AAON Reports Earnings, Record Sales & Backlog For the First Quarter of 2022
05/05/2022 - 04:01 PM
TULSA, Okla., May 05, 2022 (GLOBE NEWSWIRE) -- AAON, INC. (NASDAQ-AAON), a leader in innovation and production of premium quality, highly energy efficient HVAC equipment for nonresidential buildings, today announced its results for the first quarter of 2022.
Net sales for the first quarter of 2022 increased 57.8% to $182.8 million from $115.8 million in the first quarter of 2021. Organic volume growth contributed approximately 21.3% to net sales in the quarter and the addition of BasX Solutions added 18.1% , with the rest of the growth coming from price increases. Despite the robust growth in net sales, gross profit contracted 340 basis points to 25.2% . Gross profit was impacted primarily by higher material costs as well as supply chain issues that continue to adversely affect operational efficiencies, albeit to a smaller degree than during the second half of 2021. On a sequential basis, gross profit improved 570 basis points from the fourth quarter of 2021. Selling, general and administrative costs increased 56.9% to $23.1 million . Excluding $5.3 million of costs related to BasX Solutions, acquired in December 2021, SG&A costs increased 20.9% . All in, including a doubling of our effective tax rate, this resulted in diluted EPS of $0.33 , up 10.0% from $0.30 in the prior year period.
Financial Highlights: Three Months Ended March 31, % 2022 2021 Change (in thousands, except share and per share data) GAAP Measures Net sales $ 182,771 $ 115,788 57.8 % Gross profit $ 46,064 $ 33,157 38.9 % Gross profit margin 25.2 % 28.6 % Operating income $ 23,010 $ 18,461 24.6 % Operating margin 12.6 % 15.9 % Net income $ 18,059 $ 16,376 10.3 % Earnings per diluted share $ 0.33 $ 0.30 10.0 % Diluted average shares 53,950,995 53,814,644 0.3 % Non-GAAP Measures EBITDA1 $ 30,107 $ 25,876 16.4 % EBITDA margin1 16.5 % 22.3 % 1 These are non-GAAP measures. See "Use of Non-GAAP Financial Measures" below for reconciliation to GAAP measures.
Backlog
March 31, 2022 December 31, 2021 March 31, 2021 (in thousands) $ 461,400 $ 260,164 $ 96,733
The Company finished the first quarter of 2022 with a record backlog of $461.4 million , up 377.0% from $96.7 million a year ago, and up 77.3% from $260.2 million at the end of the fourth quarter of 2021. Excluding BasX Solutions' backlog, organic backlog was also a record, up 305.0% from the prior year quarter.
As of March 31, 2022, the Company had cash and cash equivalents of $5.6 million and total debt of $65.0 million . Rebecca Thompson, CFO, commented, “Within the quarter, we drew down $25.0 million from our line of credit to finance investments in working capital and capital expenditures. We are investing in working capital to facilitate the robust growth we are experiencing, while overcoming supply chain issues and inflation. Capital expenditures, which we continue to expect will be $100.4 million for 2022, are mostly investments to increase manufacturing capacity.”
Ms. Thompson continued, “Our balance sheet remains in a very strong position. At the end of the first quarter, our leverage ratio was 0.63. In Q2, we expect to close on the $22.0 million purchase of real estate related to the acquisition of BasX Solutions which will increase debt modestly in the second quarter. However, we anticipate cash flow will improve in the second half of the year, allowing us to start reducing net debt by year-end. Overall, we are very comfortable with our financial position and liquidity, and we will continue to invest in our long-term growth plans.”
Gary Fields, President and CEO, stated, “I am very pleased with the growth we continue to see in our backlog. New bookings in the first quarter grew organically year over year 150% , marking an acceleration from the robust growth we were already experiencing in recent quarters. I was especially glad to see this considering the year over year comparison in bookings in the first quarter was our toughest comparison in two years. We are clearly taking market share. Many factors are playing a role in this success, including our highly attractive lead times, which have provided us with a big advantage in the current market that continues to experience severe supply pressures.”
Mr. Fields continued, “Our lead times are a testament to how well we have managed our operations through a very challenging environment. While supply chain issues have eased some, they remain a day-to-day issue. The investments we have made in our facilities, our people and our operations led to record production rates and net sales in the first quarter. This has helped us manage our order book on a timely basis and maintain competitive lead times.”
