AAON, INC.
For the period ended Jun 30, 2025. Filed Aug 11, 2025.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2025 · Filed Aug 11, 2025
AAON$57.19+5.1%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2025-03-31; filed 2025-05-01.
0000824142-25-000120
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-06-30; filed 2025-08-11.
0000824142-25-000183
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 109 previous paragraphs and 119 current paragraphs.
79 unchanged; 23 reworded; 15 added; 7 removed; 0 previous and 2 current paragraphs rearranged.
Tables are not compared: 12 previous and 16 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (15)
Current report
•We continue to see strong demand and growth of the BASX brand with increases in net sales of $51.7 million and $156.3 million for the three and six months ended June 30, 2025, respectively. This growth is primarily driven by data center demand for our liquid cooling solutions.
Current report
•The AAON brand has experienced challenges with a softer rooftop market due to macroeconomic factors like higher interest rates and slowing construction starts. Additionally, the refrigerant change that went into effect on January 1, 2025 created supply chain constraints for components with the new refrigerant that challenged the first quarter and lingered into the second quarter. As a result, net sales for the AAON brand were down $53.6 million and $98.3 million for the three and six months ended June 30, 2025, respectively.
Current report
•The Company went live with its new Enterprise Resource Planning (“ERP”) system on April 1, 2025 at its Longview, Texas facility. The adoption of this new system has caused some disruptions due to changes in processes. These disruptions primarily impacted the AAON Coil Products segment with decreased net sales and gross profit margins during the three months ended, June 30, 2025. To a lesser extent, the impact to the coil production at AAON Coil Products also impacted AAON Oklahoma’s ability to ramp up production, which contributed to the lower net sales and gross profit margins for that segment during the quarter.
Current report
Total net sales decreased $2.0 million, or 0.6%. AAON Oklahoma had net sales of $185.1 million, a decrease of 18.0% compared to the same period in the prior year. This decrease was driven by lingering supply chain issues from the refrigerant transition at the beginning of the quarter and coil supply shortages in the end of the quarter due to our ERP implementation at our Longview, Texas facility which slowed production of coils made for our Tulsa plant. Sales were up 86.4%, at AAON Coil Products primarily driven by growth in BASX branded products of $40.1 million for a large liquid cooling data center. AAON branded products declined $13.0 million due to disruptions caused by the change in ERP systems. BASX net sales were up 20.4% to $68.0 million due to the continued demand for data center solutions.
Current report
Gross profit decreased $30.4 million or 26.8% and from 36.1% of sales to 26.6% of sales. AAON Oklahoma’s decrease in gross profit is primarily driven by the lower volumes discussed above that resulted in sub optimal overhead absorption. Additionally, our new plant in Memphis contributed $3.0 million in cost of sales with minimal net sales to offset this cost to the AAON Oklahoma segment. AAON Coil Products decreased 1,990 basis points in gross profit margin is a result of slower production from implementing our ERP system at the beginning of the quarter. BASX gross profit margin of 27.9% is slightly down year over year due to higher indirect costs for warehouse personnel offset by slightly lower cost of materials.
Current report
Segment Operating Results for Six Months Ended June 30, 2025 and Six Months Ended June 30, 2024
Current report
Total net sales increased $58.0 million, or 10.1%. AAON Oklahoma had net sales of $347.0 million, a decrease of 20.4% compared to the same period in the prior year. This decrease was driven by supply chain issues from the refrigerant transition at the beginning of the year and coil supply shortages in the second quarter due to our ERP implementation at our Longview, Texas facility which slowed production of coils made for our Tulsa plant. Sales were up 174.2% for AAON Coil Products primarily driven by growth in BASX branded products of $106.3 million for a large liquid cooling data center. AAON branded products declined $9.4 million due to disruptions caused by our ERP implementation. BASX net sales were up 59.4% to $134.2 million due to the continued demand for data center solutions.
Current report
Gross profit decreased $36.2 million or 17.7% and from 35.7% of sales to 26.7% of sales. AAON Oklahoma’s decrease in gross profit is primarily driven by the lower volumes discussed above that resulted in sub optimal overhead absorption. Additionally, our new plant in Memphis contributed $5.3 million in cost of sales with minimal net sales to offset this cost for the AAON Oklahoma segment. AAON Coil Products 860 basis point drop in gross profit margin is a result of slower production from implementing our ERP system at the beginning of the second quarter.
