Group 1 - The company is responsible for the development of transcript-related projects [1] - The company publishes thousands of quarterly earnings calls per quarter [1] - The company is continuing to grow and expand its coverage [1]

Core Viewpoint - AAON, Inc. is actively engaging with investors through participation in D.A. Davidson's Diversified Industrials & Services Conference, highlighting its commitment to transparency and investor relations [1][2]. Company Overview - AAON, Inc. is a global leader in HVAC solutions, founded in 1988, specializing in high-performance and energy-efficient systems for commercial, industrial, and data center environments [3]. - The company designs and manufactures highly configurable and custom-made equipment, enhancing efficiency, performance, and long-term value for customers [3]. - AAON operates under the AAON and BASX brands and is headquartered in Tulsa, Oklahoma, where it has a world-class innovation center and testing lab [3]. Event Participation - The CEO & President, Matt Tobolski, will participate in a 40-minute fireside chat with D.A. Davidson analyst Brent Thielman on September 18, 2025, at 11:30 a.m. EDT [2]. - A live webcast of the fireside chat will be available on AAON's Investor Relations website, indicating the company's focus on accessibility for investors [2].

Group 1 - Triba Research aims to identify high-quality businesses that can deliver sustainable, double-digit returns over the long term [1] - The firm's strategy emphasizes finding companies with strong competitive advantages, operating in growing markets, maintaining low debt levels, and having skilled management teams [1] - Triba Research prioritizes long-term value creation while staying informed about the latest developments in the market [1]

Financial Data and Key Metrics Changes - Net sales for the quarter declined by $2 million or 0.6% to $311.6 million, driven by a 20.9% decline in Aon branded sales, nearly offset by a 90% increase in Basics branded sales [21][22]. - Gross margin decreased to 26.6%, down 950 basis points, primarily due to lower production volumes of Aon branded equipment [22]. - Non-GAAP adjusted EBITDA was 14.9%, down 1120 basis points, and non-GAAP adjusted EPS was $0.22, down 64.5% from the previous year [22]. Business Line Data and Key Metrics Changes - Aon Oklahoma segment net sales declined by 18%, impacted by supply chain disruptions and coil supply shortages due to ERP implementation [25][26]. - Aon Coil Products sales grew by $27.1 million or 86.4%, primarily driven by growth in Basics brand products [27]. - Basics segment sales grew by 20.4%, reflecting continued demand for data center solutions [28]. Market Data and Key Metrics Changes - Basics branded data center sales increased by 127% in Q2 and 269% year to date, indicating strong market demand [18]. - National accounts orders for Aon brand grew year over year by 163% in Q2, up 90% year to date, showcasing effective customer engagement [19]. - Aon branded Alpha Class heat pump business saw sales grow by 8% in Q2, with bookings surging approximately 61% during the same period [20]. Company Strategy and Development Direction - The company is focused on addressing ERP implementation challenges while maintaining confidence in its long-term strategy [6][7]. - The Basics brand is identified as the primary growth engine, with strong demand from the data center market [32]. - The company anticipates strong growth in Aon branded production in the second half of the year, supported by a strong backlog [36]. Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenges faced due to ERP implementation but expressed confidence in recovery and long-term growth potential [6][40]. - The company revised its full-year 2025 outlook lower, now anticipating sales growth in the low teens with a gross margin of 28% to 29% [37]. - Management emphasized the importance of stabilizing production and improving operational efficiency moving forward [40]. Other Important Information - The company incurred $3 million in costs related to the new Memphis facility during the quarter, with minimal sales to offset these costs [22]. - Cash flow used in operations was $31 million year to date, compared to cash flow provided by operations of $127.9 million in the comparable period a year ago [30]. - The company expects capital expenditures to be approximately $220 million for 2025 [31]. Q&A Session Summary Question: Guidance and ERP Implementation Impact - Management explained that the revision to guidance for the back half of the year is primarily driven by ERP impacts and lower production volumes, with July performance at 37% efficiency [44][45]. Question: Data Center Backlog Health - Management confirmed strong engagement in the data center market, with year-over-year sales up 127% in Q2, and noted that capacity constraints are being addressed with the new Memphis facility [50][51]. Question: Applied Digital Partnership Significance - The partnership with Applied Digital is crucial for Basics, as it involves supplying thermal management solutions for AI data centers, indicating strong future order potential [56][59]. Question: Fourth Quarter Growth Context - Management indicated that the fourth quarter guidance includes strong growth assumptions, with significant visibility in the backlog for both Aon and Basics brands [61][62]. Question: Overall Market Outlook - Management acknowledged prolonged softness in the non-residential market but indicated that they see themselves nearing the bottom of the cycle, with expectations for an upswing in the next 16 to 18 months [80][81].

