EX-99.1 3 aaonq22024pressreleaseexs.htm EX-99.1 Document

Exhibit 99.1                        
aaona05.jpg


AAON REPORTS RECORD SALES, EARNINGS & BACKLOG
FOR THE SECOND QUARTER OF 2024

TULSA, OK, August 1, 2024 - 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 second quarter of 2024.

Net sales for the second quarter of 2024 increased 10.4% to a record $313.6 million from $284.0 million in the second quarter of 2023. The year-over-year increase was largely driven by the BASX segment, which recognized an increase in sales of 58.3%, a majority of which was spurred by sales of data center equipment. Sales at the AAON Oklahoma and AAON Coil Products segments grew year-over-year 3.4% and 4.3%, respectively.

Gross profit margin in the quarter expanded to 36.1%, up from 33.1% in the comparable quarter in 2023. Gross margin expansion was a result of greater operational efficiencies at the AAON Oklahoma and AAON Coil Products segments as well as lower material costs across the organization.

Earnings per diluted share for the three months ended June 30, 2024, were a record $0.62, up 12.7% from the second quarter of 2023.


Financial Highlights:Three Months Ended 
 June 30,		%Six Months Ended 
 June 30,		%
20242023Change20242023Change
(in thousands, except share and per share data)(in thousands, except share and per share data)
GAAP Measures
Net sales$313,566 $283,957 10.4 %$575,665 $549,910 4.7 %
Gross profit$113,094 $94,018 20.3 %$205,336 $171,172 20.0 %
Gross profit margin36.1 %33.1 %35.7 %31.1 %
Operating income$67,199 $54,740 22.8 %$114,169 $98,946 15.4 %
Operating margin21.4 %19.3 %19.8 %18.0 %
Net income$52,228 $45,682 14.3 %$91,244 $82,496 10.6 %
Earnings per diluted share1
$0.62 $0.55 12.7 %$1.09 $0.99 10.1 %
Diluted average shares1
83,786,22283,469,5810.4 %83,527,71783,478,4980.1 %
1 Reflects three-for-two stock split effective August 16, 2023.
Non-GAAP Measure
EBITDA2
$81,860 $65,865 24.3 %$142,344 $120,459 18.2 %
2 This is a non-GAAP measure. See "Use of Non-GAAP Financial Measures" below for reconciliation to GAAP measure.

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Backlog

June 30, 2024December 31, 2023June 30, 2023
(in thousands)
$650,005 $510,028 $526,209 

At June 30, 2024, we had a record backlog of $650.0 million, up sequentially for a third straight quarter. Compared to a year ago, backlog was up 23.5% from $526.2 million, driven by the BASX and AAON Coil Products segments. The increase in bookings for the quarter primarily related to solutions for the data center market.

Gary Fields, CEO, stated, “Our second quarter performance exceeded expectations. Production issues from the first quarter were largely resolved, leading to increased volume output and productivity across all three segments. This resulted in record quarterly sales and earnings. The BASX segment saw a significant rebound from the first quarter, with sales increasing 103.7% and gross profit rising by 182.2%, quarter-over-quarter. AAON Oklahoma and AAON Coil Products segments also realized sequential improvements. Our operating margin in the quarter expanded to 21.4%, making it the most profitable quarter in the Company's history. We achieved these results with premium pricing and operating efficiencies, which drove our performance.”

Mr. Fields continued, “Bookings in the second quarter performed exceptionally well, resulting in a record backlog at the end of June. The data center market continues to be robust and AAON is well positioned to take advantage of the growing opportunity. Beyond the bookings that made up the backlog at quarter-end, there remains a large pipeline of data center projects for both airside and liquid cooling products that the Company is pursuing. For AAON's traditional packaged rooftop business, bookings in the first half of 2024 were up year-over-year, including in the second quarter. However, growth moderated from prior years. This business is impacted more by the softening macro conditions and disruptions associated with the refrigerant transition, which is resulting in an increased amount of uncertainty regarding near-term demand. Any softness in the rooftop market will be more than offset with our data center products. We anticipate sales and earnings will improve in the second half of the year from the first half, mostly realized in the fourth quarter.”

