AAON Reports Sales and Earnings and Backlog for 2021

TULSA, Okla., Feb. 28, 2022 (GLOBE NEWSWIRE) -- AAON, INC. (NASDAQ-AAON), a leader in innovation and production of premium quality, highly energy efficient HVAC products for nonresidential buildings, today announced its results for the fourth quarter of 2021.

AAON reported record fourth quarter revenue of $136.3 million, up 16.8% from the prior-year quarter. Price increases contributed approximately 10.0% to revenue growth in the quarter. However, gross profit declined 21.7% to $26.5 million, or 19.5% of sales. Gross profit was impacted by supply chain issues, which constrained production, led to operational inefficiencies and unabsorbed fixed costs, and exacerbated the adverse effects of inflation by slowing the turnover of our lower priced backlog and delaying the throughput of orders placed after recent price increases. This resulted in net income of $6.2 million and earnings per diluted share of $0.11, down year over year 68.6%, compared to $0.35 in the prior-year quarter.

Excluding one-time items, including acquisition-related transaction fees of $4.4 million in the fourth quarter of 2021 and $6.4 million of gain on insurance recoveries in the fourth quarter of 2020, non-GAAP adjusted earnings per share was $0.18¹, down year over year 35.7%, compared to $0.28¹ in the prior-year quarter.

The Company finished the fourth quarter of 2021 with a backlog of $260.2 million, up 249.6% from $74.4 million a year ago, and up 43.1% from $181.8 million at the end of the third quarter of 2021. Excluding BasX's backlog, organic backlog was up 200.7% from the prior year quarter.

On December 10, 2021, AAON completed the acquisition of BasX, LLC (doing business as BasX Solutions, "BasX"), which included an upfront cash payment of $107.8 million, including acquisition-related transaction fees, net of cash acquired. As of December 31, 2021, the Company had liquidity of $61.1 million compared to liquidity of $107.2 million at December 31, 2020. We believe the Company's senior credit facility provides adequate capacity to fund working capital needs and continue our investment in long-term growth.

Rebecca Thompson, CFO, commented, “We are very comfortable with our financial position at the end of 2021. Our balance sheet remains in a very strong position and we will continue to invest in our long-term growth plans. Capital expenditures in 2021 were $55.4 million, compared to $67.8 million in 2020. We anticipate a capital expenditure budget of $100.4 million for 2022.”

Gary Fields, President and CEO, stated, “I am extremely pleased with the growth we have seen in our backlog and new bookings. Backlog is up year over year 249.6% and new bookings have maintained the strong levels we saw in the second and third quarter. Moreover, strong demand trends continued into early 2022. The growth reflects several factors, including solid end-market demand, market share gains, competitive lead times, the strengthening of our independent sales channel and the compelling value proposition AAON equipment offers.”

Mr. Fields continued, "While we are pleased with demand and the market share gains, sales and earnings results were disappointing. The primary factors that contributed to the lower than anticipated profits were supply chain constraints and material inflation. Supply chain constraints escalated for us in October and November, which led to lower production and less cost absorption. Meanwhile, our cost structure has been rising as we have been increasing headcount due to our rising backlog and in anticipation of the robust growth we foresee in 2022. Furthermore, production constraints magnify the price/cost inflation effect. Lower production means we were not churning through the lower priced backlog fast enough, delaying the recovery in gross profit. In addition to all of this, supply chain constraints created many operational inefficiencies. All in, this led to the underwhelming gross profit and earnings.”

Mr. Fields continued, “On a positive note, we believe the worst of the supply chain constraints are behind us. December was a solid month as far as production and gross profit, and we have seen month-to-month improvement in January and February. Furthermore, the margin profile of our backlog is the highest it has been in about nine months. With less supply chain constraints, higher production capacity, and a large backlog with an improving margin profile, we anticipate production and margins to improve significantly through the first half of 2022."

Mr. Fields concluded, "The challenges we, as well as much of the manufacturing sector, faced in 2021 were truly unprecedented, at least in respect to the last 30 years. In my view, we have navigated the headwinds extremely well and I am very proud of our team. I also believe we are emerging from these challenges as a much stronger Company, which will help us better execute and absorb the robust growth we are anticipating. Despite the recently disappointing results, we remain extremely optimistic on the fundamentals of the business. Our legacy business and the recently acquired BasX both have robust backlogs with paths for significant margin improvement in 2022 and beyond. We continue to believe the Company is best positioned to benefit from an increased focus on decarbonization, electrification, energy efficiency, indoor air quality and cloud-based infrastructure, and we are investing to take advantage of the robust growth we foresee."

Conference Call and Webcast

The Company will host a conference call and webcast to discuss its financial results and outlook on February 28, 2022 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. To access either mode, register at https://connect.beacon360.com/ses/JmYFFym2dtuULrRqTsWTlg~~. After registering, participants will receive an email with instructions on how to access the dial-in and webcast. 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

AAON, Inc. engaged in the engineering, manufacturing, marketing, and sale of premium air conditioning and heating equipment consisting of standard, semi-custom, and custom rooftop units, data center cooling solutions, cleanroom systems, chillers, packaged outdoor mechanical rooms, air handling units, makeup air units, energy recovery units, condensing units, geothermal/water-source heat pumps, coils, and controls. Since the founding of AAON in 1988, AAON has maintained a commitment to design, develop, manufacture and deliver heating and cooling products to perform beyond all expectations and demonstrate the value of AAON to our customers. 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 

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 adjusted net income, adjusted net income per diluted share, EBITDA, adjusted EBITDA, and adjusted EBITDA margin are non-GAAP measures and are susceptible to varying calculations, adjusted net income, adjusted net income per diluted share, EBITDA, adjusted EBITDA, and adjusted EBITDA margin, as presented, may not be directly comparable with other similarly titled measures used by other companies.

Non-GAAP Adjusted Net Income

The Company defines non-GAAP adjusted net income as net income adjusted for any one-time events, such as acquisition related costs or insurance proceeds received, net of profit sharing and tax effect, in the periods presented

The following table provides a reconciliation of net income (GAAP) to non-GAAP adjusted net income for the periods indicated:

EBITDA and Adjusted 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.

Adjusted EBITDA is calculated as EBITDA adjusted by items in non-GAAP adjusted net income, above, except for taxes, as taxes are already excluded from EBITDA.

The following table provides a reconciliation of net income (GAAP) to EBITDA (non-GAAP) and Adjusted EBITDA (non-GAAP) for the periods indicated: