Aaon, Inc. · NASDAQ:AAON
Aaon — Investor Presentation (July 2022)
38 slides from Aaon's investor presentation, Jul 12, 2022
Slide 1: AAON Investor Presentation
AAON Investor Presentation Matt Tobolski BasX Solutions President RebeccaThompson _ Gary Fields Vice President & CFO President & CEO Joseph Mondillo Director of IR —— —D July 2022
Slide 2: Safe Harbor Statement
Safe Harbor Statement Certain statements and information set forth in this presentation contains “forward-looking statements” and “forward-looking information” within the meaning of the Private Securities Litigation Reform Act of 1995. Except for statements of historical fact, certain information co
Slide 3: Company Overview
$‐ $100 $200 $300 $400 $500 $600 2021202020192018201720162015201420132012 • Industry Leading Semi‐Custom HVAC Production • Innovation Leader • Premium HVAC Products That Provide Superior Performance • Most Sustainable Products That Reduce Carbon Emissions And Improve Air Quality • Total Addressable
Slide 4: Net Sales By Products And Geography
4 Net Sales By Products And Geography* 65% 9% 7% 5% 4% 3%3% 2% Rooftop units Data center cooling solutions Parts Air handlers Condensing units Water source heat pumps Cleanroom systems Other 97% 3% U.S. International • The operations of BasX have been included in our statements of income since the c
Slide 5: AAON Strategy - Customization
AAON offers the most semi-customized HVAC equipment for nonresidential buildings in the commercial HVAC industry Customization leads to: High performance Premium quality Energy efficiency Lowest cost of ownership Automated technologically-advanced production Proprietary software util
Slide 6: AAON Strategy - Product Quality
AAON has the highest quality products on the market Standardizing premium parts and components Premium designs Lowest cost of ownership Energy efficiency Maximizing equipment life span Ease of startup and serviceability Minimized maintenance AAON’s product portfolio is one of the m
Slide 7: Transition In Leadership And Culture
In May 2020, Founder Norman Asbjornson stepped down as CEO, replaced by former President Gary Fields Since 2017, AAON began transitioning from an entrepreneurial led company to a structured team-oriented led enterprise New senior leadership and structure New Director of Investor Relations (2
Slide 8: AAON Strategy - Independent Sales Channel
AAON sells a majority of its equipment through a network of independently owned sales representative organizations Approximately 64 independently managed sales representative firms 128 office locations One international sales organization, which utilizes 28 distributors Differentiation fac
Slide 9: AAON Strategy - Unique Sales Approach
9 AAON Strategy – Unique Sales Approach Premium Good Opportunity Despite AAON achieving high- single digit organic sales growth over the last several years, we estimate about 40% of our sales representatives have significant market share opportunity. Providing our sales channel with tools for su
Slide 10: Nonresidential Commercial HVAC Market
10 Nonresidential Commercial HVAC Market AAON $611M* Customized Market Nonresidential Commercial HVAC Market $30B Total Addressable Market AAON’s total addressable market is approximately 50x the size of the company. Historically, AAON and the customized rooftop market has been a niche of the indu
Slide 11: Investing For Growth - Capex and R&D
11 In the trailing five years, we increased capex by a CAGR of 16%, spending on average 10.1% of sales. In 2017‐2021, most of capex investments were growth‐focused. Annual maintenance capex made up $20‐$30 million. In the trailing five years, we increased R&D by a CAGR of 7%, spending on avera
Slide 12: Investing For Growth - New Products
