AAON, Inc.

and welcome to the Aon Incorporated Fourth Quarter 2022 Earnings Conference Call. Our host for today's call is Joseph Mundillo. At this time, all participants are in a listen-only mode, and later we will conduct a question-and-answer session. I would now like to turn the call over to your host, Joseph Mundillo. You may begin.

Thank you, Operator, and good afternoon, everyone. The press release announcing our fourth quarter financial results was issued after market closed today and can be found on our website, The call today is accompanied with a presentation that you can also find on our website, as well as on the listen-only webcast. Please turn to slide two. 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 AN's control that could cause AN's results to differ materially from those anticipated. You are all aware of the inherent difficulties, risks, and uncertainties in making predictive statements. A press release in Form 10-K that we filed this afternoon detail 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. Joining me on today's call is Rebecca Thompson, CFO and treasurer, and Matt Tobolsky, president and co-founder of Base Basics. Unfortunately, Gary Fields, our president and CEO, is under the weather today, which is affecting his vocals a bit. Hence why we have Matt here today. He will be filling in for him. We all wish Gary a speedy recovery. Matt will provide some opening remarks to start the call. Rebecca will then walk through the financials, and then we'll finish with Matt for some commentary on the quarter and outlook for 2023. With that, I will turn over the call to Matt.

Thanks, Joe, and good afternoon. So starting on slide number three, overall, we are very pleased with our 2022 results, and particularly with how we finished the year. We started the year faced with several challenges, which resulted in a slow start. However, we quickly assessed the issues, adapted, and were able to overcome those issues by the second half of the year. We reported record results in the third quarter and followed that up with another record in the fourth quarter of 2022. Despite the slow start to the year, we finished 2022 with record sales and earnings for the year. In the fourth quarter, sales were up organically 67.7%, and earnings were up over 500%. Organic volumes in the quarter were up 41%, In a two-year stack, volumes were up 46%. Compared to our previous record EPS in the third quarter, EPS was up 39%. Gross profit margins were the highest since 2020. At the same time, backlog has increased throughout the year, finishing 2022 at record levels. We've increased capacity and production output throughout the year, and yet the orders continue to outpace production. Now, please turn to slide number four. This is a very interesting time for A&M. For decades, the company focused on a niche of the commercial HVAC market centered around the design and manufacturing of premium quality, high performing, high energy efficient equipment. Historically, two factors prevented this niche offering from becoming mainstream. The first factor being price. Aon historically has had equipment that carried at least a 15 to 20% price premium as compared to market pricing. This limited the size of our addressable market to specific applications and or customers. The second factor is value. Up until recently, a vast majority of end users were not focused on total cost of ownership and premium quality, higher performing equipment. However, over the past two years, the market has begun to shift dramatically in Aon's favor. With the pandemic creating more focus on indoor air quality, and at the same time, markets adopting an increased focus on energy efficiency due to higher energy prices, decarbonization, electrification, and government regulations, the demand for higher performing higher energy-efficient equipment has accelerated. Meanwhile, the price premium of Aon equipment has narrowed significantly as government regulations related to minimum energy efficiency standards have forced most of our competition to re-engineer their equipment, causing them to use higher quality, higher price components in their designs. Aon's full product portfolio has been in line with these new standards for years. This regulation did not affect us at all from a pricing perspective. As a result, the cost of manufacturing across our industry has gone up significantly more compared to our costs. This has resulted in substantially larger price increases of our competition compared to the price increases that we have initiated. The end result, our higher quality product offering now sells at a much more competitive price, making the value proposition that much more attractive. On top of all that, we continue to maintain the lowest lead times in the industry with best on-time delivery rates. All in, these dynamics have paved the way for Aon to transition from a niche player to a mainstream player. I'll now hand the call over to Rebecca Thompson to go over the financial results.