260,164 |
|
$ |
138,131 |
|
|
|
|
|
|
|
|
|
|
|
The Company finished the second quarter of 2022
with a record backlog of $464.0 million, up 235.9% from $138.1
million a year ago, and up 78.4% from $260.2 million at the end of
the fourth quarter of 2021. Excluding BasX's backlog, organic
backlog was up 163.6% from the prior year quarter.
Gary Fields, President and CEO, stated, “Despite
lower second quarter margin and earnings, we are very optimistic on
the outlook for the second half of the year. Moreover, the outlook
for the next several years has continued to improve since earlier
in the year. I am very pleased to report our backlog remains
robust. Our total backlog is up 235.9% and organically up 163.6%
from prior year, which positions us well as we enter the second
half of the year. Most important though, the margin profile of the
backlog is improving substantially. The majority of the Company's
backlog at the end of June 2022 will ship within the next twelve
months. At June 30, 2022, our backlog of $464.0 million mostly
relates to our legacy business, which includes both the 8% price
increase from January 2022 and 7% price increase from March 2022.
Beginning in June, we implemented a 1% per month price increase,
which we expect to begin realizing in the fourth quarter of this
year. Given this, the pricing of orders within the backlog relative
to our cost of inventory and trending prices of raw materials has
significantly improved from just three to six months ago. As such,
we are positioned to hit our target margins in the second half of
the year.”
Mr. Fields continued, “We continue to
successfully add incremental headcount, which is helping drive
record production rates. Total headcount for the legacy business at
the end of the second quarter was up approximately 20% from a year
ago. Supply chain constraints remain a week-to-week issue,
resulting in inefficiencies and larger than normal inventory.
However, the combination of our unique configurable manufacturing
operations and flexible engineering team allows us to cope better
than most of our competitors. This, along with the incremental
headcount additions, is helping us maintain competitive lead times,
which is allowing us to continue to take market share.”
Mr. Fields continued, “The BasX acquisition,
which we closed on in December, has progressed very well. While
supply chain issues and inflation have caused similar issues that
our legacy business is realizing, I am pleased with how BasX has
been so flexible to adapt to challenges. I cannot say enough about
how the revenue synergies related to the acquisition are being
realized and am pleased with the integration progress. At the end
of the second quarter, the backlog at BasX was nearly triple from
what it was at the end of 2021. Along with the orders for a new
data center project received subsequent to the end of the second
quarter, the pipeline of construction projects for BasX's data
center and clean room end-markets is robust. Overall, we are
excited about the growth opportunities that BasX is bringing to
AAON."
Mr. Fields concluded, “While the market dynamics
over the past year proved to be a challenge, they forced us to make
certain changes to our organization, helping us emerge as a much
stronger company. Near-term, our robust backlog with an improving
margin profile and increased production headcount positions us for
improved financial results in the second half of the year.
Long-term, we remain very optimistic with the Company’s outlook.
The innovations of our premier product offering combined with our
advanced manufacturing process and strong independent sales channel
positions us to fully take advantage of the secular market trends
related to decarbonization and indoor air quality. Leveraging BasX
as well as many other initiatives and changes we are making to the
AAON organization adds to the opportunities. Overall, we continue
to believe the fundamentals of the Company have never been
better.”
As of June 30, 2022, the Company had cash and
cash equivalents of $17.6 million and total debt of $106.2 million.
Rebecca Thompson, CFO, commented, “Within the quarter, we had net
borrowings of $41.2 million from our line of credit to finance the
purchase of the BasX building and meet our working capital needs.
We are investing in working capital to facilitate the robust growth
we are experiencing, while overcoming supply chain issues.”
Ms. Thompson continued, “Our balance sheet
remains strong. At the end of the second quarter, our leverage
ratio increased to 1.06, from 0.63 at the end of the first quarter.
We continue to anticipate cash flow will improve significantly in
the second half of the year, allowing us to start reducing net debt
by year-end. Overall, we are very comfortable with our financial
position and liquidity, and we will continue to invest in our
long-term growth plans.”