Mr. Fields concluded, “AAON is strategically positioned for long-term success. As regulations and demands for higher quality HVAC equipment increase, AAON is becoming increasingly cost competitive. Furthermore, the Company is leading the industry in the development of cold climate heat pumps. The opportunities within the data center market are vast and promising, which we anticipate will drive accelerated growth and further market share gains. Consequently, we are investing in expanded production capacity through new facilities and enhanced output within our existing facilities. Additionally, we continue to invest in our people and technology to effectively manage the business and adapt efficiently to the robust growth rates we are targeting for the long-term.”

As of June 30, 2024, the Company had cash, cash equivalents and restricted cash of $12.1 million and a balance on its revolving credit facility of $85.9 million. Rebecca Thompson, CFO and Treasurer, commented, “During the quarter, we completed our share repurchase program totaling $100.0 million. This initiative reflects our confidence in the long-term prospects of the Company and our commitment to delivering value to our shareholders. Looking ahead, we remain focused on executing our growth strategy with continued investments in capex and maintaining a healthy balance sheet through disciplined financial management.”

Conference Call
The Company will host a conference call and webcast today at 5:15 P.M. EDT to discuss the second quarter 2024 results and outlook. The conference call will be accessible via dial-in for those who wish to participate in Q&A as well as a listen-only webcast. The dial-in is accessible at 1-800-836-8184. To access the listen-only webcast, please register at https://app.webinar.net/OdbYjYb31qR. On the next business day following the call, a replay of the call will be available on the Company’s website at https://investors.aaon.com.

About AAON
Founded in 1988, AAON is a global 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
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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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AAON, Inc. and Subsidiaries
Consolidated Statements of Income
(Unaudited)
 Three Months Ended 
 June 30,		Six Months Ended 
 June 30,
 2024202320242023
(in thousands, except share and per share data)
Net sales$313,566 $283,957 $575,665 $549,910 
Cost of sales200,472 189,939 370,329 378,738 
Gross profit113,094 94,018 205,336 171,172 
Selling, general and administrative expenses45,895 39,272 91,183 72,214 
(Gain) loss on disposal of assets— 6 (16)12 
Income from operations67,199 54,740 114,169 98,946 
Interest expense, net(367)(1,543)(606)(2,693)
Other income, net175 163 252 277 
Income before taxes67,007 53,360 113,815 96,530 
Income tax provision14,779 7,678 22,571 14,034 
Net income$52,228 $45,682 $91,244 $82,496 
Earnings per share:  
Basic1
$0.64 $0.56 $1.12 $1.02 
Diluted1
$0.62 $0.55 $1.09 $0.99 
Cash dividends declared per common share1:
$0.08 $0.08 $0.16 $0.16 
Weighted average shares outstanding:  
Basic1
81,791,792 81,439,691 81,339,153 81,263,523 
Diluted1
83,786,222 83,469,581 83,527,717 83,478,498 
1 Reflects three-for-two stock split effective August 16, 2023.



