TULSA,
Okla., Feb. 28, 2024 /PRNewswire/ -- AAON, INC.
(NASDAQ-AAON), a leading producer of premium HVAC solutions, today
announced its results for the fourth quarter of 2023.
Gary Fields, CEO, stated, "I am
extremely pleased with our overall results for 2023. We
finished another year with record sales, EBITDA and earnings.
The fourth quarter was also another strong quarter for AAON.
In what typically is a seasonally soft period for the Company, we
achieved comparable sales and earnings to what we reported in the
third quarter, which was a record quarter for AAON. On a
year-over-year perspective, improved productivity was a key factor
to both production output and margin expansion. Our
manufacturing teams did an excellent job of improving the
efficiency of our operations, a trend we expect will continue in
2024. Gross profit margin of 36.4%, up from 30.8% in the year
ago quarter, reflects these productivity gains, along with
incremental pricing. In addition to profitability, I was also
pleased with how the Company's bookings and backlog trended
throughout the second half of 2023, including the fourth
quarter. All in, 2023 was a spectacular year and we are
optimistic on continued success in 2024."
Net sales for the fourth quarter of 2023 increased 20.4% to a
record $306.6 million from
$254.6 million in the fourth quarter
of 2022. 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 9.3%.
Gross profit for the quarter increased 42.3% to $111.7 million, or 36.4% of sales, compared to
the same period a year ago. The drivers for the year--over--year
margin expansion were incremental pricing, improved operational
efficiencies and improved overhead absorption.
Earnings per diluted share in the fourth quarter of 2023
increased 19.1% to $0.56 from
$0.47 in the fourth quarter of
2022.
Financial
Highlights:
|
Three Months
Ended
December 31,
|
|
%
|
|
|
|
Years Ended
December
31,
|
|
%
|
|
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
|
$
306,638
|
|
$
254,598
|
|
20.4 %
|
|
|
|
$ 1,168,518
|
|
$
888,788
|
|
31.5 %
|
Gross profit
|
$
111,739
|
|
$ 78,541
|
|
42.3 %
|
|
|
|
$
399,020
|
|
$
237,572
|
|
68.0 %
|
Gross profit
margin
|
36.4 %
|
|
30.8 %
|
|
|
|
|
|
34.1 %
|
|
26.7 %
|
|
|
Operating
income
|
$
63,884
|
|
$ 46,598
|
|
37.1 %
|
|
|
|
$
227,494
|
|
$
126,761
|
|
79.5 %
|
Operating
margin
|
20.8 %
|
|
18.3 %
|
|
|
|
|
|
19.5 %
|
|
14.3 %
|
|
|
Net income
|
$
47,049
|
|
$ 38,898
|
|
21.0 %
|
|
|
|
$
177,623
|
|
$
100,376
|
|
77.0 %
|
Earnings per diluted
share
|
$
0.56
|
|
$
0.47
|
|
19.1 %
|
|
|
|
$
2.13
|
|
$
1.24
|
|
71.8 %
|
Diluted average
shares
|
83,446,051
|
|
82,211,418
|
|
1.5 %
|
|
|
|
83,295,290
|
|
81,145,610
|
|
2.6 %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP
Measures
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA1
|
$
77,046
|
|
$ 56,184
|
|
37.1 %
|
|
|
|
$
274,465
|
|
$
162,266
|
|
69.1 %
|
EBITDA
margin1
|
25.1 %
|
|
22.1 %
|
|
|
|
|
|
23.5 %
|
|
18.3 %
|
|
|
Adjusted
EBITDA1
|
$
77,046
|
|
$ 56,184
|
|
37.1 %
|
|
|
|
$
281,215
|
|
$
162,266
|
|
73.3 %
|
Adjusted EBITDA
margin1
|
25.1 %
|
|
22.1 %
|
|
|
|
|
|
24.1 %
|
|
18.3 %
|
|
|
1These are
non-GAAP measures. See "Use of Non-GAAP Financial Measures" below
for reconciliation to GAAP measures.
|
Backlog
|
|
|
|
|
|
|
December 31,
2023
|
|
September 31,
2023
|
|
December 31,
2022
|
Backlog
|
$
510,028
|
|
$
490,591
|
|
548,022
|
Year over year
change
|
(6.9) %
|
|
(4.7) %
|
|
110.6 %
|
Bookings in the fourth quarter increased sequentially for a
second straight quarter and were up on a year-over-year
basis. Bookings in the quarter also outpaced production,
resulting in a quarter-over-quarter increase in backlog.
