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 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]