AAON(AAON) - 2025 Q4 - Annual Report

Financial Performance - Foreign sales accounted for approximately $38.1 million, $30.1 million, and $39.9 million of net sales in 2025, 2024, and 2023, respectively, representing 2.6%, 2.5%, and 3.4% of net sales in those years[30] - The backlog consists of products for which customer purchase orders have been received but not yet delivered, with lead times for AAON-branded products generally around 18 - 26 weeks[59][60] - The company has three customers that represented 10 percent or greater concentrations of revenue for the years ended December 31, 2025, 2024, and 2023[56] - The company maintains a bank revolving credit facility permitting borrowings up to $600 million, with an outstanding balance of $398.3 million at December 31, 2025[73] Business Segments and Products - The company operates through three reportable business segments: AAON Oklahoma, AAON Coil Products, and BASX, reflecting differences in products, manufacturing processes, and end markets[19] - AAON's flagship products include rooftop units (RTUs) with cooling capacities ranging from two to 261 tons, designed for commercial and industrial buildings[35] - BASX's cleanroom products are engineered for precise environmental control in critical manufacturing processes, including pharmaceutical and semiconductor applications[52] - The BASX brand introduced a proprietary Coolant Distribution Unit (CDU) in 2025, designed for high-density AI and HPC deployments, supporting rack densities exceeding 100 kilowatts[49] Research and Development - The company maintains a strong commitment to research and development, focusing on energy performance, equipment durability, system efficiency, and indoor air quality[27] - R&D expenses were approximately $58.2 million, $47.3 million, and $43.7 million in 2025, 2024, and 2023, respectively, indicating a focus on product innovation[82] - The company’s research and development facility includes unique capabilities for testing HVAC equipment under various environmental conditions, believed to be unmatched globally[76] - The company has invested in advanced controls manufacturing capabilities to improve production efficiency and support increased production capacity through automation[44] Sustainability Initiatives - In 2025, the company recycled over 17,328 tons of metal at its Tulsa facility, 15,715 tons at Longview, and 13,678 tons at Redmond, showing a commitment to material management and sustainability[92] - Approximately 36% of the company's energy portfolio is derived from renewable sources, with ongoing efforts to reduce greenhouse gas emissions and improve energy efficiency[90] - The company achieved Platinum level in the Sustainability Alliance Scor3card for two consecutive years, 2024 and 2025, reflecting its commitment to sustainability practices[89] - The company has transitioned to nearly 100% LED lighting in its Tulsa and Longview facilities, leading to significant cost savings and reduced energy consumption[91] Technology and Innovation - The AAON Alpha Class™ technology allows units to operate in ambient temperatures as low as negative twenty degrees Fahrenheit, addressing the demand for commercial building decarbonization[37] - The company has developed cutting-edge communication systems for its products, leveraging IoT and AI tools to enhance efficiencies in control algorithms[81] - The company has developed low ambient air source heat pump products to meet the growing demand for electrification initiatives[78] - The Electronics Prototyping Lab in Parkville, Missouri features a fully functional SMD production line, enhancing the speed to market for new technologies[80] Market Strategy - AAON's marketing strategy targets customers demanding exceptional performance and efficiency, competing on technical excellence rather than price[26] - The company competes with major manufacturers like Lennox, Trane, and Carrier, emphasizing total value proposition over initial price[63] - BASX's market position has strengthened due to operational efficiency improvements, narrowing the price gap between its semi-custom equipment and competitors' standardized offerings[66]