Aaon, Inc. · NASDAQ:AAON
Aaon — Sidoti & Co. Conference March 2021
36 slides from Aaon's conference presentation, March 2021
Slide 1: Investor Presentation Sidoti & Co. Conference
Investor Presentation Sidoti & Co. Conference Gary Fields Scott Asbjornson President & CEO Joseph Mondillo Vice President & CFO Director of IR March 2021
Slide 2: Safe Harbor Statement
Safe Harbor Statement Certain statements and information set forth in this presentation contains “forward-looking statements” and “forward-looking information” within the meaning of the Private Securities Litigation Reform Act of 1995. Except for statements of historical fact, certain information co
Slide 3: Company Overview
Company Overview AAON is a premium provider of commercial heating, ventilation and air conditioning (HVAC) products. General Information Net Sales Founded in 1988 $600 20.0% $500 15.0% $400 Established Industry-Leading Semi- $300 10.0% Custom HVAC Production $200 5.0% $100 Premium Products $-
Slide 4: Manufacturing Footprint
Manufacturing Footprint Three Facilities: Tulsa, Oklahoma (Headquarters) 1.51M Sq. Ft. R&D Laboratory - 134,000 Sq. Ft First operational in 2019 Longview, Texas 263,000 Sq. Ft. Tulsa - Rooftop Units, Outdoor Mechanical Rooms, Large Split Systems and Geothermal/Water-Source Heat Pumps N
Slide 5: Product Families
Product Families AAOGN' ROOFTOP UNITS (2-240 tons) WATER-SOURCE HEAT PUMPS (1 - 230 tons) PACKAGED aaa rae ROOMS - ‘tons) 7h a >| « ‘3 BN SERIES F ed w ie aS. BOILER MECHANICAL LF SERIES Orme RN SERIES RQ SERIES ROOM IiSepet a= a | RZSERIES VERTICAL & 15 f HORIZONTAL ‘ WSHP SB SERIES = Ma SERIES SA
Slide 6: Transition In Leadership And Culture
Transition In Leadership And Culture In May 2020, Founder Norman Asbjornson stepped down as CEO, replaced by former President Gary Fields Since 2017, AAON began transitioning from an entrepreneurial led company to a structured team-oriented led enterprise New leadership and structure Higher
Slide 7: AAON Strategy - Customization
AAON Strategy - Customization AAON offers the most customized HVAC equipment for nonresidential buildings Customization leads to: High performance Premium quality Energy efficiency Lowest cost of ownership Automated technologically-advanced production Proprietary software utilized to
Slide 8: AAON Strategy - Customization
AAON Strategy - Customization 8
Slide 9: AAON Strategy – Product Quality
AAON Strategy – Product Quality AAON has the highest quality products on the market Standardizing premium parts and components that are add-ons at alternative manufacturers Lowest cost of ownership Energy efficiency Maximizing unit life span Ease of startup and maintenance Minimizing m
Slide 10: AAON Strategy – Unique Sales Approach
AAON Strategy – Unique Sales Approach AAON sells a majority of its equipment through a network of independently owned sales representative organizations Approximately 63 independently managed sales representative firms 125 office locations One international sales organization, which utilizes
Slide 11: AAON Strategy – Unique Sales Approach
AAON Strategy – Unique Sales Approach Despite AAON achieving high- single digit organic sales growth over the last several years, we estimate about 40% of our sales Premium representatives have significant market share opportunity. Providing our sales channel with tools for success Good The New
Slide 12: Investing For Growth
Investing For Growth CAPEX In the trailing five years, we 80 14.0% increased capex by a CAGR of 26%, 70 12.0% spending on average 9.4% of sales. 60 50 10.0% In 2020, capex increased by 82%. (in $ millions) 8.0% In 2016-2020, most of capex 40 6.0% 30 20 4.0% investments were growth-focused; 10
Slide 13: Investing For Growth – Longview Facility
Investing For Growth – Longview Facility In 2019, AAON began constructing a new 210,000 sq. ft. facility (the bright white facility on the right in the picture above), which nearly doubles capacity of the existing 263,000 sq. ft. facility. The expansion will be used for both equipment and coil w
Slide 14: Investing For Growth – NAIC and R&D
Investing For Growth – NAIC and R&D The Norman Asbjornson Innovative Center (“NAIC”) opened in 2019. The 65-foot tall 134,000 sq. ft. facility consists of 10 chambers that have acoustic and thermal performance testing and measuring capabilities simulated under various weather conditions. This
Slide 15: Investing For Growth – New Products
Investing For Growth – New Products Next Generation Water-Source Heat Pump New RZ Series Rooftop Units AAON entered the $500 million-plus WSHP market in 2015 with an in-house design. By 2019, AAON captured 5% market share, growing at a 50%+ CAGR in 2017-2019. In 2021, AAON will be introducing
Slide 16: Total Addressable Market
Nonresidential Building Rooftop HVAC Market Total Addressable Market Historically, AAON has lead the customized rooftop market. Customized market positioned to take share – we see demand trends shifting more and more towards customization. Nonresidential Rooftop Market AAON owns approximately 5%
Slide 17: AAON Sales Breakout By Sector
AAON Sales Breakout By Sector Manufacturing 17% Other Religious New vs Replacement* 5% 1% Lodging 50% New Construction 8% Educational 50% Replacement 23% * Breakout is approximated. Office Health Care 18% 10% Commercial 19% May not add to 100% due to rounding 17
Slide 18: Nonresidential Construction Spending
