AAON, Inc.

Ladies and gentlemen, thank you for standing by and welcome to Aon's third quarter 2022 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, please press star followed by the number one on your telephone keypad. If you would like to withdraw your question, again, press star one. Thank you. Joel Mandelo, Director of IR, you may begin your conference.

Thank you, Operator, and good afternoon, everyone. Press release announcing our third 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 today are Gary Fields, President and CEO, and Rebecca Thompson, CFO and Treasurer. Shortly, I'll be handing the call off to Rebecca for her to go through the third 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 to Q&A. Prior to that, though, we begin 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 Exchange Act of 1934. Each is 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're 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 most 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 will turn the call over to Rebecca.

Thank you, Joe. I'd like to begin by discussing the comparative results of the three months ended September 30th, 2022 versus September 30th, 2021. Net sales increased 75.1% to 242.6 million from 138.6 million. The largest driving factor to the growth was organic volume, which contributed 26.9%. Volume growth reflected the company's strong backlog and a third straight quarter record production. Improved productivity, along with an approximate 18% increase in organic headcount, helped drive the increased production. In addition to volume, pricing contributed 24.4%, and the acquisition of basics contributed 23.8%. Similar to the legacy business, Basics performed extremely well in the quarter. Basics realized record sales in EBITDA of any quarter in its history, while increasing its backlog 33.8% from the end of the second quarter of 2022. Our gross profit increased 82.1% to $65.6 million from $36 million. As a percentage of sales, gross profit was 27% compared to 26% in the third quarter of 2021. The expansion in gross profit margin was driven by higher pricing and improved productivity, partially offset by higher costs and adverse effects of supply chain issues. Gross profit was the highest since the second quarter of 2021. Similar to the trend realized in the second quarter of 2022, gross profit margin improved throughout the third quarter. Selling general and administrative expenses increased 81.7%, to $28.9 million from $15.9 million in the third quarter of 2021. As a percentage of sales, SG&A increased to 11.9% from 11.5% in the third quarter of 2021. Excluding basics, SG&A expenses increased 41.5% and totaled 10.7% of sales, down 80 basis points from a year ago. We continue to do a good job at controlling these expenses. Income from operations increased 82.3% to $36.7 million or 15.1% of sales from $20.1 million or 14.5% of sales in the third quarter of 2021. Our effective tax rate increased to 23.3% from 22.5%. The company's estimated annual 2022 effective tax rate, excluding discrete events, is expected to be approximately 25%. net income increased to $27.5 million or 11.3% of sales compared to $15.6 million or 11.2% of sales in the third quarter of 2021. Deleted earnings per share increased 75.9% to $0.51 per share from $0.29 per share. Turning to the balance sheet, you'll see that we had a working capital balance of $193.9 million versus $131.3 million at December 31, 2021. Unrestricted cash totaled $10.7 million on September 30, 2022, and total debt at the end of the quarter totaled $76.3 million. Within the quarter, we paid down approximately $30 million on our line of credit, lowering our leverage ratio to 0.65 from 1.06 at the end of the second quarter. Capital expenditures for the first nine months of the year were $41.6 million. We now expect capital expenditures for the year to be approximately $73.3 million. We monitor our growth trajectory and capacity regularly, and we continue to invest in long-term growth. The company had stock repurchases of $8.9 million during the nine months ended September 30, 2022. Shareholders' equity per diluted share is $9.72 at September 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.