Mr. Fields continued, “I was also pleased to see our margins improve in the first quarter after experiencing such a difficult fourth quarter of 2021. Gross margins were still below our target of 28% -32% , but we are managing well through the supply chain difficulties and we maintain a disciplined pricing strategy to offset inflationary headwinds. As a result, we continue to believe we are on track to return to target margins later this year. We anticipate net sales, margin and earnings will improve throughout 2022.”
Mr. Fields concluded, “Long-term, we are very optimistic with the Company’s outlook. The innovations of our customized product offering combined with our advanced manufacturing process and strong independent sales channel fully support the secular market trends related to decarbonization and indoor air quality. Our recent acquisition of BasX Solutions is also an integral component to our long-term strategy. Since acquiring the business nearly five months ago, backlog at BasX has nearly doubled and new bookings are up significantly from a year ago. The pipeline of construction projects for BasX's data center and cleanroom end-markets is immense. We have also learned the revenue synergies related to the acquisition are greater than we initially estimated. Overall, the fundamentals of the Company have never been better.”
The Company will host a conference call and webcast today at 5:15 P.M. ET to discuss the first quarter 2022 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. To access either mode, register at https://connect.beacon360.com/ses/RWuvrKRXN7eRHOe6k-3uyQ~~ https://AAON.com/Investors
About AAON www.AAON.com
Forward-Looking Statements
Contact Information joseph.mondillo@aaon.com
AAON, Inc. and Subsidiaries Consolidated Statements of Income (Unaudited) Three Months Ended March 31, 2022 2021 (in thousands, except share and per share data) Net sales $ 182,771 $ 115,788 Cost of sales 136,707 82,631 Gross profit 46,064 33,157 Selling, general and administrative expenses 23,056 14,696 Gain on disposal of assets (2 ) — Income from operations 23,010 18,461 Interest (expense) income, net (190 ) 3 Other income, net 21 17 Income before taxes 22,841 18,481 Income tax provision 4,782 2,105 Net income $ 18,059 $ 16,376 Earnings per share: Basic $ 0.34 $ 0.31 Diluted $ 0.33 $ 0.30 Weighted average shares outstanding: Basic 52,613,232 52,293,464 Diluted 53,950,995 53,814,644
AAON, Inc. and Subsidiaries Consolidated Balance Sheets (Unaudited) March 31, 2022 December 31, 2021 Assets (in thousands, except share and per share data) Current assets: Cash and cash equivalents $ 5,633 $ 2,859 Restricted cash 595 628 Accounts receivable, net of allowance for credit losses of $837 and $549 , respectively 113,736 70,780 Income tax receivable 2,092 5,723 Inventories, net 146,091 130,270 Contract assets 10,001 5,749 Prepaid expenses and other 5,548 2,071 Total current assets 283,696 218,080 Property, plant and equipment: Land 5,016 5,016 Buildings 139,089 135,861 Machinery and equipment 326,306 318,259 Furniture and fixtures 23,817 23,072 Total property, plant and equipment 494,228 482,208 Less: Accumulated depreciation 227,858 224,146 Property, plant and equipment, net 266,370 258,062 Intangible assets, net 67,310 70,121 Goodwill 81,892 85,727 Right of use assets 16,862 16,974 Other long-term assets 1,328 1,216 Total assets $ 717,458 $ 650,180 Liabilities and Stockholders' Equity Current liabilities: Accounts payable $ 35,796 $ 29,020 Accrued liabilities 52,890 50,206 Contract liabilities 25,540 7,542 Total current liabilities 114,226 86,768 Revolving credit facility, long-term 65,000 40,000 Deferred tax liabilities 32,966 31,993 Other long-term liabilities 18,693 18,843 New market tax credit obligation 6,417 6,406 Commitments and contingencies Stockholders' equity: Preferred stock, $.001 par value, 5,000,000 shares authorized, no shares issued — — Common stock, $.004 par value, 100,000,000 shares authorized, 53,065,081 and 52,527,985 issued and outstanding at March 31, 2022 and December 31, 2021, respectively 212 210 Additional paid-in capital 77,574 81,654 Retained earnings 402,370 384,306 Total stockholders' equity 480,156 466,170 Total liabilities and stockholders' equity $ 717,458 $ 650,180
