Slide 1: Q4 2022 Earnings Conference Call
Q4 2022 Earnings Conference Call February 27, 2023
Slide 2: Forward-Looking Statements and Other References
Forward-Looking Statements and Other References Certain statements and information set forth in this presentation contains future results to differ materially from the Company’s historical experience “forward-looking statements” and “forward-looking information” within the and its present expectatio
Slide 3: Q4 2022 Summary
Q4 2022 Summary SALES $254.6M GROSS PROFIT MARGIN 30.8% Total +86.8% Y/Y • Organic +67.7% Y/Y +1130 bps Y/Y • +380 bps Q/Q ADJUSTED EBITDA $56.2M DILUTED EPS $0.71 +226.5% Y/Y • 22.1% margin +545.5% Y/Y • 39.2% Q/Q BACKLOG $548.0M +110.6% Y/Y • +6.5% Q/Q 3
Slide 4: Government Regulations Economics: From Niche to Mainstream
Government Regulations Economics From Niche to MAINSTEAM
Slide 5: Q4 2022 Sales Bridge
Q4 2022 Sales Bridge Q4 Highlights Record quarterly sales +19.1% Reflects strong backlog +26.7% Record production rates +41.0% Organic headcount growth +36.2% Organic unit volume growth +41.0% Parts sales growth +23.1% Accelerated price realization Robust growth at BASX 5
Slide 6: Q4 2022 Gross Profit Margin
Q4 2022 Gross Profit Margin 35% Q4 Highlights 30.8% 29.3% 30% 28.6% 27.0% 26.0% 25.2% + Improved pricing 25% 22.7% + Better productivity 19.5% 20% ⁻ Higher component costs 15% and wages ⁻ Supply chain issues 10% 5% 0% Q1'21 Q2'21 Q3'21 Q4'21 Q1'22 Q2'22 Q3'22 Q4'22 6
Slide 7: Q4 2022 SG&A
Q4 2022 SG&A $35 14% Q4 Highlights $30 13% $25 ⁻ Adjusted SG&A grew y/y 85.9% 13% on total sales growth of 86.8% $20 (in millions) 12% ⁻ As a percent of sales, Adjusted $15 SG&A decreased y/y by 10 12% basis points to 12.5% $10 $5 11% + SG&A increased y/y due to $0 11% investments that will help fac
Slide 8: Q4 2022 Income from Operations
Q4 2022 Income from Operations $50 20% Q4 Highlights $45 18% + Record income from $40 15.1% 16% operations $35 14% + Operating margin of 18.3% $30 12% highest since 2020 (in millions) $25 10% 14.5% $20 8% + Robust sales combined with $15 6% moderating cost inflation $10 4% + AAON Oklahoma Segment $5
Slide 9: Q4 2022 Diluted EPS
Q4 2022 DILUTED EPS $0.80 $0.71 Q4 Highlights $0.70 $0.60 + Record quarterly Diluted EPS $0.51 + Y/Y growth +545.5% $0.50 + Q/Q growth +39.2% $0.38 $0.40 $0.33 $0.30 $0.29 $0.30 $0.30 ⁻ Q4’22 benefited from reduction in income taxes from $0.20 $0.11 a change in estimate of 179D $0.10 deduction and R
Slide 10: Q4 2022 Balance Sheet and Liquidity
Q4 2022 Balance Sheet and Liquidity Cash Debt $6.0 $80.0 Q4 Highlights $5.0 $60.0 Balance sheet remains strong $4.0 Debt of $71.0 million is up y/y $3.0 $40.0 $31.0 million, but only equates $2.0 $20.0 to a leverage ratio of 0.46 $1.0 versus 0.42 a year ago $0.0 $0.0 Q4'21 Q4'22 Q4'21 Q4'22 In
Slide 11: Record Organic Volume and Production
Record Organic Volume and Production Production Capacity Productivity Backlog Strengthening Sales Channel Squeezing additional Sales per day per Organic backlog More alignment with capacity out of existing person improving entering Q3 +164% y/y channel partners footprint Mitigating supply
Slide 12: Pricing Strategy Driving Gross Profit Margin
Pricing Strategy Driving Gross Profit Margin Managing Pricing to Cost Managing Pricing to Market Gross Margin Historically, AAON managed Favorable market trends are pricing to cost exclusively resulting in AAON managing 35% 30.8% its pricing more to market 30% 28.6% 29.3% 26.0% 25.2% 27.0% Hyp
Slide 13: Backlog
Backlog $600 Q4 Highlights $500 Industry best lead-times and on-time delivery rates $400 (in millions) Narrowing price premium of $300 AAON equipment compared to market $200 AAON equipment offers most $100 attractive value proposition $0 Strengthening sales channel Robust demand at BASX Q4
Slide 14: Macroeconomic Indicators Remain Positive
Macroeconomic Indicators Remain Positive Nonresidential Construction Spending - AAON Sectors Dodge Nonresidential Construction Starts Nonresidential Construction Starts Y/Y change ConstructConnect Nonresidential Construction 25.0% 540,000 Starts - 3-Month Rolling Average Y/Y Change (in $ millions, a
Slide 15: Investing in Production Capacity
Investing in Production Capacity CAPEX Q4 Highlights $150 AAON’s lead-times are by far an industry- 29% $100 CAGR best, but they continue to expand and are (in millions) more than 2x where we want them to be $50 Orders remain robust, making it difficult to $0 reduce lead-times 2018 2019 2020 202
Slide 16: Focusing on Parts and Service
Focusing on Parts and Service Q4 Highlights $60,000 Parts sales were up 23.1% in Q4 $50,000 Parts sales were up 30.3% in 2022 $40,000 (in thousands) On a two-year stack, parts sales $30,000 were up 64.6% in 2022 $20,000 Parts sales should accelerate as $10,000 supply chain issues wane $0 L
Slide 17: 2023 Outlook
2023 Outlook Highlights Record backlog entering 2023 Improving margin profile of backlog entering 2023 Orders trends remain strong Production and productivity is improving Anticipate another year of record sales and EPS 2023 Modelling Assumptions Pricing contribution to sales growth: Low d
Slide 18: Appendix: Non-GAAP Reconciliations
Appendix Non-GAAP Reconciliations
Slide 19: Adjusted SG&A & Income from Operations
ADJUSTED SG&A & INCOME FROM OPERATIONS Quarter Ended March 31 June 30 September 30 December 31 March 31 June 30 September 30 December 31 2021 2022 ($ in 000s) SG&A $ 14,696 $ 16,895 $ 15,897 $ 21,110 $ 23,056 $ 26,933 $ 28,891 $ 31,943 Acquisition-related fees, net of profit sharing effect - - - 3,9