TULSA, OK, May 4, 2023 - AAON, INC. (NASDAQ-AAON), a provider of premier, configurable HVAC solutions that bring long-term value to customers and owners, today announced its results for the first quarter of 2023.
Earnings Call Earnings Call Presentation
Net sales for the first quarter of 2023 increased 45.5% to a record $266.0 million from $182.8 million in the first quarter of 2022. Organic volume growth and product mix contributed approximately 23.5% to year-over-year growth. Volume growth reflects the increased production output resulting from the Company's success in attracting and retaining employees along with continuously adapting our production in order to manage parts shortages. Additionally, we continue to realize more pricing each month with pricing comprising 22.0% of growth.
Gross profit margin in the quarter increased to 29.0%, up 380 basis points from the comparable quarter in 2022. Price increases implemented over the last year combined with moderating cost inflation were the driving factors to the gross profit margin expansion.
Earnings per diluted share in the first quarter of 2023 increased 103.0% to a record $0.67 from $0.33 in the first quarter of 2022. The increase in earnings was primarily due to robust volume growth and improved gross profit margin. As a percent of sales, SG&A expenses were 12.4%, down 20 basis points from the first quarter of 2022. Lastly, our stellar stock performance in the first quarter resulted in a large excess tax benefit of $3.8 million.
The Company finished the first quarter of 2023 with a record backlog of $599.9 million, up 30.0% from $461.4 million a year ago, and up 9.5% from $548.0 million at the end of the fourth quarter of 2022.
Gary Fields, President and CEO, stated, “The first quarter of 2023 was another excellent quarter for AAON. We posted a fifth straight quarter of record sales. At the same time, our backlog continued to grow to record levels. Our bookings are still very strong and continue to grow, even when excluding the impact of price increases. We achieved this while continuing to expand production output and capacity. We made further investments in plant and equipment and our total headcount was up 27.3% from a year ago and up 10.4% from the end of 2022.”
Mr. Fields continued, “Our gross profit margin of 29.0%, while down compared to the fourth quarter of 2022, was in line with our expectations. As we communicated on our previous conference call, we incurred certain one-time expenses this quarter as a result of improving some employee benefits. Clearly, these investments we are making in people are paying off as demonstrated in our ability to hire. As also stated on our previous call, we continue to expect gross profit margin will improve throughout the year, particularly in the second half when we anticipate more pricing and better productivity from the capacity investments we are making in the first half of the year.”
Mr. Fields concluded, “As we sit here in the early part of the year, we remain positive on the business. The profitability of the record backlog has never been better, positioning us extremely well through at least the third quarter. Bookings also continue to trend positively, which will help carry us through year-end. Furthermore, we recently closed on our second New Markets Tax Credit transaction related to expansion of our Longview, Texas facility, along with acquiring additional properties in Tulsa. These investments will create additional production capacity, warehouse space, and office space needed to continue our growth trajectory.”
As of March 31, 2023, the Company had cash and cash equivalents of $2.5 million and total debt of $83.7 million. Rebecca Thompson, CFO, commented, “Capital expenditures in the quarter were up 106.2% to $28.9 million due to our continuous investment at all locations. This along with our quarterly dividend paid on March 31st resulted in net borrowings of $12.7 million on our line of credit. That said, our balance sheet remains strong. At the end of the first quarter, our leverage ratio was 0.47. As earnings improve throughout the year and working capital becomes a source of cash, we anticipate cash flows from operations will improve, allowing us to reduce our borrowings under the line of credit while making necessary capital investments for long-term growth.”
Conference Call
The Company will host a conference call and webcast today at 5:15 P.M. ET to discuss the first quarter 2023 results and outlook. 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 dial-in is 1-877-550-1858 for domestic callers or 1-848-488-9160 for international callers, both accessible with the conference ID 1754341. To access the listen-only webcast, please register at https://app.webinar.net/v2AqQOrNY0L. 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 world leader in HVAC solutions for commercial and industrial indoor environments. The Company's industry-leading approach to designing and manufacturing highly configurable 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
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