Financial Data and Key Metrics Changes - In Q4 2025, net sales increased by 42.5% year-over-year to $424.2 million, driven by a 138.8% growth in BASX branded sales and a 9.5% increase in AAON branded sales [26][28] - Gross margin for Q4 was 25.9%, slightly down from 26.1% in the prior year, primarily due to unabsorbed fixed costs from the new Memphis facility [26][27] - Non-GAAP adjusted EBITDA margin for Q4 was 15.2%, down from 15.8% a year ago, while diluted EPS was $0.39, up 30% from Q4 2024 [27] Business Line Data and Key Metrics Changes - BASX branded sales increased 143% to $548 million in 2025, with a backlog growth of 141% to $1.3 billion [11][20] - AAON branded sales declined by 8% in 2025, outperforming the broader industry which saw a 16% decline [13] - AAON branded bookings grew approximately 12%, driven by a significant 86% increase in national accounts [14] Market Data and Key Metrics Changes - The data center market remains a robust growth opportunity, with BASX brand experiencing strong demand for custom solutions [11][12] - Despite a challenging commercial HVAC market, AAON branded bookings remained strong, reflecting resilience in demand [35] Company Strategy and Development Direction - The company is focused on converting demand into sustained profitable growth through disciplined execution and capacity readiness [12][34] - Strategic investments have been made in manufacturing capacity, supply chain management, product development, and IT systems to support long-term growth [15][16] - The company aims for sales growth of 18%-20% in 2026, with gross margins expected to be between 29%-31% [36] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in improved operating performance and margin expansion as temporary headwinds fade [11][19] - The company anticipates strong growth and accelerated incremental margin in 2026, supported by robust backlog and production nearing record levels [23][24] - Management acknowledged challenges in 2025 but emphasized a focus on operational improvements and customer service enhancements [63][66] Other Important Information - The company became the first in the commercial HVAC industry to commercialize rooftop units with Cold Climate Heat Pumps capable of reliable heating at -20 degrees Fahrenheit [17] - Cash flow from operations was a source of cash of $0.5 million in 2025, compared to $192.5 million in 2024, with capital expenditures decreasing by 3.9% to $204.9 million [33] Q&A Session Summary Question: Can you clarify the gross margin in the quarter? - Management indicated that the primary driver for the margin being below expectations was related to Tulsa volumes, which faced supply chain constraints [39] Question: What are the expectations for revenue growth in 2026? - Management expects growth in the AAON brand to be a significant driver, with a strong recovery anticipated in the Tulsa organization [44][46] Question: Can you discuss cash generation expectations for 2026? - Management anticipates improved cash flows through increased earnings and better working capital management, with debt expected to remain elevated for most of the year [57] Question: How is the backlog composition for BASX? - Management noted that there is diversity in the customer base for BASX, with increasing traction outside of hyperscalers [60] Question: What are the lead times in the Oklahoma business? - Lead times are currently extended beyond desired levels, but management is focused on driving throughput to reduce them [69]