Conference Call The Company
will host a conference call and webcast today at 5:15 P.M. ET to
discuss the second quarter 2022 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
accessible dial-in is 1-833-630-1956 for domestic callers or
1-412-317-1837 for international callers. To access the listen-only
webcast, please register at
https://edge.media-server.com/mmc/p/vppmz7k5.
About AAONFounded 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. AAON's culture of 360° innovation
empowers its team to deliver solutions that lead to a cleaner and
more sustainable future. For more information, please
visit www.AAON.com.
Forward-Looking
StatementsCertain statements in this news release may be
“forward-looking statements” within the meaning of Section 27A of
the Securities Act of 1933. Statements regarding future prospects
and developments are based upon current expectations and involve
certain risks and uncertainties that could cause actual results and
developments to differ materially from the forward-looking
statements.
Contact InformationJoseph
MondilloDirector of Investor RelationsPhone: (617) 877-6346Email:
joseph.mondillo@aaon.com
AAON, Inc. and Subsidiaries |
Consolidated Statements of Income |
(Unaudited) |
|
Three Months Ended June
30, |
|
Six Months Ended June
30, |
|
|
2022 |
|
|
|
2021 |
|
|
|
2022 |
|
|
|
2021 |
|
|
(in thousands, except share and per share data) |
Net sales |
$ |
208,814 |
|
|
$ |
143,876 |
|
|
$ |
391,585 |
|
|
$ |
259,664 |
|
Cost of sales |
|
161,438 |
|
|
|
101,769 |
|
|
|
298,145 |
|
|
|
184,400 |
|
Gross profit |
|
47,376 |
|
|
|
42,107 |
|
|
|
93,440 |
|
|
|
75,264 |
|
Selling, general and
administrative expenses |
|
26,933 |
|
|
|
16,895 |
|
|
|
49,989 |
|
|
|
31,591 |
|
Gain on disposal of
assets |
|
(10 |
) |
|
|
— |
|
|
|
(12 |
) |
|
|
— |
|
Income from operations |
|
20,453 |
|
|
|
25,212 |
|
|
|
43,463 |
|
|
|
43,673 |
|
Interest expense, net |
|
(550 |
) |
|
|
(4 |
) |
|
|
(740 |
) |
|
|
(1 |
) |
Other income, net |
|
220 |
|
|
|
39 |
|
|
|
241 |
|
|
|
56 |
|
Income before taxes |
|
20,123 |
|
|
|
25,247 |
|
|
|
42,964 |
|
|
|
43,728 |
|
Income tax provision |
|
4,177 |
|
|
|
4,632 |
|
|
|
8,959 |
|
|
|
6,737 |
|
Net income |
$ |
15,946 |
|
|
$ |
20,615 |
|
|
$ |
34,005 |
|
|
$ |
36,991 |
|
Earnings per share: |
|
|
|
|
|
|
|
Basic |
$ |
0.30 |
|
|
$ |
0.39 |
|
|
$ |
0.64 |
|
|
$ |
0.71 |
|
Diluted |
$ |
0.30 |
|
|
$ |
0.38 |
|
|
$ |
0.63 |
|
|
$ |
0.69 |
|
Cash dividends declared per
common share: |
$ |
0.19 |
|
|
$ |
0.19 |
|
|
$ |
0.19 |
|
|
$ |
0.19 |
|
Weighted average shares
outstanding: |
|
|
|
|
|
|
|
Basic |
|
53,095,286 |
|
|
|
52,432,822 |
|
|
|
52,992,439 |
|
|
|
52,389,989 |
|
Diluted |
|
53,661,876 |
|
|
|
53,603,932 |
|
|
|
53,944,616 |
|
|
|
53,736,134 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AAON, Inc. and Subsidiaries |
Consolidated Balance Sheets |
