Aaon, Inc. · NASDAQ:AAON
Aaon — Investor Presentation (November 2022)
36 slides from Aaon's investor presentation, November 2022
Slide 1: Investor Presentation
INVESTOR Gary Fields President and CEO PRESENTATION Rebecca Thompson Vice President and CFO Matt Tobolski November 2022 BASX Solutions President Joseph Mondillo Director of Investor Relations
Slide 2: Safe Harbor Statement
Safe Harbor Statement Certain statements and information set forth in this forward-looking statements are reasonable as and when presentation contains “forward-looking statements” and made, these statements are not guarantees of future “forward-looking information” within the meaning of the performa
Slide 3: Company Overview
Company Overview General Information Net Sales • Industry Leading Semi-Custom HVAC $600 Production $500 $400 • Innovation Leader $300 • Premium HVAC Products That Provide $200 $100 Superior Performance $- • Most Sustainable Products That Reduce 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Carbo
Slide 4: Net Sales By Products And Geography
Net Sales By Products And Geography* 3% 2% Rooftop units 3% 3% 4% Data center cooling 5% solutions Parts 7% Air handlers U.S. Condensing units International 9% Water source heat pumps Cleanroom systems 65% Other 97% *The operations of BASX have been included in our statements of income since the clo
Slide 5: AAON Strategy - Customization
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 producti
Slide 6: AAON Strategy – Product Quality
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
Slide 7: Transition In Leadership And Culture
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:
Slide 8: AAON Strategy – Unique Sales Approach
AAON Strategy – Unique Sales Approach • 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
Slide 9: AAON Strategy – Unique Sales Approach
AAON Strategy – Unique Sales Approach • 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 success Premium • The New Blue
Slide 10: Nonresidential Commercial HVAC Market
Nonresidential Commercial HVAC Market TOTAL ADDRESSABLE MARKET • AAON’s total addressable market is approximately 50x the size of the company. Nonresidential Commercial HVAC Market • Historically, AAON and the customized $30B rooftop market has been a niche of the industry. • Customized market is po
Slide 11: Investing For Growth
Investing For Growth CAPEX • In the trailing five years, we increased $80 14% capex by a CAGR of 15.8%, spending on $60 12% average 10.1% of sales. (in millions) $40 10% • In 2017-2021, most of capex investments were growth-focused. $20 8% Annual maintenance capex made up $0 6% 2017 2018 2019 2020 2
Slide 12: Investing For Growth – New Products
Investing For Growth – New Products NEW RZ SERIES ROOFTOP UNITS - AAON’s new RZ Series Rooftop Unit, which comes in sizes of 45-250 tons, replaced the former RL Series with greater efficiency, higher capacity and quieter operation. - In 2021, the RZ rooftop unit was recognized by readers of the buil
Slide 13: Investing For Growth – New Products
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 ou
Slide 14: Investing For Growth – Longview Facility
Investing For Growth – Longview Facility • In 2021, AAON’s new 210,000 sq. ft. facility (the bright white facility on the right in the top left picture), 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
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 ou
Slide 16: Backlog
Backlog Backlog (in $ millions) $500 $450 $400 $350 $300 $250 $200 $150 $100 $50 $0 16
Slide 17: Acquisition Of BASX Solutions in December 2021
Acquisition Of BASX Solutions in December 2021 DESCRIPTION BASX Solutions is an industry leader in designing, engineering and manufacturing high-efficiency data 49% CAGR center cooling solutions, cleanroom systems, custom HVAC systems and modular solutions. SALES MIX 2018 2021 Data Centers Cleanroom
Slide 18: Strategic Rationale Of Acquiring BASX Solutions
Strategic Rationale Of Acquiring BASX Solutions • Attractive End-Markets - Provides AAON with exposure to the primary • Synergies cooling data center market and the - Cost Synergies cleanroom systems market | Opportunity related to • High Barriers to Entry material/component procurement, in-house fa
Slide 19: Acquisition Of BASX Solutions
Acquisition Of BASX Solutions • Upfront payment of $100M TRANSACTION TERMS • Additional $80M payments are subject to earn-out milestones that extend out through 2023 • Acquisition of real estate property utilized by BASX for $22M in separate transaction FINANCIAL BENEFITS • Excluding upfront acquisi