Current report
Raw Material Costs
Current report
Selling, General and Administrative Expenses
Current report
Selling, general and administrative expenses increased $19.3 million for the six months ended June 30, 2025, from the prior year period. Profit sharing is down as a result of our lower earnings in the period. Salaries and benefits have increased as we add additional headcount to help build out our organizational capacity for future growth. Depreciation and amortization increased $6.1 million during the period due to increased investments from our ERP implementation. We incurred approximately $6.1 million in incentive fees due to our real estate broker associated with the acquisition of our Memphis, Tennessee plant for a percentage of the incentives awarded to us by various entities. Other includes an increase in expense of $5.7 million for technology related consulting fees along with increased expenses related to travel and other consulting expenses.
Current report
Income Taxes
Current report
Outstanding Debt - On December 16, 2024, we entered into the Third Amendment and Restated Loan Agreement dated November 24, 2021, to include an $80.0 million term loan payable in equal monthly installments, plus interest, over 60 months, expiring December 16, 2029 (“Term Loan”). The agreement provided for a $200.0 million revolving credit facility and an option to increase the maximum borrowings to $300.0 million. In April 2025, we increased our available Revolver to $230.0 million, an increase of $30.0 million, to fund our additional working capital needs.
Current report
On May 29, 2025, we entered into the Fifth Amendment to the Amended and Restated Loan Agreement dated November 24, 2021 (as amended, “Amended Loan Agreement”) whereby the remaining balance of the Term Loan, approximately $72.0 million, was rolled into the amended Revolving Loan (“Amended Revolver”), the capacity of which was increased from $230.0 million to $500.0 million. The Amended Revolver is prepayable without penalty.
Current report
The Term Loan had no outstanding balance as of June 30, 2025 and a balance of $78.4 million as of December 31, 2024 respectively.
Removed paragraphs (7)
Previous report
•Consolidated net sales for the three months ended March 31, 2025, increased 22.9%, or $59.9 million, due to an increase in sales of our BASX branded products. BASX branded products increased 374.8%, or $104.6 million when compared to 2024, offset by a decrease of our AAON branded products of 19.1%, or $44.7 million when compared to 2024.
Previous report
•We increased our dividend from $0.08 per share per quarter to $0.10 per share per quarter, an increase of 25.0%.
Previous report
Total net sales increased $60.0 million, or 22.9%. BASX increased by 138.9%, or $38.5 million, and AAON Coil Products increased 287.8%, or $69.8 million, both primarily related to demand from the BASX branded data center products. AAON Oklahoma sales decreased 23.0%, or $48.3 million due to challenges from the industry-regulated refrigerant transition and nonresidential construction activity that experienced weakened demand during the three months ended March 31, 2025 as compared to 2024.
Previous report
Gross profit as a percent of sales decreased to 26.8% during the three months ended March 31, 2025 as compared to 35.2% in 2024. As noted above, challenges from the industry-regulated refrigerant transition and nonresidential construction activity significantly affected our largest segment, AAON Oklahoma, resulting in decreased volumes and lower overhead absorption.
Previous report
Our AAON Coil Products segment gross profit increased $24.3 million, or 299.1%, as compared to 2024. Our new Longview, Texas plant expansion was completed in early January 2025, increasing overall plant capacity to be primarily utilized for the production of BASX branded data center products. Our BASX segment gross profit also increased $10.2 million, or 179.5%, as compared to 2024. The temporary inefficiencies associated with our Redmond, Oregon facility construction in 2024 have abated and we continue to ramp up production of this facility. The increased production in Redmond helped improve gross profit as a percent of sales for the BASX segment, increasing it to 24.0% during the three months ended March 31, 2025 as compared to 20.5% in 2024.
Previous report
Outstanding Debt - On December 16, 2024, we amended our Amended and Restated Loan Agreement dated November 24, 2021 (as amended, “Amended Loan Agreement”) to include an $80.0 million term loan (“Term Loan”) in addition to the $200.0 million revolving credit facility (the “Revolver”).
Previous report
The Term Loan had an outstanding balance of $74.4 million and $78.4 million as of March 31, 2025 and December 31, 2024 respectively. The Term Loan is payable in equal month installments, plus interest, over 60 months, expiring December 16, 2029.
Reworded paragraphs (23)
Previous wording
We engineer, manufacture, and sell premium heating, ventilation, and air conditioning equipment consisting of semi-custom and custom rooftop units, data center cooling solutions, cleanroom systems, packaged outdoor mechanical rooms, air handling units, makeup air units, energy recovery units, condensing units, geothermal/water-source heat pumps, coils, and controls. These products are marketed and sold to a variety of vertical markets including retail, manufacturing, educational, lodging, supermarket, data centers, medical and pharmaceutical, industrial, and other commercial markets. We sell our products to all 50 states in the United States and certain provinces in Canada. Foreign sales were approximately $11.3 million of our total net sales for the three months ended March 31, 2025, and $7.4 million of our sales during the same period of 2024.