Financial Data and Key Metrics Changes - Net sales for Q2 2025 declined by $2 million or 0.6% year-over-year to $311.6 million, driven by a 20.9% decline in Aon branded sales, offset by a 90% increase in Basics branded sales [22][23] - Gross margin decreased to 26.6%, down 950 basis points, primarily due to lower production volumes of Aon branded equipment [23][24] - Non-GAAP adjusted EBITDA was 14.9%, down 1120 basis points, and non-GAAP adjusted EPS was $0.22, a decrease of 64.5% from the previous year [23] Business Line Data and Key Metrics Changes - Aon Oklahoma segment net sales declined by 18%, impacted by supply chain disruptions and coil supply shortages due to ERP implementation [25][26] - Aon Coil Products sales grew by $27.1 million or 86.4%, primarily driven by Basics brand products [28] - Basics segment sales increased by 20.4% due to continued demand for data center solutions, with gross margin contracting by 60 basis points [29] Market Data and Key Metrics Changes - Basics branded data center sales surged by 127% in Q2 and 269% year-to-date, indicating strong market demand [19] - National accounts orders for Aon brand grew by 163% year-over-year in Q2, reflecting effective customer engagement [20] - Aon branded Alpha Class heat pump business saw sales growth of 8% in Q2, with bookings increasing by approximately 61% [21] Company Strategy and Development Direction - The company is focused on addressing ERP implementation challenges while maintaining confidence in its long-term strategy [6][7] - The Basics brand is identified as the primary growth engine, with expectations of a 40% year-over-year increase in sales [35] - The company plans to ramp up production at both Tulsa and Longview facilities to meet strong demand, particularly in the data center market [36][37] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenges faced in Q2 due to ERP implementation but expressed confidence in recovery and long-term growth [6][42] - The company revised its full-year 2025 outlook to anticipate low teens sales growth and gross margins of 28% to 29% [38] - Management highlighted strong underlying fundamentals and a solid backlog, expecting significant growth in Aon branded sales in the second half of the year [41] Other Important Information - The company incurred $3 million in costs related to the new Memphis facility during the quarter, impacting overall financial performance [23] - Cash flow used in operations year-to-date was $31 million, compared to $127.9 million in the same period last year, reflecting increased investments in working capital [31] Q&A Session Summary Question: Guidance and ERP Implementation Impact - Management indicated that the revised guidance reflects the impact of ERP implementation and lower production volumes, with a focus on recovery in the second half of the year [44][45] Question: Data Center Backlog Health - Management confirmed strong activity in the data center market, with year-over-year sales up 127% in Q2, and emphasized the importance of capacity to meet demand [50][51] Question: Applied Digital Partnership Significance - The partnership with Applied Digital is crucial for Basics, as it involves supplying thermal management solutions for AI data centers, indicating strong future order potential [57][59] Question: Fourth Quarter Growth Expectations - Management expects strong growth in Q4, with a focus on ramping production and leveraging backlog, while still considering ERP impacts [61][62] Question: Aon Brand Booking Strength - The increase in Aon brand bookings is attributed to a successful national account strategy and strong product value proposition, despite a challenging non-residential market [66][68]