Backlog at the end of the fourth quarter of 2023 was
$510.0 million, up 4.0% from
$490.6 million the end of the third
quarter and down 6.9% from $548.0
million at December 31, 2022.
Mr. Fields concluded, "As we progress through the early months
of 2024, we are cautiously optimistic with the outlook for the
current year. While increasingly there are signs of slowing
in the nonresidential construction sector, along with uncertainties
surrounding the new refrigerant transition, we continue to
anticipate sales and earnings growth for the year, albeit at slower
growth rates than recent years. We are also confident we will
continue to take market share due to our advanced position in both
new refrigerant equipment and cold climate air-source heat
pumps. We currently have a majority of our product portfolio
offered with the new refrigerant in our electronic catalog as well
as a full line of packaged rooftop equipment configurable with heat
pumps designed to operate down to zero degrees Fahrenheit, both of
which provide us an advantage against most of our
competition. At the same time, we see more opportunity for
enhancements in productivity across our operations in 2024.
Recently announced changes to Company leadership will help leverage
these opportunities, best positioning AAON for growth.
Therefore, while there are external factors that could result in a
slower market environment, we are optimistic we will continue to
drive growth this year and create more value for all of our
stakeholders."
As of December 31, 2023, the Company had cash, cash
equivalents and restricted cash of $9.0
million and $38.3 million
outstanding on the revolving credit facility. Rebecca Thompson, CFO, commented, "Our cash
flows from operating activities strengthened in both the fourth
quarter and 2023, growing year-over-year 189.0% and 159.1%,
respectively, and outpacing earnings growth in the respective
periods. Cash flows from operating activities in both periods
also exceeded capital expenditures, which were up significantly
from prior periods. We continue to find attractive organic
growth opportunities with compelling returns, which will result in
another year of elevated capital expenditures in 2024. At the
same time, we see further opportunities to enhance our earnings to
cash flow conversion rates in 2024. Our balance sheet remains
strong with a current ratio of 3.2 and a leverage ratio of
0.15."
Conference Call and Webcast
The Company will host a conference call and webcast to discuss
its financial results and outlook on February 28, 2024 at
5:15 P.M. ET. 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 accessible at 1-800-836-8184. To access the listen-only webcast,
please register at https://app.webinar.net/b6rzgxE5JyM. 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 global leader in HVAC solutions for
commercial and industrial indoor environments. The Company's
industry-leading approach to designing and manufacturing highly
configurable and custom-made 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
December 31,
|
|
Years Ended
December 31,
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
|
(in thousands,
except share and per share data)
|
Net sales
|
$
306,638
|
|
$
254,598
|
|
$
1,168,518
|
|
$
888,788
|
Cost of
sales
|
194,899
|
|
176,057
|
|
769,498
|
|
651,216
|
Gross profit
|
111,739
|
|
78,541
|
|
399,020
|
|
237,572
|
Selling, general and
administrative expenses
|
47,855
|
|
31,943
|
|
171,539
|
|
110,823
|
Gain on disposal of
assets
|
—
|
|
—
|
|
(13)
|
|
(12)
|
Income from
operations
|
63,884
|
|
46,598
|
|
227,494
|
|
126,761
|
Interest expense,