Nonresidential Construction Spending* 10.0% 450,000 8.0% 440,000 6.0% 430,000 4.0% (in $ millions) 420,000 2.0% 0.0% 410,000 -2.0% 400,000 -4.0% 390,000 -6.0% 380,000 -8.0% -10.0% 370,000 Oct-20 Oct-19 Jan-20 May-20 Jan-21 Oct-18 Aug-20 Nov-20 Jan-19 May-19 Mar-20 Jan-18 May-18 Mar-19 Aug-19 Nov-19
Slide 19: Nonresidential Construction Leading Indicators
Nonresidential Construction Leading Indicators Architectural Billings Index Dodge Nonresidential Construction Starts $500,000 40% 60 (in $ millions, seasonally adjusted 53.3 $400,000 20% 55 50 $300,000 0% annual rate) 45 $200,000 -20% 40 35 $100,000 -40% 30 $0 -60% 25 20 Nonresidential Construction
Slide 20: Replacement Market
Replacement Market Planned replacement makes up approximately 50% of AAON’s equipment sales. AAON participates very little in the unplanned replacement market. Replacement demand is driven by many factors, including: General economic growth Average age of existing equipment in the market
Slide 21: Indoor Air Quality
Indoor Air Quality The American Society of Heating, Refrigeration and Air-Conditioning Engineers (ASHRAE), a professional association with a goal of advancing HVAC&R systems designs and construction, put together an Epidemic Task Force in 2020 and determined several recommendations to mitigate the
Slide 22: Indoor Air Quality (continued)
Indoor Air Quality (continued) Filtration ASHRAE now recommends using a minimum filter level of MERV 13 to mitigate infections aerosols. Prior to 2020, a vast majority of commercial buildings utilized filtration levels of MERV 4 to MERV 8. Standard packaged rooftop units in the market, partic
Slide 23: Sustainability - Environmental
Sustainability - Environmental According to the EIA, 13% of total energy consumption in the U.S. is generated from commercial buildings and 30% of commercial building energy usage is related to heating, ventilation and air-conditioning. In the last decade, commercial building energy consumption
Slide 24: Sustainability – Environmental (continued)
Sustainability – Environmental (continued) AAON has an ongoing focus to reduce its own operational carbon footprint. In 2020, we invested in new overhead doors and a new HVAC system, replaced Metal Halide lighting with LED lighting, set goals around energy conservation, implemented lean manufact
Slide 25: Sustainability – Diversity & Inclusion
Sustainability – Diversity & Inclusion At AAON, a diverse and inclusive workplace is integral to our business strategy and critical to our success. At the end of 2020, 68% of our total workforce were Black, Indigenous and people of Color and 29% were female. AAON employs individuals from over
Slide 26: Financial Performance
Financial Performance Net Sales* EPS* 35% ROIC* 30% EBITDA Margin 30% 25% 25% 20% 20% 15% 15% 10% 10% 5% 5% 0% 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 0% ROIC 10-year average ROIC 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 * Sales are in $ millions. EPS and ROIC calculations exclude
Slide 27: Balance Sheet & Capital Deployment
Balance Sheet & Capital Deployment As of December 31, 2020, AAON had no debt and an unrestricted cash balance of $79 million. In 2013-2020, AAON has deployed an annual average 102% of operating cash flow via capital expenditures, dividends, share repurchases and acquisitions. In the last five
Slide 28: How AAON Performance Stacks Up Against The Most Expensive Industrials
How AAON Performance Stacks Up Against The Most Expensive Industrials In The Market Organic Sales Growth ROIC 25.0% 40% 20.0% 35% 15.0% 30% 25% 10.0% 20% 5.0% 15% 0.0% 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 10% -5.0% 5% -10.0% 0% -15.0% 2010 2011 2012 2013 2014 2015 2016 2017 2018 20
Slide 29: AAON Share Valuation
AAON Share Valuation Forward EV/EBITDA* AAON LII TT CARR JCI FIX EME AOS ROK AME ROP 0 5 10 15 20 25 30 * Forward EV/EBITDA multiples are based on C2021 EBITDA consensus estimates. 29
Slide 30: Investment Thesis
Investment Thesis Premium Product Offering Industry Leading Innovation Pricing Power Highly Efficient, Technologically-Advanced Production Total Addressable Market Offers Share Gain Opportunity Strengthening Sales Channel Investing In Capacity And Growth More Efficient Leadership Str
Slide 31: Appendix
APPENDIX 31
Slide 32: Yearend Backlog
Yearend Backlog Backlog (in $ millions) $160 $140 $120 $100 $80 $60 $40 $20 $0 2012 2013 2014 2015 2016 2017 2018 2019 2020 32
Slide 33: AAON Total Addressable Market
AAON Total Addressable Market Market Size (in $ billions) Rooftops $3.9 Chillers $0.8 Air Handling Units $2.7 Split Systems* $7.3 Geothermal/WSHP** $0.5 Total $15.1 Based on AHRI sales reporting * AHRI data includes both commercial and residential systems. Residential systems likely account for a la
Slide 34: Product Mix
Product Mix Product Mix In Units 0.6% Product Mix In Dollars 4.1% Rooftop Units 5.1% Rooftop Units 4.5% Condensing Units Condensing Units 24.7% Air Handlers Air Handlers 0.1% 7.9% 59.9% Outdoor Mechanical Outdoor Mechanical 7.3% Rooms 85.7% Rooms Water-Source Heat Water-Source Heat Pumps Pumps 34
Slide 35: Stock Performance – 25+ year
Stock Performance – 25+ year AAON, Inc. (NASDAQ:AAON) AAON Increase (14,863%) Comparison with - GSPC = S&P 500 (504%) - INXC = NASDAQ (1068%) AAON Stock Performance Shown with Stock Splits and Dividends Stock Price 1991 = ~ 0.10 Stock Price March 23, 2021 = 70.69 Chart available from www.yahoo.com/f
Slide 36: AAON
AAON Defining Quality. Building Comfort. 36