(Unaudited) |
|
June 30, 2022 |
|
December 31, 2021 |
Assets |
(in thousands, except share and per share data) |
Current assets: |
|
|
|
Cash and cash equivalents |
$ |
17,647 |
|
|
$ |
2,859 |
|
Restricted cash |
|
563 |
|
|
|
628 |
|
Accounts receivable, net of allowance for credit losses of $563 and
$549, respectively |
|
124,335 |
|
|
|
70,780 |
|
Income tax receivable |
|
7,618 |
|
|
|
5,723 |
|
Inventories, net |
|
164,001 |
|
|
|
130,270 |
|
Contract assets |
|
8,569 |
|
|
|
5,749 |
|
Prepaid expenses and other |
|
4,679 |
|
|
|
2,071 |
|
Total current assets |
|
327,412 |
|
|
|
218,080 |
|
Property, plant and
equipment: |
|
|
|
Land |
|
7,916 |
|
|
|
5,016 |
|
Buildings |
|
162,962 |
|
|
|
135,861 |
|
Machinery and equipment |
|
332,178 |
|
|
|
318,259 |
|
Furniture and fixtures |
|
24,571 |
|
|
|
23,072 |
|
Total property, plant and equipment |
|
527,627 |
|
|
|
482,208 |
|
Less: Accumulated depreciation |
|
235,163 |
|
|
|
224,146 |
|
Property, plant and equipment,
net |
|
292,464 |
|
|
|
258,062 |
|
Intangible assets, net |
|
66,409 |
|
|
|
70,121 |
|
Goodwill |
|
81,892 |
|
|
|
85,727 |
|
Right of use assets |
|
5,886 |
|
|
|
16,974 |
|
Other long-term assets |
|
2,649 |
|
|
|
1,216 |
|
Total assets |
$ |
776,712 |
|
|
$ |
650,180 |
|
|
|
|
|
Liabilities and
Stockholders' Equity |
|
|
|
Current liabilities: |
|
|
|
Accounts payable |
$ |
36,189 |
|
|
$ |
29,020 |
|
Dividends payable |
|
10,096 |
|
|
|
— |
|
Accrued liabilities |
|
60,125 |
|
|
|
50,206 |
|
Contract liabilities |
|
29,759 |
|
|
|
7,542 |
|
Total current liabilities |
|
136,169 |
|
|
|
86,768 |
|
Revolving credit facility,
long-term |
|
106,249 |
|
|
|
40,000 |
|
Deferred tax liabilities |
|
31,866 |
|
|
|
31,993 |
|
Other long-term
liabilities |
|
5,495 |
|
|
|
18,843 |
|
New market tax credit
obligation |
|
6,427 |
|
|
|
6,406 |
|
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,
53,127,055 and 52,527,985 issued and outstanding at June 30,
2022 and December 31, 2021, respectively |
|
213 |
|
|
|
210 |
|
Additional paid-in capital |
|
82,078 |
|
|
|
81,654 |
|
Retained earnings |
|
408,215 |
|
|
|
384,306 |
|
Total stockholders'
equity |
|
490,506 |
|
|
|
466,170 |
|
Total liabilities and
stockholders' equity |
$ |
776,712 |
|
|
$ |
650,180 |
|
|
|
|
|
|
|
|
|
AAON, Inc. and Subsidiaries |
Consolidated Statements of Cash Flows |
(Unaudited) |
|
Six Months Ended June
30, |
|
|
2022 |
|
|
|
2021 |
|
Operating
Activities |
(in thousands) |
Net income |
$ |
34,005 |
|
|
$ |
36,991 |
|
Adjustments to reconcile net income to net cash (used in) provided
by operating activities: |
|
|
|
Depreciation and amortization |
|
16,300 |
|
|
|
14,924 |
|
Amortization of debt issuance cost |
|
21 |
|
|
|
20 |
|
Amortization of right of use assets |
|
143 |
|
|
|
— |
|
Provision for credit losses on accounts receivable, net of
adjustments |
|
181 |
|
|
|
12 |
|