net
|
(884)
|
|
(933)
|
|
(4,843)
|
|
(2,627)
|
Other income,
net
|
133
|
|
104
|
|
503
|
|
399
|
Income before
taxes
|
63,133
|
|
45,769
|
|
223,154
|
|
124,533
|
Income tax
provision
|
16,084
|
|
6,871
|
|
45,531
|
|
24,157
|
Net income
|
$
47,049
|
|
$
38,898
|
|
$
177,623
|
|
$
100,376
|
Earnings per
share:
|
|
|
|
|
|
|
|
Basic
|
$
0.58
|
|
$
0.49
|
|
$
2.19
|
|
$
1.26
|
Diluted
|
$
0.56
|
|
$
0.47
|
|
$
2.13
|
|
$
1.24
|
Cash dividends declared
per common share:
|
$
0.08
|
|
$
0.16
|
|
$
0.32
|
|
$
0.29
|
Weighted average shares
outstanding:
|
|
|
|
|
|
|
|
Basic
|
81,293,549
|
|
79,975,517
|
|
81,156,114
|
|
79,582,480
|
Diluted
|
83,446,051
|
|
82,211,418
|
|
83,295,290
|
|
81,145,610
|
AAON, Inc. and
Subsidiaries
|
Consolidated Balance
Sheets
|
(Unaudited)
|
|
December 31,
2023
|
|
December 31,
2022
|
Assets
|
(in thousands,
except share and per share data)
|
Current
assets:
|
|
|
|
Cash and cash
equivalents
|
$
287
|
|
$
5,451
|
Restricted
cash
|
8,736
|
|
498
|
Accounts receivable,
net
|
138,108
|
|
127,158
|
Inventories,
net
|
213,532
|
|
198,939
|
Contract
assets
|
45,194
|
|
15,151
|
Prepaid expenses and
other
|
3,097
|
|
1,919
|
Total current
assets
|
408,954
|
|
349,116
|
Property, plant and
equipment:
|
|
|
|
Land
|
15,438
|
|
8,537
|
Buildings
|
205,841
|
|
169,156
|
Machinery and
equipment
|
391,366
|
|
342,045
|
Furniture and
fixtures
|
40,787
|
|
30,033
|
Total property, plant
and equipment
|
653,432
|
|
549,771
|
Less: Accumulated depreciation
|
283,485
|
|
245,026
|
Property, plant and
equipment, net
|
369,947
|
|
304,745
|
Intangible assets,
net
|
68,053
|
|
64,606
|
Goodwill
|
81,892
|
|
81,892
|
Right of use
assets
|
11,774
|
|
7,123
|
Other long-term
assets
|
816
|
|
6,421
|
Total assets
|
$
941,436
|
|
$
813,903
|
|
|
|
|
Liabilities and
Stockholders' Equity
|
|
|
|
Current
liabilities:
|
|
|
|
Accounts
payable
|
27,484
|
|
45,513
|
Accrued
liabilities
|
85,508
|
|
78,630
|
Contract
liabilities
|
13,757
|
|
21,424
|
Total current
liabilities
|
126,749
|
|
145,567
|
Revolving credit
facility, long-term
|
38,328
|
|
71,004
|
Deferred tax
liabilities
|
12,134
|
|
18,661
|
Other long-term
liabilities
|
16,807
|
|
11,508
|
New market tax credit
obligation
|
12,194
|
|
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, 81,508,381
and 80,137,776 issued and outstanding at December 31, 2023
and
December 31, 2022, respectively
|
326
|
|
322
|
Additional paid-in
capital
|
122,063
|
|
98,735
|
Retained
earnings
|
612,835
|
|
461,657
|
Total stockholders'
equity
|
735,224
|
|
560,714
|
Total liabilities and
stockholders' equity
|
$
941,436
|
|
$
813,903
|
AAON, Inc. and
Subsidiaries
|
Consolidated
Statements of Cash Flows
|
(Unaudited)
|
|
Years Ended
December 31,
|
|
2023
|
|
2022
|
Operating
Activities
|
(in
thousands)
|
Net income
|
$
177,623
|
|
$
100,376
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
Depreciation and
amortization
|
46,468
|
|
35,106
|
Amortization of debt
issuance cost
|
82
|
|
43
|
Amortization of right
of use assets
|
324
|
|
324
|
(Recoveries of)
provision for accounts receivable,
net of adjustments
|
(154)
|
|
(72)
|
Provision for
excess and obsolete inventories, net of
write-offs
|
1,633
|
|
2,740
|
Share-based
compensation
|
16,384
|
|
13,700
|
Gain
on disposition of assets
|
(13)
|
|
(12)
|
Foreign currency
transaction (gain) loss
|
(10)
|
|
41
|
Interest income on
note receivable
|
(21)
|
|
(22)
|
Deferred income
taxes
|
(6,527)
|
|
(13,332)
|
Changes in assets and
liabilities:
|
|
|
|
Accounts
receivable
|
(9,978)
|
|
(56,306)
|
Income
taxes
|
(11,302)
|
|
18,195
|
Inventories
|
(16,226)
|
|
(71,409)