Financial Data and Key Metrics Changes - Net sales in Q4 2025 increased by 42.5% year-over-year to $424.2 million, driven primarily by a 138.8% growth in BASX branded sales [15][16] - Gross margin for Q4 was 25.9%, slightly down from 26.1% in the prior year, primarily due to unabsorbed fixed costs at the new Memphis facility [15][16] - Non-GAAP adjusted EBITDA margin for Q4 was 15.2%, down from 15.8% a year ago [16] - Diluted EPS for Q4 was $0.39, up 30% from Q4 2024 [16] Business Line Data and Key Metrics Changes - BASX branded sales increased 143% to $548 million in 2025, with a backlog growth of 141% to $1.3 billion [5][11] - AAON branded sales declined by 8% in 2025, significantly outperforming the broader industry which saw a 16% decline [6][7] - AAON branded bookings increased by 20% year-over-year, with backlog up 24% sequentially and 61% from the prior year [11] Market Data and Key Metrics Changes - The data center market remains a robust growth opportunity, with BASX brand experiencing strong demand for custom solutions [5][6] - The overall commercial HVAC market is expected to remain flat in 2026, impacting AAON's growth trajectory [36] Company Strategy and Development Direction - The company is focused on converting strong demand into sustained profitable growth through disciplined execution and capacity readiness [6][8] - Strategic investments in manufacturing capacity, supply chain management, and IT systems are aimed at improving throughput and reducing costs [9][10] - The company anticipates sales growth of 18%-20% in 2026, with gross margins expected to be between 29%-31% [24] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ability to execute and deliver stronger results in 2026, supported by a strong backlog and improving operational cadence [21][23] - Temporary challenges from the refrigerant transition and ERP upgrades are expected to be resolved, leading to margin improvements [10][12] - The company is focused on improving lead times and production reliability to meet customer expectations [51][59] Other Important Information - Cash flow from operations was a source of cash of $0.5 million in 2025, a significant decrease from $192.5 million in 2024 [20] - Capital expenditures in 2025 decreased by 3.9% to $204.9 million, with planned CapEx for 2026 at $190 million [20] Q&A Session Summary Question: Can you clarify the gross margin in the quarter? - Management indicated that the primary driver for the margin shortfall was lower volumes in Tulsa due to seasonality and supply chain constraints [26][27] Question: What are the expectations for BASX revenue growth in 2026? - Management expects BASX growth to be around 25%, with significant contributions from the AAON brand as well [31][32] Question: How is cash generation expected to improve in 2026? - Management anticipates improved cash flows through increased earnings and better working capital management [43][45] Question: What is the current status of lead times in the Oklahoma business? - Lead times are currently extended, but management is focused on increasing throughput to bring them back to normal levels [57][59] Question: How does the BASX backlog composition look? - The backlog is diverse, with increasing traction from various customer segments, not just hyperscalers [48][50]

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]

Financial Data and Key Metrics Changes - The Q4 and fiscal year 2025 performance was mixed, with weaker than expected top line growth but strong margin and earnings performance [5][6] - Organic sales growth was about 8%, but when excluding the 13% to 14% related to retailer inventory build, it resulted in approximately negative 5% [11][12] - The gross margin impact was higher than anticipated, with a 150 basis point impact for the quarter and 50 basis points for the full year [41][42] Business Line Data and Key Metrics Changes - Cleaning products performed well, with continued share growth and successful innovation plans [16][19] - The Kingsford business faced execution challenges, particularly during key holidays, but trends improved in July [84][85] Market Data and Key Metrics Changes - The overall consumer environment remains uncertain, with consumers exhibiting value-seeking behaviors and trading down to smaller sizes [109][111] - The promotional environment is rational overall, but there are pockets of high promotional activity in specific categories like trash and cat litter [60][61] Company Strategy and Development Direction - The company is focused on leveraging its innovation pipeline and improving execution to drive market share and financial performance in fiscal year 2026 [8][19] - The ERP transition is seen as a critical step in modernizing capabilities and improving data utilization for better decision-making [32][33] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenges posed by macroeconomic uncertainties but expressed confidence in the company's plans and capabilities to navigate these challenges [8][19] - The company expects sluggish category performance to continue but anticipates improvements in the second half of the year due to strategic actions [20][24] Other Important Information - The company expects higher costs from tariffs to be around $40 million, with plans to offset this through various mitigating actions [63] - The ERP implementation is complex and has created noise in the financials, but management believes it will lead to stronger performance in the long term [46][47] Q&A Session Summary Question: Sales performance and consumption data - Management explained that organic sales growth was about 8%, but after adjusting for inventory build, it was negative 5%, which was lower than previous expectations [11][12] Question: Improvement in consumption trends - Management indicated that improvements are expected in the back half of the year due to innovation and adjustments in plans to address consumer behavior [20][22] Question: Impact of destocking and ERP - Management clarified that destocking was in line with expectations and that the ERP transition led to higher than anticipated retailer inventory builds [30][39] Question: Promotional environment and category growth - Management noted that the promotional environment remains rational overall, with some competitive activity in specific categories, and they plan to strategically allocate promotional spending [60][61] Question: Expectations for fiscal year 2026 - Management provided guidance for organic sales growth to be between negative 1% to positive 2%, with expectations for improved performance in the back half of the year [57][58]