Provision for excess and obsolete inventories |
|
148 |
|
|
|
292 |
|
Share-based compensation |
|
6,908 |
|
|
|
5,793 |
|
Gain on disposition of assets |
|
(12 |
) |
|
|
— |
|
Foreign currency transaction (gain) loss |
|
9 |
|
|
|
(11 |
) |
Interest income on note receivable |
|
(11 |
) |
|
|
(19 |
) |
Deferred income taxes |
|
(127 |
) |
|
|
2,747 |
|
Changes in assets and liabilities: |
|
|
|
Accounts receivable |
|
(53,736 |
) |
|
|
(5,936 |
) |
Income tax receivable |
|
(1,895 |
) |
|
|
1,248 |
|
Inventories |
|
(33,879 |
) |
|
|
(5,472 |
) |
Contract assets |
|
(2,820 |
) |
|
|
— |
|
Prepaid expenses and other long-term assets |
|
(3,066 |
) |
|
|
799 |
|
Accounts payable |
|
6,490 |
|
|
|
10,650 |
|
Contract liabilities |
|
22,217 |
|
|
|
— |
|
Deferred revenue |
|
421 |
|
|
|
574 |
|
Accrued liabilities and other long-term liabilities |
|
7,123 |
|
|
|
300 |
|
Net cash (used in) provided by operating activities |
|
(1,580 |
) |
|
|
62,912 |
|
Investing
Activities |
|
|
|
Capital expenditures |
|
(27,227 |
) |
|
|
(33,157 |
) |
Cash paid for building |
|
(22,000 |
) |
|
|
— |
|
Cash paid in business combination, net of cash acquired |
|
(249 |
) |
|
|
— |
|
Proceeds from sale of property, plant and equipment |
|
12 |
|
|
|
2 |
|
Principal payments from note receivable |
|
27 |
|
|
|
29 |
|
Net cash used in investing activities |
|
(49,437 |
) |
|
|
(33,126 |
) |
Financing
Activities |
|
|
|
Borrowings under revolving credit facility |
|
94,900 |
|
|
|
— |
|
Payments under revolving credit facility |
|
(28,651 |
) |
|
|
— |
|
Principal payments on financing lease |
|
(28 |
) |
|
|
— |
|
Stock options exercised |
|
6,385 |
|
|
|
11,848 |
|
Repurchase of stock |
|
(5,912 |
) |
|
|
(10,271 |
) |
Employee taxes paid by withholding shares |
|
(954 |
) |
|
|
(1,532 |
) |
Net cash provided by financing activities |
|
65,740 |
|
|
|
45 |
|
Net increase in cash,
cash equivalents and restricted cash |
|
14,723 |
|
|
|
29,831 |
|
Cash, cash equivalents
and restricted cash, beginning of period |
|
3,487 |
|
|
|
82,288 |
|
Cash, cash equivalents
and restricted cash, end of period |
$ |
18,210 |
|
|
$ |
112,119 |
|
|
|
|
|
|
|
|
|
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, |
|
|
2022 |
|
|
|
2021 |
|
|
|
2022 |
|
|
|
2021 |
|
|
(in thousands) |
Net income, a GAAP
measure |
$ |
15,946 |
|
|
$ |
20,615 |
|
|
$ |
34,005 |
|
|
$ |
36,991 |
|
Depreciation and amortization |
|
9,224 |
|
|
|
7,526 |
|
|
|
16,300 |
|
|
|
14,924 |
|
Interest expense, net |
|
550 |
|
|
|
4 |
|
|
|
740 |
|
|
|
1 |
|
Income tax expense |
|
4,177 |
|
|
|
4,632 |
|
|
|
8,959 |
|
|
|
6,737 |
|
EBITDA, a non-GAAP
measure |
$ |
29,897 |
|
|
$ |
32,777 |
|
|
$ |
60,004 |
|
|
$ |
58,653 |
|
EBITDA margin |
|
14.3 |
% |
|
|
22.8 |
% |
|
|
15.3 |
% |
|
|
22.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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