Financial Data and Key Metrics Changes - Net sales increased by $57 million, or 17.4%, year-over-year to $384.2 million, driven by a 95.8% rise in BASX-branded sales due to demand for data center solutions [11][12] - Gross margin was 27.8%, down from 34.9% in the prior year, but up 120 basis points sequentially [11][12] - Diluted EPS was $0.37, down 41.3% from a year ago, but up 94.7% sequentially [13] Business Line Data and Key Metrics Changes - BASX-branded backlog grew to $896.8 million, up 119.5% year-over-year and up 43.9% from the prior quarter [5][6] - AAON-branded sales grew 28.1% sequentially, driven by over 20% production increases at both the Tulsa and Longview facilities [7][8] - AAON-branded bookings were flat year-over-year but up 15% on a two-year stack, reflecting continued strength in underlying demand [8] Market Data and Key Metrics Changes - Demand for airside and liquid cooling products remains strong, with bookings of Alpha-class air source heat pump equipment up 45% quarter-over-quarter [8][9] - National account wins were robust, with bookings up 96% in the third quarter and 92% year-to-date, representing 35% of total bookings for the year [8] Company Strategy and Development Direction - The BASX brand is positioned as the key growth driver, fueled by exceptional demand in the data center market [18] - The company plans to ramp up production capacity at the new Memphis facility, which adds nearly 800,000 sq ft of manufacturing capacity [6][18] - The AAON brand also maintains strong momentum, with a focus on reducing backlog and lead times to better serve customers [7][18] Management's Comments on Operating Environment and Future Outlook - Management expects sequential margin improvement to continue through the fourth quarter and into early 2026, despite current operational inefficiencies [5][9] - For 2025, the company anticipates full-year sales growth in the mid-teens with a gross margin of 28%-28.5% [20] - Management expressed confidence in the strength of the business and the appropriateness of accounting practices, addressing concerns raised in a recent short report [35][36] Other Important Information - Cash, cash equivalents, and restricted cash balances totaled $2.3 million, with debt at $360.1 million and a leverage ratio of 1.73 [15] - Capital expenditures for the first three quarters increased 22.1% to $138.9 million, with net borrowings of $205 million largely to finance investments [16][17] Q&A Session Summary Question: Can you speak to the drivers and confidence in the outlook for BASX segment growth? - Management highlighted improved visibility and traction in the third quarter, with strong order activity across airside and liquid-side solutions, particularly for the Memphis facility [27][29] Question: What are the expectations for gross margins in the Oklahoma segment? - Management indicated that normalized gross margins for the Oklahoma segment could be in the mid-30s range, factoring in the impact of the Memphis facility and pricing dynamics [31][32] Question: Can you address the recent short report claims regarding accounting changes? - Management reaffirmed the integrity of financial reporting, stating that all practices are in accordance with GAAP and ASC 606, and emphasized strong demand and pricing for products [35][36] Question: What is the current status of lead times in the Oklahoma segment? - Lead times are currently about 50% higher than desired, with a focus on reducing backlog and improving execution to meet market demands [60][61] Question: How is the company preparing for the ERP implementation at the Tulsa facility? - Management plans to be proactive in communication and preparation, applying lessons learned from the Longview implementation to minimize disruption [62][63]

Financial Data and Key Metrics Changes - Net sales increased by $57 million, or 17.4%, year-over-year to $384.2 million, driven by a 95.8% rise in Basics-branded sales due to demand for data center solutions [12][16] - Gross margin was 27.8%, down from 34.9% in the prior year but up 120 basis points sequentially [12][16] - Diluted EPS was $0.37, down 41.3% from a year ago but up 94.7% sequentially [13][16] Business Line Data and Key Metrics Changes - Basics brand backlog grew to $896.8 million, up 119.5% year-over-year and up 43.9% from the prior quarter [5][6] - AAON-branded sales grew 28.1% sequentially, driven by over 20% production increases at both Tulsa and Longview facilities [7][12] - Sales at the Basics segment grew 19.2%, driven by sustained demand for data center solutions [15] Market Data and Key Metrics Changes - AAON branded bookings were flat year-over-year but up 15% on a two-year stack, reflecting continued strength in underlying demand [9] - National account wins were robust, with bookings up 96% in the third quarter and 92% year-to-date, representing 35% of total bookings for the year [9] Company Strategy and Development Direction - The company is focused on ramping up production capacity at the new Memphis facility, which adds nearly 800,000 sq ft of manufacturing capacity [6][18] - The Basics brand is identified as the key growth driver, fueled by exceptional demand for data center market solutions [18] - The company plans to implement the ERP system at the Tulsa facility in the second half of 2026, expecting minimal disruption based on learnings from Longview [19] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the operational recovery and capacity expansion, expecting sequential margin improvement to continue through the fourth quarter and into early 2026 [5][19] - The company anticipates full-year sales growth in the mid-teens for 2025, with a gross margin of 28-28.5% [19] - Management highlighted the resilience of the business despite a soft commercial HVAC market, with strong demand and bookings remaining robust [19] Other Important Information - Cash, cash equivalents, and restricted cash balances totaled $2.3 million, with debt at $360.1 million and a leverage ratio of 1.73 [15][16] - Capital expenditures for the first three quarters increased 22.1% to $138.9 million, with a reduction in anticipated 2025 capital expenditures to $180 million [16][17] Q&A Session Summary Question: Drivers and confidence in the outlook for Basics segment growth - Management noted strong traction and visibility in backlog growth, particularly in liquid cooling orders and airside solutions, indicating confidence in continued strong orders [22][25] Question: Gross margin expectations for the Oklahoma segment - Management indicated that normalized gross margins for the Oklahoma segment could be in the mid-30s range, considering the impact of unabsorbed costs and pricing dynamics [27][28] Question: Response to short report claims regarding accounting changes - Management reaffirmed the integrity of financial reporting, stating that all practices are in accordance with GAAP and ASC 606, emphasizing strong demand and pricing for products [30][31] Question: CapEx guidance and its impact on capacity ramp - Management clarified that the reduction in CapEx would not slow down the ramp-up of the Memphis facility, which is already well-equipped for production [36] Question: Lead times and order conversion in the Oklahoma business - Management reported that lead times are currently about 50% higher than desired, with a focus on reducing them through improved execution and backlog management [52][53] Question: Role of the new COO - The new COO is expected to manage consistency across facilities and drive best practices in lean manufacturing, enhancing operational efficiency [56][57] Question: Free cash flow expectations for Q4 - Management indicated that free cash flow should significantly improve in Q4, driven by the collection of delayed billings [58] Question: Customer mix and demand profile for Basics orders - Management noted a diverse customer base for Basics orders, with both large and smaller customers contributing to backlog growth [79]