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]

Financial Data and Key Metrics Changes - The company's first quarter revenues were $696 million, down 5% year-over-year, and adjusted EBITDA was $58 million, down 18% year-over-year [4][5] - The decline in adjusted EBITDA was primarily due to intentional client exits and transformation-related investments [5][6] - The company is lowering its revenue and adjusted EBITDA outlook to flat to down low single digits for the year [16] Business Line Data and Key Metrics Changes - In Branded Services, revenues were $257 million and adjusted EBITDA was $28 million, down 9% year-over-year [18] - In Experiential Services, revenues were $221 million and adjusted EBITDA was $12 million, down 12% year-over-year [19] - In Retailer Services, revenues were $218 million and adjusted EBITDA was $18 million, down 3% and 7% year-over-year, respectively [19] Market Data and Key Metrics Changes - Consumer confidence has waned, leading to lower than expected consumer purchases and a reevaluation of spending levels by clients [5][6] - Retailers have been destocking inventory, impacting order volumes across many consumer packaged goods (CPG) categories [5][50] - The company noted a shift towards private label products, particularly among larger retailers [50] Company Strategy and Development Direction - The company is focused on modernizing its tech infrastructure and enhancing analytics capabilities to drive efficiency [12][13] - A task force has been mobilized to improve labor utilization and address staffing challenges [14] - The company aims to be a cost-leading solutions partner to CPGs and retailers despite a softer growth environment [15] Management's Comments on Operating Environment and Future Outlook - Management remains optimistic about the future, citing a track record of performing well through recessionary environments [8] - The first quarter was impacted by a challenging labor market, but improvements in staffing and execution rates are expected in Q2 [9][10] - The company is confident in its long-term earnings power and cash generation potential despite near-term challenges [16] Other Important Information - The company ended the quarter with $121 million in cash and a net leverage ratio of approximately 4.4x adjusted EBITDA [20][22] - The ERP implementation is expected to yield greater cash flow benefits as the year progresses [25] Q&A Session Summary Question: Any notable changes in the macro environment compared to Q1? - Management noted improvements in hiring rates and a smoothing out of labor challenges in Q2 [32][34] Question: Have labor costs increased due to staffing issues? - Management indicated that labor cost inflation is in line with the macro market, and staffing issues were more related to talent acquisition strategies [39][40] Question: What was the nature of the debt repurchase in the quarter? - The company repurchased bonds during the quarter and is focused on balancing cash for debt reduction and share repurchases [42][44] Question: What is the impact of destocking on orders? - Destocking improved as the quarter progressed, but management has not yet seen April data to confirm if it has completely stopped [69][70] Question: What is the breakdown of consumer products versus food companies? - Approximately 70% of the company's portfolio is in food, with strong presence in personal care and household goods [73]