12 Investing For Growth – New Products AAON’s latest generation of its RN D Series Rooftop Unit, which comes in sizes of 26‐70 tons, was introduced to the market in October 2021. The new D Series unit comes dramatically more energy efficient, with an average IEER of 38% higher, leading the market
Slide 13: Investing For Growth - Low Ambient Air Sourced Heat Pump
13 Investing For Growth – New Products Advancements In Low Ambient Air Sourced Heat Pump (ASHP) Technology ASHP’s are some of the most energy efficient HVAC systems on the market. However, down to a certain outdoor temperature ASHP’s historically are very inefficient or even inoperable when the
Slide 14: Investing For Growth - Longview Facility
14 Investing For Growth – Longview Facility In 2021, AAON’s new 210,000 sq. ft. facility (the bright white facility on the right in the picture above), which nearly doubled capacity of the existing 263,000 sq. ft. facility, became operable. The expansion is used for both equipment and coil wareh
Slide 15: Investing For Growth - NAIC and R&D
15 Investing For Growth – NAIC and R&D The Norman Asbjornson Innovative Center (“NAIC”) opened in 2019. The 65‐foot tall 134,000 sq. ft. facility consists of 10 chambers that have acoustic and thermal performance testing and measuring capabilities simulated under various weather conditions. To
Slide 16: Backlog
LSS Backlog Backlog (in $ millions) $500 $450 $400 $350 $300 $250 $200 $150 $100 | | $50 “pooaeae ll ab os is” Se os” s® os s os” os * ! s Gaon —— s
Slide 17: 2021 Acquisition of BasX Solutions
2018 2021 17 Acquisition of BasX Solutions BasX Solutions is an industry leader in designing, engineering and manufacturing high‐efficiency data center cooling solutions, cleanroom systems, custom HVAC systems and modular solutions SALES MIX Unitary Data Center Cooling Systems Cleanroom Plenum Syste
Slide 18: Strategic Rationale of Acquiring BasX Solutions
18 Strategic Rationale of Acquiring BasX Solutions Attractive End‐Markets o Provides AAON with exposure to the primary cooling data center market and the cleanroom systems market High Barriers to Entry Customization Innovation Strong Leadership Growth o Three‐year revenue CAGR of 49% o S
Slide 19: Acquisition of BasX Solutions Transaction Terms
19 Acquisition of BasX Solutions Financial Benefits of the Transaction Potential Synergies Transaction Terms Financing Timing Upfront payment of $100M Additional $80M payments are subject to earn‐out milestones that extend out through 2023 Acquisition of real estate property utilized by BasX f
Slide 20: Nonresidential Construction Spending
20 Nonresidential Construction Spending* Source: www.census.gov • Includes only sectors that related to a majority of AAON’s sales, including lodging, office, commercial, healthcare, education and manufacturing.
Slide 21: Nonresidential Construction Leading Indicators
21 Nonresidential Construction Leading Indicators Source: www.aia.org, www.constructconnect.com, www.construction.com N on re sid en tia l C on st ru ct io n Pl an ni ng In di ca to rs N on re sid en tia l C on st ru ct io n St ar ts In di ca to rs
Slide 22: Replacement Market
Planned replacement makes up approximately 65% of AAON’s equipment sales. AAON participates very little in the unplanned replacement market. Replacement demand is driven by many factors, including: General economic growth Average age of existing equipment in the market Energy efficiency
Slide 23: Financial Performance
23 Financial Performance Net Sales* EPS* ROIC* EBITDA Margin * Sales are in $ millions. EPS and ROIC calculations exclude one‐time items. $‐ $100 $200 $300 $400 $500 $600 2021202020192018201720162015201420132012 5‐ and 10‐year organic sales CAGR of 7% $‐ $0.20 $0.40 $0.60 $0.80 $1.00 $1.20 $1.40 $1.