分组1 - Aaon reported quarterly earnings of $0.22 per share, missing the Zacks Consensus Estimate of $0.31 per share, and down from $0.62 per share a year ago, representing an earnings surprise of -29.03% [1] - The company posted revenues of $311.57 million for the quarter ended June 2025, missing the Zacks Consensus Estimate by 6.16%, and down from $313.57 million year-over-year [2] - The stock has underperformed the market, losing about 31.6% since the beginning of the year compared to the S&P 500's gain of 8.6% [3] 分组2 - The current consensus EPS estimate for the coming quarter is $0.66 on $383 million in revenues, and for the current fiscal year, it is $1.98 on $1.39 billion in revenues [7] - The Zacks Industry Rank for Building Products - Air Conditioner and Heating is currently in the top 16% of over 250 Zacks industries, indicating a favorable outlook for the industry [8] - The estimate revisions trend for Aaon was unfavorable ahead of the earnings release, resulting in a Zacks Rank 5 (Strong Sell) for the stock, suggesting expected underperformance in the near future [6]

Financial Performance - Q2 2025 net sales were $311.6 million, a decrease of 0.6% year-over-year[6, 22] - Gross profit margin was 26.6%, a decrease of 950 bps year-over-year[6] - Non-GAAP adjusted EBITDA was $46.6 million, with a margin of 14.9%, a decrease of 43.1% year-over-year[6, 22] - Non-GAAP adjusted diluted EPS was $0.22, a decrease of 64.5% year-over-year[6, 22] Segment Performance - AAON Oklahoma net sales declined by 18.0% to $185.1 million, with a gross margin of 27.5%[23, 29] - AAON Coil Products net sales increased by 86.4% to $58.5 million, with a gross margin of 22.0%[23, 32, 33] - BASX net sales increased by 20.4% to $68.0 million, with a gross margin of 27.9%[23, 36, 37] Backlog and Orders - Adjusted backlog was $1.12 billion[6] - AAON-branded backlog increased by 93.4% year-over-year and 22.4% quarter-over-quarter[14] - BASX-branded backlog increased by 58.0% year-over-year to $623.4 million[43] Balance Sheet - The company closed on a new $500.0 million credit facility in Q2[42] - The company repurchased $30.0 million of shares[42] - Expect capital expenditures of approximately $220.0 million in 2025[42] Revised Outlook - The company revised its 2025 sales growth outlook to low-teens[45] - The company revised its 2025 gross margin outlook to 28%-29%[45] - The company revised its 2025 adjusted SG&A as a percentage of sales outlook to 16.5%-17.0%[45]

[Q2 2025 Financial & Operational Highlights](index=1&type=section&id=AAON%20Reports%20Second%20Quarter%202025%20Results) Overview of the company's second quarter 2025 financial and operational performance, highlighting key results and strategic responses [Second Quarter 2025 Performance Summary](index=1&type=section&id=Second%20Quarter%202025%20Results) Q2 2025 results fell short of expectations due to ERP implementation issues, impacting sales and profitability, despite strong backlog growth Q2 2025 Key Financial Metrics (Year-over-Year) | Metric | Q2 2025 (USD) | Q2 2024 (USD) | Change | | :--- | :--- | :--- | :--- | | Net Sales | $311.6 million | $313.6 million | -0.6% | | Gross Profit Margin | 26.6% | 36.1% | -950 bps | | GAAP Diluted EPS | $0.19 | $0.62 | -69.4% | | Non-GAAP Adj. Diluted EPS | $0.22 | $0.62 | -64.5% | | Non-GAAP Adj. EBITDA Margin | 14.9% | 26.1% | -1,120 bps | - The primary driver of underperformance was poor operational execution, mainly associated with the implementation of a new ERP system at the Longview, TX facility, which impacted production at both Longview and Tulsa[6](index=6&type=chunk) - Despite operational setbacks, booking trends remain strong for both AAON- and BASX-branded equipment, leading to a significant **71.9% year-over-year increase** in adjusted backlog to **$1.12 billion**, suggesting continued market share gains[7](index=7&type=chunk)[8](index=8&type=chunk) - The company is taking immediate actions to address production issues and expects sequential improvement in the second half of the year, but has revised its full-year 2025 outlook downward due to the challenges[6](index=6&type=chunk)[8](index=8&type=chunk) [Segment Performance](index=2&type=section&id=Segment%20Results) Detailed