AAON, Inc.

Good day and welcome to the Aon Inc. second quarter 2022 earnings conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press stars and one. Please note that this event is being recorded. I would now like to turn the conference over to Joe Mondillo with Director of Investor Relations. Please go ahead, sir.

Thank you, Operator, and good afternoon, everyone. The press release announcing our second quarter 2022 financial results was issued after market closed today and can be found on our corporate website, Aon.com. Joining me on the call this afternoon is Gary Fields, our President and CEO, and Rebecca Thompson, our CFO and Treasurer. Shortly, I'll be handing the call off to Rebecca for her to go through the second quarter results. Gary will then provide further insight on the quarter along with commentary on our outlook, and then we'll open up the call for Q&A. Prior to that, though, we begin with our customary forward-looking statement policy. During the call, any statement presented dealing with information that is not historical is considered forward-looking and made pursuant to the safe harbor provisions of the Securities Litigation Reform Act of 1995, the Securities Act of 1933, and the Securities and Exchange Act of 1934, each as amended. As such, it is subject to the occurrence of many events outside of AON's control, and that could cause AON's results to differ materially from those anticipated. You are all aware of the inherent difficulties, risks, and uncertainties in making predictive statements. Our press release in Form 10-Q that we filed this afternoon details some of the important risk factors that may cause our actual results to differ from those in our predictions. Please note that we do not have the duty to update our forward-looking statements. And with that, I'll turn over the call to Rebecca.

Thank you, Joe. I'd like to begin by discussing the comparative results of the three months ended June 30, 2022 versus June 30, 2021. Net sales increased 45.1% to $208.8 million from $143.9 million. The addition of basic sales of $24.6 million was the largest contributing factor to our growth. As noted in our earnings release, revenue synergies from this acquisition have materialized faster than expected and are expected to have significant growth in the coming year. Another contributing factor to the total sales increase was the growth of our Aon Coil product segment realized. Organic unit volumes at the segment increased 43.3% due to the new manufacturing capacity added to our Longview, Texas facility in early 2021. as well as strong market demand for the electric powered split systems this facility produces. Our gross profit increased 12.5% to $47.4 million from $42.1 million. As a percentage of sales, gross profit was 22.7% compared to 29.3% in the second quarter of 2021. The contraction in gross margin was primarily due to higher cost of materials. While the cost of some materials has stabilized, We continue to see volatility in the cost of our component parts, and we continue to experience supply disruptions that create additional costs to the business. On a positive note, gross margin improved sequentially throughout the quarter as we worked through lower price backlog and began to see some of our higher price backlog hit the production floor. While we expect supply disruptions will continue through the second half of the year, we believe pricing will offset those costs and help drive gross margin expansions in the second half of the year. Selling general and administrative expenses increased 59.4% to $26.9 million from $16.9 million in the second quarter of 2021. As a percentage of sales, SG&A increased to 12.9% from 11.7% in the second quarter of 2021. Excluding basics, SG&A expenses increased 25.6% and total 11.5% of sales down 20 basis points from a year ago. We continue to do a good job at controlling these expenses, particularly in the inflationary environment we are in. Income from operations decreased 18.9% to 20.5 million or 9.8% of sales from 25.2 million or 17.5% of sales in the second quarter of 2021. Our effective tax rate increased to 20.8% from 18.3%. The company's estimated annual 2022 effective tax rate, excluding discrete events, is expected to be approximately 25%. Net income decreased to 15.9 million or 7.6% of sales compared to 20.6 million or 14.3% of sales in the second quarter of 2021. Diluted earnings per share decreased by 21.1% to $0.30 per share from 38% per share. Turning to the balance sheet, you'll see that we had a working capital balance of $191.2 million versus $131.3 million at December 31, 2021. Unrestricted cash totaled $17.6 million at June 30, 2022. Our current ratio is approximately 2.4 to 1. Capital expenditures for the first six months of the year were 27.2 million. We now expect capital expenditures for the year to be approximately 73.3 million. The reduction from our previous guidance of 100.4 million is due to our existing facilities finding ways to increase capacity under the current square footage, allowing us to push out some of our other capacity expansion projects. The company had stock repurchases of $6.9 million during the six months ended June 30, 2022. Shareholders' equity per diluted share is $9.09 at June 30, 2022, compared to $8.68 at December 31, 2021. I'd now like to turn the call over to our CEO and President, Gary Fields. Good afternoon.