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AAON, Inc. and Subsidiaries
Consolidated Balance Sheets
(Unaudited)
 June 30, 2024December 31, 2023
Assets(in thousands, except share and per share data)
Current assets:  
Cash and cash equivalents$13 $287 
Restricted cash12,065 8,736 
Accounts receivable, net149,149 138,108 
Income tax receivable4,969 — 
Inventories, net182,988 213,532 
Contract assets68,171 45,194 
Prepaid expenses and other5,740 3,097 
Total current assets423,095 408,954 
Property, plant and equipment:  
Land16,018 15,438 
Buildings240,317 205,841 
Machinery and equipment403,664 391,366 
Furniture and fixtures41,128 40,787 
Total property, plant and equipment701,127 653,432 
Less:  Accumulated depreciation287,893 283,485 
Property, plant and equipment, net413,234 369,947 
Intangible assets, net75,560 68,053 
Goodwill81,892 81,892 
Right of use assets16,086 11,774 
Other long-term assets849 816 
Total assets$1,010,716 $941,436 
Liabilities and Stockholders' Equity  
Current liabilities:  
Accounts payable$28,958 $27,484 
Accrued liabilities85,499 85,508 
Contract liabilities26,862 13,757 
Total current liabilities141,319 126,749 
Revolving credit facility, long-term85,884 38,328 
Deferred tax liabilities5,811 12,134 
Other long-term liabilities21,170 16,807 
New market tax credit obligation16,034 12,194 
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, 80,950,856 and 81,508,381 issued and outstanding at June 30, 2024 and December 31, 2023, respectively1
324 326 
Additional paid-in capital49,174 122,063 
Retained earnings1
691,000 612,835 
Total stockholders' equity740,498 735,224 
Total liabilities and stockholders' equity$1,010,716 $941,436 
1 Reflects three-for-two stock split effective August 16, 2023.
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AAON, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
 Six Months Ended 
 June 30,
 20242023
Operating Activities(in thousands)
Net income
$91,244 $82,496 
Adjustments to reconcile net income to net cash provided by operating activities:
  
Depreciation and amortization27,923 21,236 
Amortization of debt issuance costs71 32 
Amortization of right of use assets73 67 
Provision for (recoveries of) credit losses on accounts receivable, net of adjustments
1,169 (171)
Provision for excess and obsolete inventories, net of write-offs
641 1,458 
Share-based compensation8,451 7,823 
(Gain) loss on disposition of assets
(16)12 
Foreign currency transaction loss (gain)
15 (13)
Interest income on note receivable
(9)(10)
Deferred income taxes41 (4,438)
Changes in assets and liabilities:  
Accounts receivable(12,210)(26,782)
Income taxes(6,139)(15,171)
Inventories29,903 (17,927)
Contract assets(22,977)(4,711)
Prepaid expenses and other long-term assets(2,708)(2,502)
Accounts payable(1,804)(14,874)
Contract liabilities13,105 (1,162)
Extended warranties1,195 1,526 
Accrued liabilities and other long-term liabilities(56)33,051 
Net cash provided by operating activities
127,912 59,940 
Investing Activities  
Capital expenditures(65,381)(60,629)
Proceeds from sale of property, plant and equipment16 104 
Software development expenditures(10,058)— 
Principal payments from note receivable26 28 
Net cash used in investing activities
(75,397)(60,497)
Financing Activities  
Proceeds from financing obligation, net of issuance costs4,186 6,061 
Payment related to financing costs(417)(398)
Borrowings under revolving credit facility272,526 279,961 
Payments under revolving credit facility(224,970)(272,429)
Stock options exercised15,821 23,244 
Repurchase of stock(100,034)— 
Employee taxes paid by withholding shares(3,493)(1,162)
Cash dividends paid to stockholders(13,079)(13,004)
Net cash (used in) provided by financing activities
(49,460)22,273 
Net increase in cash, cash equivalents and restricted cash3,055 21,716 
Cash, cash equivalents and restricted cash, beginning of period9,023 5,949 
Cash, cash equivalents and restricted cash, end of period$12,078 $27,665 



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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 is a non-GAAP measures and is susceptible to varying calculations, EBITDA, 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.

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) for the periods indicated:

Three Months Ended 
 June 30,		Six Months Ended 
 June 30,
2024202320242023
(in thousands)
Net income, a GAAP measure$52,228 $45,682 $91,244 $82,496 
Depreciation and amortization14,486 10,962 27,923 21,236 
Interest expense, net367 1,543 606 2,693 
Income tax expense14,779 7,678 22,571 14,034 
EBITDA, a non-GAAP measure$81,860 $65,865 $142,344 $120,459 


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