analysis of financial performance across AAON Oklahoma, AAON Coil Products, and BASX segments [AAON Oklahoma](index=2&type=section&id=AAON%20Oklahoma) AAON Oklahoma segment experienced an **18.0% decrease** in net sales and a **970 basis point** gross margin contraction due to ERP-related coil shortages and supply chain issues AAON Oklahoma Q2 Performance | Metric | Q2 2025 (USD) | Q2 2024 (USD) | Change | | :--- | :--- | :--- | :--- | | Net Sales | $185.1 million | $225.7 million | -18.0% | | Gross Profit | $50.9 million | $83.9 million | -39.3% | | Gross Profit Margin | 27.5% | 37.2% | -970 bps | - The sales decrease was driven by lingering supply chain issues from the refrigerant transition and coil supply shortages from the Longview facility's ERP implementation[10](index=10&type=chunk) - Gross profit margin contraction was primarily caused by suboptimal overhead absorption from lower volumes and **$3.0 million** in costs from the new Memphis plant with minimal offsetting sales[11](index=11&type=chunk) [AAON Coil Products](index=3&type=section&id=AAON%20Coil%20Products) AAON Coil Products saw **86.4% sales growth** driven by BASX products, but ERP implementation caused significant production disruptions and a **1,990 basis point** gross margin contraction AAON Coil Products Q2 Performance | Metric | Q2 2025 (USD) | Q2 2024 (USD) | Change | | :--- | :--- | :--- | :--- | | Net Sales | $58.5 million | $31.4 million | +86.4% | | Gross Profit | $12.9 million | $13.2 million | -2.2% | | Gross Profit Margin | 22.0% | 41.9% | -1,990 bps | - Sales growth was driven by BASX branded products for a large liquid cooling data center, while AAON branded products declined due to disruptions from the new ERP system[13](index=13&type=chunk) - Gross margin contracted significantly to **22.0%** from **41.9%** a year ago, a result of production inefficiencies from the ERP system implementation[14](index=14&type=chunk) [BASX](index=3&type=section&id=BASX) The BASX segment delivered strong results with **20.4% net sales growth** driven by data center demand, maintaining a stable gross profit margin with sequential improvement BASX Q2 Performance | Metric | Q2 2025 (USD) | Q2 2024 (USD) | Change | | :--- | :--- | :--- | :--- | | Net Sales | $68.0 million | $56.5 million | +20.4% | | Gross Profit | $19.0 million | $16.1 million | +18.2% | | Gross Profit Margin | 27.9% | 28.5% | -60 bps | - The primary driver of the year-over-year sales increase was stronger demand for data center equipment[16](index=16&type=chunk) - Gross profit margin showed sequential improvement for the second straight quarter, reflecting continued operational improvements[17](index=17&type=chunk) [Financial Position and Outlook](index=3&type=section&id=Financial%20Position%20and%20Outlook) Overview of the company's balance sheet, cash flow, backlog, and revised full-year 2025 financial guidance [Balance Sheet & Cash Flow](index=3&type=section&id=Balance%20Sheet%20%26%20Cash%20Flow) The company maintained **$1.3 million** in cash, drew **$317.3 million** on its credit facility, and secured a new **$500.0 million** facility to support **$220.0 million** in 2025 capital expenditures - At the end of Q2 2025, the company had cash, cash equivalents and restricted cash of **$1.3 million** and a balance on its revolving credit facility of **$317.3 million**[18](index=18&type=chunk) - A new **$500.0 million** credit facility was closed during the quarter to provide liquidity for growth investments. Capital expenditure plans for 2025 remain unchanged at **$220.0 million**[18](index=18&type=chunk) [Backlog](index=3&type=section&id=Backlog) Total backlog surged **71.9% year-over-year** to **$1.12 billion**, driven by strong demand for both AAON-branded and BASX-branded equipment, indicating significant market share gains Backlog by Brand | Brand | June 30, 2025* (USD) | March 31, 2025 (USD) | June 30, 2024 (USD) | YoY Change | QoQ Change | | :--- | :--- | :--- | :--- | :--- | :--- | | AAON-branded | $494.2 million | $403.9 million | $255.5 million | +93.4% | +22.4% | | BASX-branded* | $623.4 million | $623.0 million | $394.5 million | +58.0% | +0.1% | | **Total** | **$1.12 billion** | **$1.03 billion** | **$650.0 million** | **+71.9%** | **+8.8%** | - The significant growth in AAON-branded equipment backlog, despite weakness in the nonresidential construction market, indicates substantial market share gains[20](index=20&type=chunk) - Demand from data center customers remains exceptionally strong, driving continued backlog growth for BASX-branded equipment[21](index=21&type=chunk) [Full-Year 2025 Outlook](index=4&type=section&id=Full-Year%202025%20Outlook) The company revised its full-year 2025 guidance downwards, anticipating low-teens sales growth and a **28%-29%** gross profit margin, reflecting ongoing operational inefficiencies Updated Full-Year 2025 Outlook | Metric | Q3 2025 | Q4 2025 | FY25 | | :--- | :--- | :--- | :--- | | YoY Sales Growth | Low Single Digits | High Twenties | Low Teens | | Gross Profit Margin | 28.5%-29.5% | 30.0%-31.0% | 28%-29% | | Non-GAAP adj. SG&A % of sales | 17.0%-17.5% | 16.5%-17.0% | 16.5%-17.0% | [Financial Statements and Reconciliations](index=5&type=section&id=Financial%20Statements%20and%20Reconciliations) Presentation of unaudited consolidated financial statements and reconciliations of non-GAAP measures to their GAAP equivalents [Consolidated Financial Statements](index=5&type=section&id=Consolidated%20Financial%20Statements) Unaudited consolidated statements of income, segment results, balance sheets, and cash flows for the three and six months ended June 30, 2025, are presented with comparative 2024 data [Consolidated Statements of Income](index=5&type=section&id=Consolidated%20Statements%20of%20Income) Summary of the company's unaudited consolidated income statement for the three and six months ended June 30, 2025 Consolidated Statements of Income (Unaudited) | | Three Months Ended June 30, (USD) | Six Months Ended June 30, (USD) | | :--- | :--- | :--- | | | **2025** | **2024** | **2025** | **2024** | | Net sales | $311.6 million | $313.6 million | $633.6 million | $575.7 million | | Gross profit | $82.7 million | $113.1 million | $169.1 million | $205.3 million | | Income from operations | $23.6 million | $67.2 million | $58.7 million | $114.2 million | | Net income | $15.5 million | $52.2 million | $44.8 million | $91.2 million | | Diluted EPS | $0.19 | $0.62 | $0.54 | $1.09 | [Segment Net Sales and Profit](index=6&type=section&id=Segment%20Net%20Sales%20and%20Profit) Breakdown of gross profit by segment for the three months ended June 30, 2025 and 2024 Segment Gross Profit (Unaudited) | Segment | Three Months Ended June 30, 2025 (USD) | Three Months Ended June 30, 2024 (USD) | | :--- | :--- | :--- | | AAON Oklahoma | $50.9 million | $83.9 million | | AAON Coil Products | $12.9 million | $13.2 million | | BASX | $19.0 million | $16.1 million | | **Consolidated Gross Profit** | **$82.7 million** | **$113.1 million** | [Consolidated Balance Sheets](index=7&type=section&id=Consolidated%20Balance%20Sheets) Overview of the company's unaudited consolidated balance sheet as of June 30, 2025, and December 31, 2024 Consolidated Balance Sheet Highlights (Unaudited) | | June 30, 2025 (USD) | Dec 31, 2024 (USD) | | :--- | :--- | :--- | | Total current assets | $654.2 million | $488.2 million | | Total assets | $1.40 billion | $1.18 billion | | Total current liabilities | $210.7 million | $174.9 million | | Debt, long-term | $317.3 million | $138.9 million | | Total stockholders' equity | $832.7 million | $824.6 million | | Total liabilities and stockholders' equity | $1.40 billion | $1.18 billion | [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Summary of the company's unaudited consolidated cash flow statement for the six months ended June 30, 2025 and 2024 Consolidated Cash Flow Highlights (Unaudited) | Six Months Ended June 30, | 2025 (USD) | 2024 (USD) | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | $(31.0 million) | $127.9 million | | Net cash used in investing activities | $(89.5 million) | $(75.4 million) | | Net cash provided by (used in) financing activities | $115.3 million | $(49.5 million) | | Net (decrease) increase in cash | $(5.2 million) | $3.1 million | [Non-GAAP Financial Measures](index=9&type=section&id=Use%20of%20Non-GAAP%20Financial%20Measures) This section provides reconciliations of non-GAAP financial measures, including Adjusted Net Income, EBITDA, and Adjusted EBITDA, to their GAAP counterparts, primarily adjusting for a one-time incentive fee [Reconciliation of Net Income to Non-GAAP Adjusted Net Income](index=9&type=section&id=Non-GAAP%20Adjusted%20Net%20Income) Reconciliation of GAAP net income to non-GAAP adjusted net income, highlighting adjustments for specific items - Non-GAAP adjusted net income for Q2 2025 was **$17.9 million**, or **$0.22 per diluted share**, after adjusting for a **$3.4 million** incentive fee related to the Memphis plant[37](index=37&type=chunk) Non-GAAP Adjusted Net Income Reconciliation (Q2 2025) | | Amount (USD) | | :--- | :--- | | Net income, a GAAP measure | $15.5 million | | Memphis incentive fee | $3.4 million | | Profit sharing effect | $(0.3 million) | | Tax effect | $(0.7 million) | | **Non-GAAP adjusted net income** | **$17.9 million** | [Reconciliation of Net Income to EBITDA and Adjusted EBITDA](index=9&type=section&id=EBITDA) Reconciliation of GAAP net income to EBITDA and Adjusted EBITDA, detailing adjustments for non-operating items - Adjusted EBITDA for Q2 2025 was **$46.6 million**, resulting in an Adjusted EBITDA margin of **14.9%**, compared to **26.1%** in the prior-year quarter. The adjustment accounts for the Memphis incentive fee[41](index=41&type=chunk) Adjusted EBITDA Reconciliation (Q2 2025) | | Amount (USD) | | :--- | :--- | | Net income, a GAAP measure | $15.5 million | | Depreciation and amortization | $19.9 million | | Interest expense, net | $4.0 million | | Income tax expense | $4.0 million | | **EBITDA, a non-GAAP measure** | **$43.5 million** | | Memphis incentive fee | $3.4 million | | Profit sharing effect | $(0.3 million) | | **Adjusted EBITDA, a non-GAAP measure** | **$46.6 million** | [Reconciliation of SG&A to Non-GAAP Adjusted SG&A](index=10&type=section&id=Non-GAAP%20Adjusted%20Selling%2C%20General%20and%20Administrative%20Expenses) Reconciliation of GAAP SG&A expenses to non-GAAP adjusted SG&A, excluding specific non-recurring items - Non-GAAP adjusted SG&A expenses were **$56.0 million** in Q2 2025, or **18.0% of sales**. This is adjusted from the GAAP SG&A of **$59.1 million** to exclude the Memphis incentive fee and its profit-sharing effect[42](index=42&type=chunk)

Revenue Performance - For the three months ended June 30, 2025, total revenue was $311.6 million, a decrease of 0.8% compared to $313.6 million for the same period in 2024[34] - For the six months ended June 30, 2025, total revenue was $633.6 million, a decrease of 10.1% compared to $575.7 million for the same period in 2024[34] - Aftermarket part sales for the three months ended June 30, 2025, were $20.7 million, up 9.5% from $18.9 million in 2024[34] Contract and Asset Management - Contract assets increased to $233.8 million as of June 30, 2025, compared to $135.8 million as of December 31, 2024[43] - Contract liabilities increased to $33.8 million as of June 30, 2025, compared to $14.9 million as of December 31, 2024[43] - Costs incurred on uncompleted contracts for the six months ended June 30, 2025, were $162.2 million, an increase from $118.7 million in 2024[44] - Estimated earnings on uncompleted contracts for the six months ended June 30, 2025, were $136.4 million, compared to $90.8 million in 2024[44] Employee Compensation and Benefits - The Company awarded annual merit raises of 3.3% in March 2024 and 4.0% in March 2025[28] - Payments