TULSA, Okla., Aug. 1, 2024 /PRNewswire/ — 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,
%
2024
2023
Change
2024
2023
Change
(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 margin
36.1 %
33.1 %
35.7 %
31.1 %
Operating income
$ 67,199
$ 54,740
22.8 %
$ 114,169
$ 98,946
15.4 %
Operating margin
21.4 %
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
83,786,222
83,469,581
0.4 %
83,527,717
83,478,498
0.1 %
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.
Backlog
June 30, 2024
December 31, 2023
June 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 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
AAON, Inc. and Subsidiaries
Consolidated Statements of Income
(Unaudited)
Three Months Ended
June 30,
Six Months Ended
June 30,
2024
2023
2024
2023
(in thousands, except share and per share data)
Net sales
$ 313,566
$ 283,957
$ 575,665
$ 549,910
Cost of sales
200,472
189,939
370,329
378,738
Gross profit
113,094
94,018
205,336
171,172
Selling, general and administrative expenses
45,895
39,272
91,183
72,214
(Gain) loss on disposal of assets
—
6
(16)
12
Income from operations
67,199
54,740
114,169
98,946
Interest expense, net
(367)
(1,543)
(606)
(2,693)
Other income, net
175
163
252
277
Income before taxes
67,007
53,360
113,815
96,530
Income tax provision
14,779
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.
AAON, Inc. and Subsidiaries
Consolidated Balance Sheets
(Unaudited)
June 30,
2024
December 31, 2023
Assets
(in thousands, except share and per share data)
Current assets:
Cash and cash equivalents
$ 13
$ 287
Restricted cash
12,065
8,736
Accounts receivable, net
149,149
138,108
Income tax receivable
4,969
—
Inventories, net
182,988
213,532
Contract assets
68,171
45,194
Prepaid expenses and other
5,740
3,097
Total current assets
423,095
408,954
Property, plant and equipment:
Land
16,018
15,438
Buildings
240,317
205,841
Machinery and equipment
403,664
391,366
Furniture and fixtures
41,128
40,787
Total property, plant and equipment
701,127
653,432
Less: Accumulated depreciation
287,893
283,485
Property, plant and equipment, net
413,234
369,947
Intangible assets, net
75,560
68,053
Goodwill
81,892
81,892
Right of use assets
16,086
11,774
Other long-term assets
849
816
Total assets
$ 1,010,716
$ 941,436
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable
$ 28,958
$ 27,484
Accrued liabilities
85,499
85,508
Contract liabilities
26,862
13,757
Total current liabilities
141,319
126,749
Revolving credit facility, long-term
85,884
38,328
Deferred tax liabilities
5,811
12,134
Other long-term liabilities
21,170
16,807
New market tax credit obligation
16,034
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 capital
49,174
122,063
Retained earnings1
691,000
612,835
Total stockholders’ equity
740,498
735,224
Total liabilities and stockholders’ equity
$ 1,010,716
$ 941,436
1 Reflects three-for-two stock split effective August 16, 2023.
AAON, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
Six Months Ended
June 30,
2024
2023
Operating Activities
(in thousands)
Net income
$ 91,244
$ 82,496
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
27,923
21,236
Amortization of debt issuance costs
71
32
Amortization of right of use assets
73
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 compensation
8,451
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 taxes
41
(4,438)
Changes in assets and liabilities:
Accounts receivable
(12,210)
(26,782)
Income taxes
(6,139)
(15,171)
Inventories
29,903
(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 liabilities
13,105
(1,162)
Extended warranties
1,195
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 equipment
16
104
Software development expenditures
(10,058)
—
Principal payments from note receivable
26
28
Net cash used in investing activities
(75,397)
(60,497)
Financing Activities
Proceeds from financing obligation, net of issuance costs
4,186
6,061
Payment related to financing costs
(417)
(398)
Borrowings under revolving credit facility
272,526
279,961
Payments under revolving credit facility
(224,970)
(272,429)
Stock options exercised
15,821
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 cash
3,055
21,716
Cash, cash equivalents and restricted cash, beginning of period
9,023
5,949
Cash, cash equivalents and restricted cash, end of period
$ 12,078
$ 27,665
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,
2024
2023
2024
2023
(in thousands)
Net income, a GAAP measure
$ 52,228
$ 45,682
$ 91,244
$ 82,496
Depreciation and amortization
14,486
10,962
27,923
21,236
Interest expense, net
367
1,543
606
2,693
Income tax expense
14,779
7,678
22,571
14,034
EBITDA, a non-GAAP measure
$ 81,860
$ 65,865
$ 142,344
$ 120,459
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