Slide 24: Balance Sheet & Capital Deployment
As of March 31, 2022, AAON had $65 million of debt and an unrestricted cash balance of $6 million. In 2013‐2021, AAON has deployed an annual average 124% of operating cash flow via capital expenditures, dividends, share repurchases and acquisitions. In the last five years, regular dividends an
Slide 25: How AAON Performance Stacks Up Against Expensive Industrials
25 How AAON Performance Stacks Up Against The Most Expensive Industrials In The Market ‐20.0% ‐10.0% 0.0% 10.0% 20.0% 30.0% 2021202020192018201720162015201420132012 Organic Sales Growth AAON LII AOS ROK AME ROP ZBRA XYL ‐80.0% ‐30.0% 20.0% 70.0% 120.0% 2021202020192018201720162015201420132012 Net In
Slide 26: How AAON Valuation Compares To Expensive Industrials
26 How AAON Valuation Compares To The Most Expensive Industrials In The Market
Slide 27: ASHRAE Epidemic Recommendations - Humidity and Outdoor Air
The American Society of Heating, Refrigeration and Air‐Conditioning Engineers (ASHRAE), a professional association with a goal of advancing HVAC&R systems designs and construction, put together an Epidemic Task Force in 2020 and determined several recommendations to mitigate the spread of the viru
Slide 28: ASHRAE Recommendations - Filtration and Air Disinfection
Filtration ASHRAE now recommends using a minimum filter level of MERV 13 to mitigate infections aerosols. Prior to 2020, a vast majority of commercial buildings utilized filtration levels of MERV 4 to MERV 8. Standard packaged rooftop units in the market, particularly 40 tons and smaller, ar
Slide 29: Energy Efficiency of AAON Equipment
According to the EIA, 13% of total energy consumption in the U.S. is generated from commercial buildings and 30% of commercial building energy usage is related to heating, ventilation and air‐conditioning. In the last decade, commercial building energy consumption was flat despite total square f
Slide 30: Reducing AAON's Operational Carbon Footprint
AAON has an ongoing focus to reduce its own operational carbon footprint. In 2020, we invested in new overhead doors and a new HVAC system, replaced Metal Halide lighting with LED lighting, set goals around energy conservation, implemented lean manufacturing processes as well as many other initi
Slide 31: Diversity and Inclusion
At AAON, a diverse and inclusive workplace is integral to our business strategy and critical to our success. At the end of 2021, 69% of our total workforce were Black, Indigenous and people of Color and 28% were female. AAON employs individuals from over 32 countries. We have an inclusive ow
Slide 32: Investment Thesis
Premium Product Offering Industry Leading Innovation Pricing Power Highly Efficient, Technologically‐Advanced Production Total Addressable Market Offers Share Gain Opportunity Strengthening Sales Channel Investing In Capacity And Growth More Efficient Leadership Structure Compellin
Slide 33: Manufacturing Footprint
33 Tulsa, Oklahoma (HQ) 1.39M Sq. Ft. R&D Laboratory – 134K Sq. Ft. Longview, Texas 485K Sq. Ft. Redmond, Oregon 194K Sq. Ft. Acquisition of BasX Solutions in Dec. 2021 Parkville, Missouri 51K Sq. Ft. Acquired in 2018 Accelerating AAON Controls Product Development Tulsa ‐ Rooftop Uni
Slide 34: Appendix
EEE APPENDIX
Slide 35: Product Families
Product Families Outdoor Air Handling Units Condensing Units Chillers = Self-Contained Units (800 -72,000 + cfm) (2-70 tons) (4-55 tons) -70tons) 3 . E ere gy 4 Indoor Air Handling Units Water-Source Heat Pumps | Packaged Rooftop Units (800 ~50,000 + cfm) (4-230 tons) (2-240 tons) Q B- we ze. & * =
Slide 36: AAON Sales Breakout By Sector
Lodging Office Commercial Health Care Educational Religious Manufacturing Other May not add to 100% due to rounding 36 New vs Replacement* 35% New Construction 65% Replacement AAON Sales Breakout By Sector * Breakout is approximated.
Slide 37: AAON Total Addressable Market
Market Size (in $ billions) Rooftops $3.9 Cleanroom Systems $8.1 Datacenter Cooling Solutions $6.5 Chillers $0.8 Air Handling Units $2.7 Split Systems* $7.3 Geothermal/WSHP** $0.5 Total $29.7 37 Based on AHRI sales reporting * AHRI data includes both commercial and residential systems. Residential s
Slide 38: AAON Strategy - Customization Example
38 AAON Strategy – Customization Example