AAON, Inc.

Welcome to the Aon, Inc. Third Quarter 2023 Earnings Conference Call. Our host for today's call is Joseph Mondillo. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. I would now like to turn the call over to your host. Mr. Mondillo, you may begin.

Thank you, Operator, and good afternoon, everyone. The press release announcing our third quarter financial results was issued after market closed today. and can be found on our corporate website, aaon.com. The call today is accompanied with a presentation that you can also find on our website, as well as the listen-only webcast. Please turn to slide two. We begin our customary forward-looking statement policy. During the call, any statement presented dealing with the 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 that could cause AON's results to differ materially from those anticipated. You are aware of the inherent difficulties, risks, and uncertainties in making predictive statements. Our press release and Form 10-Q 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. Our press release and portions of today's call use non-GAAP financial measures as defined in Regulation G. You can find the related reconciliations to GAAP measures in our press release and presentation. Joining me on today's call is Gary Fields, president and CEO, Rebecca Thompson, CFO and treasurer, and Matt Tobolsky, our new president of Aon. Gary will provide some opening remarks. Rebecca will then walk you through the quarterly results and we'll then finish with Gary and Matt with some commentary on the quarter and outlook. With that, I will turn the call over to Gary.

Start on slide three. Third quarter was another very good quarter for Aon. We reported record sales for a seventh straight quarter. Organic volume was up year over year 11.9%. That was against a quarter a year ago where organic volume was up 26.8%. On a two-year stack, volumes were up 41.9%. Gross margin expanded quarter over quarter, another 410 basis points. driven by increased productivity and a positive contribution from price cost. The increased volume at higher gross margin drove earnings per share growth of 70.6% to 58 cents per diluted share. Now let's turn to slide four. Our operation team continues to do a great job at efficiently increasing production capacity to manage the robust demand. Production outpaced bookings for a second straight quarter, which we were very happy to see. Backlog declined further, allowing our lead times to continue to fall. Lead times are now finally back to normal levels, which is important for competitive reasons. Productivity across all three of our major locations improved in the quarter. Supply chain disruptions have abated, minimizing the impact of production operations. These have all been a key factor to the improved margins. Now let's please turn to slide five. Market environment remains busy despite what the macroeconomic indicators have been signaling. Bookings and the book to bill improved quarter over quarter and sentiment at the ground level remains very positive. From a high level perspective, industry trends remain favorable for Aon. The high quality, high performing custom equipment we manufacture has become a very compelling value proposition with a market that is increasingly focused on decarbonization, energy efficiency, and electrification. Additionally, increased regulations on the industry led to a narrower price premium between our equipment and the competitions, increasing the value proposition of our equipment, all of which have contributed to us taking market share. As such, we continue to invest in the future. Now let's please turn to slide six. As you can see from our CapEx spend and headcount year-to-date, we are aggressively investing in production capacity. Despite what you're seeing with the general economy, several of our end markets remain strong. This includes data centers, semiconductor manufacturing, general manufacturing, and education. In addition to production capacity, we're investing more in sales and marketing, product development, and IT infrastructure. All of this with the intent to better position us for long-term growth. Our parts business also continues to be an area we focus on. In the third quarter, parts sales grew 14%. That was 5.8% of total sales. We continue to target a strong double-digit annual growth in parts and expect to increase the business by two to three times in the next five years. With that, I'll now hand over the call to Rebecca to go over the financial results.