Slide 20: Nonresidential Construction Spending
Nonresidential Construction Spending* 20.0% 500,000 15.0% 480,000 10.0% 460,000 (in $ millions) 5.0% 440,000 0.0% 420,000 -5.0% 400,000 -10.0% 380,000 -15.0% 360,000 Dec-20 Jun-18 Jun-19 Jun-20 Jun-21 Jun-22 Mar-18 Mar-19 Mar-20 Mar-21 Mar-22 Sep-18 Dec-18 Sep-19 Dec-19 Sep-20 Sep-21 Dec-21 Sep-22 C
Slide 21: Nonresidential Construction Leading Indicators
Nonresidential Construction Leading Indicators Architectural Billings Index Dodge Momentum Index Nonresidential Construction 200 Index Y/Y Growth 50% 65 175 40% 60 58.5 51.7 150 30% Planning Indicators 55 53.4 50 125 20% 45 100 10% 40 75 0% 35 30 50 -10% 25 29.5 25 -20% 20 0 -30% Jan-20 Jan-18 Jan-1
Slide 22: Replacement Market
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 -
Slide 23: Financial Performance
Financial Performance Net Sales EPS $600 $1.60 5-year and 10-year organic sales CAGR of 7% $500 $1.40 $1.20 $400 $1.00 $300 $0.80 $200 $0.60 $0.40 $100 $0.20 $- $- 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 ROIC EBITDA Margin 35% 30% 30% 25% 2
Slide 24: Balance Sheet & Capital Deployment
Balance Sheet & Capital Deployment • As of September 30, 2022, AAON had $76 million of debt and an unrestricted cash balance of $11 million. • In 2013-2021, AAON has deployed an annual average 124% of operating cash flow via capital expenditures, dividends, share repurchases and acquisitions. • In t
Slide 25: How AAON Performance Stacks Up Against The Most Expensive Industrials
How AAON Performance Stacks Up Against The Most Expensive Industrials In The Market Organic Sales Growth ROIC 30.0% 40% 20.0% 30% 10.0% 20% 0.0% 10% 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 -10.0% 0% -20.0% 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 AAON LII AOS ROK AAON LII AOS ROK
Slide 26: Indoor Air Quality
Indoor Air Quality 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 s
Slide 27: Indoor Air Quality (Continued)
Indoor Air Quality (Continued) • Filtration • Air Disinfection - ASHRAE now recommends using a minimum filter level of - ASHRAE supports using ultraviolet lighting and MERV 13 to mitigate infections aerosols. bipolar ionization technology. - Prior to 2020, a vast majority of commercial buildings uti
Slide 28: Sustainability - Environmental
Sustainability - Environmental • According to the EIA, 16% of total energy consumption in the U.S. is generated from commercial buildings and 40% of commercial building energy usage is related to heating, ventilation and air-conditioning. • In the last decade, commercial building energy consumption
Slide 29: Sustainability – Environmental (Continued)
Sustainability – Environmental (CONTINUED) • AAON has an ongoing focus to reduce its own operational carbon footprint. - In 2020-2021, 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 man
Slide 30: Sustainability – Diversity & Inclusion
Sustainability – Diversity & 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
Slide 31: Investment Thesis
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 Str
Slide 32: Appendix
APPENDIX 32
Slide 33: Manufacturing Footprint
Manufacturing Footprint Tulsa, Oklahoma (HQ) - 1.39 million square feet - Norman Asbjornson Innovation Center (R&D Lab) – 134,000 square feet Longview, Texas - 485,000 square feet Redmond, Oregon Tulsa - Rooftop Units, Outdoor Mechanical Rooms, Large Split - 194,000 square feet Systems and Geotherma
Slide 34: Product Families
Product Families Outdoor Air Handling Units Condensing Units Chillers Self-Contained Units (800- 72,000-+ cfm) (2-70 tons) (4-55 tons) (3-70 tons) _ _ r — aie. \ < =a @r+ fi Senes AN Seles BU Sets, Pace ml Fries LF Series ¥ =a dicate is Indoor Air Handling Units Water-Source Heat Pumps Packaged Roof
Slide 35: AAON Sales Breakout By Sector
Aaon Sales Breakout By Sector Manufacturing New vs Replacement* Religious Other • 35% New Construction Lodging • 65% Replacement * Breakout is approximated. Educational Office Health Care Commercial Note: May not add up to 100% due to rounding 35
Slide 36: AAON Total Addressable Market
AAON Total Addressable Market Market Size (in $ billions) Rooftops $4 Cleanroom Systems $8 Datacenter Cooling Solutions $7 Chillers $1 Air Handling Units $3 Split Systems* $7 Total $30 Based on AHRI sales reporting * AHRI data includes both commercial and residential systems. Residential systems lik