to representatives for the three months ended June 30, 2025, were $12.0 million, compared to $10.2 million in 2024[42] - The profit sharing bonus plan for the three months ended June 30, 2025, was $2,038,000, down from $6,477,000 in the same period of 2024, indicating a decrease of 68%[98] - Medical premium payments rose to $5,573,000 for the three months ended June 30, 2025, compared to $3,924,000 in 2024, reflecting a 42% increase[100] Financial Position and Liquidity - As of June 30, 2025, total accounts receivable increased to $171,881,000 from $148,472,000 as of December 31, 2024, representing a growth of 15.7%[51] - The net inventories as of June 30, 2025, amounted to $234,980,000, up from $187,420,000 as of December 31, 2024, indicating a 25.3% increase[52] - Total property, plant, and equipment increased to $898,412,000 as of June 30, 2025, compared to $819,998,000 as of December 31, 2024, reflecting a growth of 9.6%[53] - The total future lease payments as of June 30, 2025, are estimated at $22,320,000, with the largest portion due in 2026 at $3,890,000[50] - The allowance for credit losses increased to $1,308,000 as of June 30, 2025, from $1,038,000 as of December 31, 2024, marking a rise of 25.9%[51] Debt and Financing - The company increased its available Revolver to $230,000,000 in April 2025, up from $200,000,000, to support additional working capital needs[61] - The total Revolver commitment was increased to $500,000,000 as of June 30, 2025, compared to $200,000,000 on December 31, 2024[63] - The weighted average interest rate for the Revolver was 5.6% for the three and six months ended June 30, 2025, down from 6.6% in the same periods of 2024[66] - The company’s leverage ratio was 1.4 to 1.0 as of June 30, 2025, well below the covenant requirement of not exceeding 3 to 1[68] Taxation - The provision for income taxes for the three months ended June 30, 2025, was $4,018,000, compared to $14,779,000 for the same period in 2024, indicating a significant decrease[69] - The effective tax rate for the three months ended June 30, 2025, was 20.6%, compared to 22.1% for the same period in 2024[70] - The company expects the reinstatement of 100% bonus depreciation under the One Big Beautiful Bill Act to increase its June 30, 2025, tax receivable by approximately $4,000,000[77] - The repeal of mandatory capitalization of domestic R&D expenses is expected to increase the company's June 30, 2025, income tax receivable by approximately $10,700,000[78] Stock and Shareholder Information - The 2024 Long-Term Incentive Plan ("2024 Plan") was adopted, providing for approximately 2.7 million new shares and 3.7 million shares from the 2016 Plan, which are now authorized for issuance under the 2024 Plan[81] - As of June 30, 2025, the total intrinsic value of options exercised was $22.3 million, compared to $23.8 million for the same period in 2024[85] - The total pre-tax compensation cost related to unvested stock options not yet recognized as of June 30, 2025, is $15.8 million, expected to be recognized over approximately 2.3 years[84] - The fair value of unvested restricted stock awards at June 30, 2025, was approximately $9.1 million, expected to be recognized over a weighted average period of 2.1 years[86] - The total pre-tax compensation cost related to unvested performance restricted stock units (PSUs) not yet recognized as of June 30, 2025, is $5.9 million, expected to be recognized over approximately 1.7 years[88] - Share-based compensation expense for the six months ended June 30, 2025, totaled $22.5 million, compared to $19.2 million for the same period in 2024[91] - The Company matches 175.0% up to 6.0% of employee contributions in the defined contribution plan[95] - Contributions to the defined contribution plan increased to $5,977,000 for the three months ended June 30, 2025, compared to $4,366,000 in the same period of 2024, representing a 37% increase[96] Sales Performance by Segment - For the three months ended June 30, 2025, AAON Oklahoma reported external sales of $185.1 million, a decrease from $225.7 million in the same period of 2024[133] - AAON Coil Products achieved external sales of $58.5 million for the three months ended June 30, 2025, compared to $31.4 million in the same period of 2024[133] - BASX reported external sales of $68.0 million for the three months ended June 30, 2025, up from $56.5 million in the same period of 2024[133] - Consolidated gross profit for the three months ended June 30, 2025, was $82.7 million, down from $113.1 million in the same period of 2024[133] Economic and Market Conditions - The company is facing inflationary cost pressures and supply chain disruptions impacting demand for products and financial position[202] - There are concerns regarding the creditworthiness of customers and their access to capital, which may affect revenue generation[202] - The company is monitoring the timing and market acceptance of new products as a key factor for future growth[202] - Labor market tightening is affecting the company's ability to hire employees necessary for continued growth[202] - The company is assessing the impact of economic and market conditions specific to its industry on operational performance[202] - Future capital expenditures and research and development levels are critical for the company's growth strategy[202] - Legal and regulatory compliance is essential for the company to meet mandated standards and specifications[202] - Integration of acquired businesses is a focus area to realize synergies and cost savings[202] - The company is evaluating the effects of natural disasters and extreme weather on manufacturing locations[202] - Cybersecurity risks, including breaches and compromised data, are being closely monitored to protect information technology systems[202]

Core Insights - AAON, Inc. reported a net sales decrease of 0.6% year-over-year for Q2 2025, totaling $311.6 million, primarily due to an 18.0% decline in the AAON Oklahoma segment, impacted by supply chain constraints [2][7][9] - The gross profit margin contracted significantly to 26.6% from 36.1% in the same quarter last year, attributed to lower production volumes and operational inefficiencies from the ERP system implementation [3][7] - Earnings per diluted share fell 69.4% year-over-year to $0.19, with non-GAAP adjusted diluted earnings per share down 64.5% to $0.22 [5][7] Financial Performance - Net sales for the AAON Oklahoma segment decreased to $185.1 million, down 18.0% from $225.7 million in Q2 2024, with a gross profit margin of 27.5%, down from 37.2% [9][10] - AAON Coil Products experienced an 86.4% increase in sales to $58.5 million, but gross profit margin fell to 22.0% from 41.9% due to ERP-related disruptions [11][12] - BASX segment sales grew 20.4% to $68.0 million, with a gross profit margin of 27.9%, slightly down from the previous year [13][14] Operational Challenges - The implementation of the new ERP system at the Longview facility has caused production disruptions, affecting both finished products and coils, which in turn limited production at the Tulsa facility [6][8] - Despite these challenges, the company has seen month-to-month improvements in production rates since April, with July being the strongest production month of the year [6][8] Backlog and Demand - Total backlog increased 71.9% year-over-year to $1.12 billion, with AAON-branded products backlog rising 93.4% compared to the same quarter last year [17] - Demand for BASX-branded data center equipment remains exceptionally strong, contributing to the growth in backlog and order activity [17][18] Future Outlook - The company has revised its full-year 2025 outlook downward due to ongoing inefficiencies at the Longview facility and moderated production levels in Tulsa [8] - The anticipated sales growth for Q3 is projected in the low single digits, while Q4 is expected to see high twenties growth [18]