AAON, Inc. and Subsidiaries Consolidated Statements of Cash Flows (Unaudited) Three Months Ended March 31, 2022 2021 Operating Activities (in thousands) Net income $ 18,059 $ 16,376 Adjustments to reconcile net income to net cash (used in) provided by operating activities: Depreciation and amortization 7,076 7,398 Amortization of debt issuance cost 11 10 Amortization of right of use assets 67 — Provision for (recovery of) credit losses on accounts receivable, net of adjustments 288 (13 ) Provision for (recovery of) excess and obsolete inventories 220 (194 ) Share-based compensation 3,112 2,761 Gain on disposition of assets (2 ) — Foreign currency transaction gain (9 ) (8 ) Interest income on note receivable (6 ) (6 ) Deferred income taxes 973 4,658 Changes in assets and liabilities: Accounts receivable (43,244 ) (5,179 ) Income tax receivable 3,631 (2,766 ) Inventories (16,041 ) (1,627 ) Contract assets (4,252 ) — Prepaid expenses and other (3,588 ) 108 Accounts payable 6,325 4,904 Contract liabilities 17,998 — Deferred revenue 68 2,358 Accrued liabilities 2,511 58 Net cash (used in) provided by operating activities (6,803 ) 28,838 Investing Activities Capital expenditures (14,031 ) (16,404 ) Cash paid in business combination, net of cash acquired (249 ) — Proceeds from sale of property, plant and equipment 2 — Principal payments from note receivable 14 14 Net cash used in investing activities (14,264 ) (16,390 ) Financing Activities Borrowings under revolving credit facility 25,000 — Stock options exercised 2,890 9,438 Repurchase of stock (3,278 ) (5,185 ) Employee taxes paid by withholding shares (804 ) (1,217 ) Net cash provided by financing activities 23,808 3,036 Net increase in cash, cash equivalents and restricted cash 2,741 15,484 Cash, cash equivalents and restricted cash, beginning of period 3,487 82,288 Cash, cash equivalents and restricted cash, end of period $ 6,228 $ 97,772
Use of Non-GAAP Financial Measures
To supplement the Company’s consolidated financial statements presented in accordance with generally accepted accounting principles (“GAAP”), additional non-GAAP financial measures are provided and reconciled in the following tables. The Company believes that these non-GAAP financial measures, when considered together with the GAAP financial measures, provide information that is useful to investors in understanding period-over-period operating results. The Company believes that this non-GAAP financial measure enhances the ability of investors to analyze the Company’s business trends and operating performance as they are used by management to better understand operating performance. Since EBITDA and EBITDA margin are non-GAAP measures and are susceptible to varying calculations, EBITDA and EBITDA margin, as presented, may not be directly comparable with other similarly titled measures used by other companies.
EBITDA
EBITDA (as defined below) is presented herein and reconciled from the GAAP measure of net income because of its wide acceptance by the investment community as a financial indicator of a company's ability to internally fund operations. The Company defines EBITDA as net income, plus (1) depreciation and amortization, (2) interest expense (income), net and (3) income tax expense. EBITDA is not a measure of net income or cash flows as determined by GAAP. EBITDA margin is defined as EBITDA as a percentage of net sales.
The Company’s EBITDA measure provides additional information which may be used to better understand the Company’s operations. EBITDA is one of several metrics that the Company uses as a supplemental financial measurement in the evaluation of its business and should not be considered as an alternative to, or more meaningful than, net income, as an indicator of operating performance. Certain items excluded from EBITDA are significant components in understanding and assessing a company's financial performance. EBITDA, as used by the Company, may not be comparable to similarly titled measures reported by other companies. The Company believes that EBITDA is a widely followed measure of operating performance and is one of many metrics used by the Company’s management team and by other users of the Company’s consolidated financial statements.
The following table provides a reconciliation of net income (GAAP) to EBITDA (non-GAAP) and for the periods indicated:
Three Months Ended March 31, 2022 2021 (in thousands) Net income, a GAAP measure $ 18,059 $ 16,376 Depreciation and amortization 7,076 7,398 Interest expense (income), net 190 (3 ) Income tax expense 4,782 2,105 EBITDA, a non-GAAP measure 30,107 25,876 EBITDA margin 16.5 % 22.3 %