|
Contract
assets
|
(30,043)
|
|
(9,402)
|
Prepaid expenses and
other long-term assets
|
(1,048)
|
|
(2,367)
|
Accounts
payable
|
(18,316)
|
|
11,574
|
Contract
liabilities
|
(7,667)
|
|
13,882
|
Extended
warranties
|
2,600
|
|
1,314
|
Accrued liabilities
and other long-term liabilities
|
15,086
|
|
16,945
|
Net cash provided by
operating activities
|
158,895
|
|
61,318
|
Investing
Activities
|
|
|
|
Capital
expenditures
|
(104,294)
|
|
(54,024)
|
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
|
Acquisition of
intangible assets
|
(5,197)
|
|
—
|
Principal payments
from note receivable
|
51
|
|
48
|
Net cash used in
investing activities
|
(109,311)
|
|
(76,213)
|
Financing
Activities
|
|
|
|
Borrowings under
revolving credit facility
|
597,111
|
|
225,758
|
Payments under
revolving credit facility
|
(629,787)
|
|
(194,754)
|
Proceeds from
financing obligation, net of issuance costs
|
6,061
|
|
—
|
Payments related to
financing costs
|
(398)
|
|
—
|
Principal payments on
financing lease
|
—
|
|
(115)
|
Stock options
exercised
|
33,259
|
|
23,140
|
Repurchase of
stock
|
(25,009)
|
|
(12,737)
|
Employee taxes paid by
withholding shares
|
(1,302)
|
|
(1,018)
|
Dividends paid to
stockholders
|
(26,445)
|
|
(22,917)
|
Net cash (used in)
provided by financing activities
|
(46,510)
|
|
17,357
|
Net increase in
cash, cash equivalents and restricted cash
|
3,074
|
|
2,462
|
Cash, cash
equivalents and restricted cash, beginning of period
|
5,949
|
|
3,487
|
Cash, cash
equivalents and restricted cash, end of period
|
$
9,023
|
|
$
5,949
|
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 adjusted net income, adjusted net income per diluted share,
EBITDA, adjusted EBITDA, and adjusted EBITDA margin are non-GAAP
measures and are susceptible to varying calculations, adjusted net
income, adjusted net income per diluted share, EBITDA, adjusted
EBITDA, and adjusted 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 infrequent 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
December 31,
|
|
Years Ended
December 31,
|
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
|
|
(in
thousands)
|
Net income, a GAAP
measure
|
|
$
47,049
|
|
$
38,898
|
|
$
177,623
|
|
$
100,376
|
Litigation
Settlement
|
|
—
|
|
—
|
|
7,500
|
|
—
|
Profit sharing
effect1
|
|
—
|
|
—
|
|
(750)
|
|
—
|
Tax effect
|
|
—
|
|
—
|
|
(1,242)
|
|
—
|
Non-GAAP adjusted net
income
|
|
47,049
|
|
38,898
|
|
183,131
|
|
100,376
|
Non-GAAP adjusted
earnings per diluted share2
|
|
$
0.56
|
|
$
0.47
|
|
$
2.20
|
|
$
1.24
|
1Profit
sharing effect of litigation settlement in the respective
period.
|
2Reflects
three-for-two stock split effective August 16, 2023.
|
EBITDA and Adjusted 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
December 31,
|
|
Years Ended
December 31,
|
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
|
|
(in
thousands)
|
Net income, a GAAP
measure
|
|
$ 47,049
|
|
$ 38,898
|
|
$
177,623
|
|
$
100,376
|
Depreciation and
amortization
|
|
13,029
|
|
9,482
|
|
46,468
|
|
35,106
|
Interest
expense
|
|
884
|
|
933
|
|
4,843
|
|
2,627
|
Income tax
expense
|
|
16,084
|
|
6,871
|
|
45,531
|
|
24,157
|
EBITDA, a non-GAAP
measure
|
|
77,046
|
|
56,184
|
|
274,465
|
|
162,266
|
Litigation
Settlement
|
|
—
|
|
—
|
|
7,500
|
|
—
|
Profit sharing
effect1
|
|
—
|
|
—
|
|
(750)
|
|
—
|
Adjusted EBITDA, a
non-GAAP measure
|
|
$ 77,046
|
|
$ 56,184
|
|
$
281,215
|
|
$
162,266
|
Adjusted EBITDA
margin
|
|
25.1 %
|
|
22.1 %
|
|
24.1 %
|
|
18.3 %
|
1Profit
sharing effect of litigation settlement in the respective
period.
|
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SOURCE AAON