Aaon, Inc. · NASDAQ:AAON
Aaon — Q4 2022 Earnings Presentation
19 slides from Aaon's earnings presentation, Feb 27, 2023
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: Electrification: From Niche to Mainstream
Electrification From Niche to MAINSTREAM
Slide 5: Q4 2022 Sales Bridge
Q4 2022 Sales Bridge Q4 Highlights $300 ü Record quarterly sales $26.0 $254.6 $250 $36.4 +19.1% ü Reflects strong backlog $55.9 +26.7% $200 ü Record production rates (in millions) $150 $136.3 +41.0% ü Organic headcount growth +36.2% $100 ü Organic unit volume growth +41.0% $50 ü Parts sales growth +
Slide 6: Q4 2022 Gross Profit Margin
Q4 2022 Gross Profit Margin 35% 30.8% Q4 Highlights 28.6% 29.3% 30% 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% $30 12% + Operating margin of 18.3% 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 ü Balance sheet remains strong $4.0 ü Debt of $71.0 million is up y/y $3.0 $40.0 $31.0 million, but only equates $2.0 $1.0 $20.0 to a leverage ratio of 0.46 versus 0.42 a year ago $0.0 $0.0 Q4'21 Q4'22 Q4'21 Q4'22 ü In
Slide 11: Record Organic Volume and Production
Record Organic Volume and Production Production Capacity Productivity Backlog Strengthening Sales Channel ü Squeezing additional ü Sales per day per ü Organic backlog ü More alignment with capacity out of existing person improving entering Q3 +164% y/y channel partners footprint ü 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 ü Historically, AAON managed ü Favorable market trends are pricing to cost exclusively resulting in AAON managing 35% its pricing more to market 30.8% 30% 28.6% 29.3% 26.0% 25.2% 27.0% ü Hyp
Slide 13: Backlog
Backlog $600 Q4 Highlights $500 ü Industry best lead-times and on-time delivery rates $400 (in millions) ü Narrowing price premium of $300 AAON equipment compared to market $200 ü AAON equipment offers most $100 attractive value proposition $0 ü Strengthening sales channel 16 0 17 0 18 0 19 0 20 0 2
Slide 14: Macroeconomic Indicators Remain Positive
10.0% 15.0% 20.0% 25.0% 0.0% 5.0% -15.0% -10.0% -5.0 % Mar-18 Jun-18 Sep-18 Dec-18 Mar-19 M 20 25 30 35 40 45 50 55 60 65 ar Jun-19 -1 Ju 8 Sep-19 n- 1 Dec-19 Se 8 p- 1 Mar-20 De 8 c-1 Jun-20 M 8 Sep-20 ar Con struction Spen din g -1 Ju 9 Dec-20 n- 1 Mar-21 Se 9 p- 1 Jun-21 De 9 c-1 Sep-21 M 9 Dec-2
Slide 15: Investing in Production Capacity
Investing in Production Capacity CAPEX Q4 Highlights $150 ü 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 ü 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 ü Parts sales were up 23.1% in Q4 $50,000 ü Parts sales were up 30.3% in 2022 $40,000 (in thousands) ü On a two-year stack, parts sales $30,000 were up 64.6% in 2022 $20,000 ü Parts sales should accelerate as $10,000 supply chain issues wane $0 ü L
Slide 17: 2023 Outlook
2023 Outlook Highlights ü Record backlog entering 2023 ü Improving margin profile of backlog entering 2023 ü Orders trends remain strong ü Production and productivity is improving ü Anticipate another year of record sales and EPS 2023 Modelling Assumptions Pricing contribution to sales growth: Low d
Slide 18: Appendix: Non-GAAP Reconciliations
Appendix Non-GAAP Reconciliations
Slide 19: Adjusted SG&A & Income from Operations
ADJUSTED SG&A & INCOME FROM OPERATIONS Quarter Ended March 31 June 30 September 30 December 31 March 31 June 30 September 30 December 31 2021 2022 ($ 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