AAON(US:AAON)2026-03-02 15:00Financial 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]