TULSA, OK, February 27, 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 fourth quarter of 2022.
Net sales for the fourth quarter of 2022 increased 86.8% to a record $254.6 million from $136.3 million in the fourth quarter of 2021. Organic volume growth and product mix contributed approximately 41.0% to year-over-year growth. Volume growth reflected the Company's strong backlog and a fourth straight quarter of record production. In addition to volume, pricing contributed 26.7% of growth and inorganic growth contributed 19.1%.
Gross profit for the quarter increased 195.9% to $78.5 million, or 30.8% of sales compared to the same period a year ago. While 2021 was negatively impacted by supply chain, constrained production, inefficiencies and unabsorbed fixed costs, the fourth quarter of 2022 benefited from multiple prices increases initiated throughout the year, reduced impacts from supply chain and significant production efficiency improvements over all of the plant floors. The Company continues to successfully demonstrate our ability to adapt quickly and maximize production even with the ongoing challenges of parts shortages.
Earnings per diluted share in the fourth quarter of 2022 increased 545.5% to $0.71 from $0.11 in the fourth quarter of 2021. As noted above, the increase in earnings was the result of volume growth, improved gross profit margin and a full year of BASX operations. The year-over-year increase was also attributable to abnormally low gross margin in the fourth quarter of 2021 as well as the $4.4 million of acquisition-related transaction fees from the closing of the BASX acquisition in December 2021.
The Company finished the fourth quarter of 2022 with a record backlog of $548.0 million, up 110.6% from $260.2 million at December 31, 2021. Orders booked in the quarter at the legacy business were robust, outpacing orders booked in both the year ago quarter as well as the previous quarter. Orders at BASX were also strong. Backlog at BASX finished the year up 260.9%.
Gary Fields, President and CEO, stated, “I am extremely pleased with our overall results for 2022, particularly with how we finished the year. We started the year with a significant number of challenges, resulting in a slow start. However, we were able to quickly assess the issues, adapt and overcome. Despite the slow start, we finished 2022 with record sales, EBITDA and earnings for the year. We reported record earnings in the third quarter and followed that up with another record in the fourth quarter. At the same time, we finished the year with a record backlog that has a much-improved margin profile, so we are entering 2023 with positive momentum.”
Mr. Fields continued, “In the fourth quarter, our operations built on the progress made in the third quarter. Gross margin of 30.8% was the high-water mark for the year and was the highest of any quarter since the first quarter of 2020. The price increases we initiated early in the year finally began to hit the production floor, resulting in a realignment of pricing and costs. In addition, productivity improvements and an increase in our headcount helped accelerate throughput. Headcount in the quarter was up 36.2% from a year ago and up 5.9% from the third quarter. Overall, our operations improved significantly throughout the year and we are now performing at the highest level in over a year.”
Mr. Fields continued, “In addition to our manufacturing operations, I am extremely pleased with how well our sales channel is performing. Despite being up against tough comparisons, orders continued to grow, both on a year-over-year and quarter-over-quarter basis, and our backlog finished the year at a record level. Even with price increases removed, bookings still outpaced sales. We clearly continue to take market share, a testament to how well our sales channel partners are performing. We will support our sales channel, so our partners can best leverage the compelling value proposition AAON equipment offers in a market that is increasingly open to investing in premium energy efficient equipment that AAON has specialized in for decades.”
Mr. Fields concluded, “As we celebrate the one year anniversary of closing on BASX and progress into the early part of 2023, we are very positive on the business. Production rates and productivity levels continue to increase, the margin profile of the backlog is the best that it has ever been and order trends remain positive. While it is early in the year, we are optimistic AAON is positioned to achieve another record year of sales and earnings.”
As of December 31, 2022, the Company had cash and cash equivalents of $5.5 million and total debt of $71.0 million. Rebecca Thompson, CFO and Treasurer, commented, “Within the quarter, we paid down $5.3 million on our line of credit and our balance sheet remains strong. At the end of the fourth quarter, our leverage ratio decreased to 0.46, from 0.65 at the end of the third quarter. In 2023, we anticipate cash flows from operations will remain strong, allowing us to continue to reduce our borrowings under the line of credit while making necessary capital investments for long-term growth. We anticipate capital expenditures of approximately $135.0 million for 2023.”
Conference Call and Webcast
The Company will host a conference call and webcast to discuss its financial results and outlook on February 27, 2023 at 5:15 P.M. ET. 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 accessible 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, register at https://app.webinar.net/rbzdMK9Vv27. 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.
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.
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.
Director of Investor Relations
Phone: (617) 877-6346