Current wording
We engineer, manufacture, and sell premium heating, ventilation, and air conditioning equipment consisting of semi-custom and custom rooftop units, data center cooling solutions, cleanroom systems, packaged outdoor mechanical rooms, air handling units, makeup air units, energy recovery units, condensing units, geothermal/water-source heat pumps, coils, and controls. These products are marketed and sold to a variety of vertical markets including retail, manufacturing, educational, lodging, supermarket, data centers, medical and pharmaceutical, industrial, and other commercial markets. We sell our products to all 50 states in the United States and certain provinces in Canada. Foreign sales were approximately $7.5 million and $18.8 million the three and six months ended June 30, 2025, respectively, as compared to $7.1 million and $14.5 million for the three and six months ended June 30, 2024, respectively.
Previous wording
The price levels of our raw materials fluctuate given that the market continues to be volatile and unpredictable as a result of the uncertainty related to the U.S. economy and global economy. At March 31, 2025, the price (year to date average) for copper and aluminum increased 6.5% and 3.0%, respectively, while galvanized steel and stainless steel decreased 3.4% and 30.8%, respectively, as compared to the price (year to date average) at March 31, 2024.
Current wording
The price levels of our raw materials fluctuate given that the market continues to be volatile and unpredictable as a result of the uncertainty related to the U.S. economy and global economy. At June 30, 2025, the price (year to date average) for copper increased 10.3% while stainless steel decreased 27.5%, respectively. The price (year to date average) for galvanized steel and aluminum remained relatively flat, as compared to the price (year to date average) at June 30, 2024.
Previous wording
Beginning in January 2025, the current United States (“U.S.”) Administration began enacting a series of tariffs affecting nearly all goods imported into the U.S. In retaliation, numerous foreign countries imposed reciprocal tariffs and restricted certain exports to the U.S. The continuous changes and uncertainty in tariff policy could impact our cost of materials, parts, or components imported into the U.S. and could impact the availability of supply from our vendors. We expect to continue to pass along some of these costs to our customers, but the increased price of our products could adversely affect the demand, which could have an adverse effect on our business and our earnings.
Current wording
Beginning in January 2025, the current United States (“U.S.”) Administration began enacting a series of tariffs affecting nearly all goods imported into the U.S. In retaliation, numerous foreign countries imposed reciprocal tariffs and restricted certain exports to the U.S. The continuous changes and uncertainty in tariff policy could impact our cost of materials, parts, or components imported into the U.S. and could impact the availability of supply from our vendors. We source raw materials domestically, but historically have seen those suppliers increase prices when tariffs are increased. Additionally, while we source most components domestically, our vendors may be impacted by tariffs if they use foreign parts and materials and often pass any additional costs as a result of tariffs through to us. We expect to continue to pass along some of these costs to our customers, but the increased price of our products could adversely affect the demand, which could have an adverse effect on our business and our earnings.
Previous wording
Due to our favorable liquidity position, we are well positioned to make strategic purchases of materials when we see opportunities or potential disruptions in our supply chain. While we source a significant amount of our inventory and supplies from domestic vendors, certain vendors may source components internationally. We have experienced supply chain challenges related to specific manufacturing parts, which could be exacerbated by the trade conflict. We manage our supply chain challenges through strong vendor relationships as well as expanding our list of available vendors.
Current wording
Due to our favorable liquidity position, we are well positioned to make strategic purchases of materials when we see opportunities or potential disruptions in our supply chain. We have experienced supply chain challenges related to specific manufacturing parts, which could be exacerbated by the trade conflict. We manage our supply chain challenges through strong vendor relationships as well as expanding our list of available vendors.
Previous wording
Additionally, we continue to experience challenges in a tight labor market, especially the hiring of both skilled and unskilled production labor. We continue to implement human resource initiatives to retain and attract labor to further increase production capacity. We have implemented the following wage increases to remain competitive and to attract and retain employees:
Current wording
Additionally, we continue to experience challenges in a tight labor market, especially the hiring of production labor. We continue to implement human resource initiatives to retain and attract labor to further increase production capacity. We have implemented the following wage increases to remain competitive and to attract and retain employees:
Previous wording
At March 31, 2025, our consolidated backlog is at a record $1,026.9 million, an increase of 83.9%, or $468.4 million, as compared to March 31, 2024. Backlog was up from a year ago for both AAON Products and BASX Products with BASX Products increasing 122.7%, or $343.2 million, when compared to March 31, 2024. Most of these orders were associated with the BASX branded data center liquid cooling solutions.
Current wording
At June 30, 2025, our consolidated backlog is $995.3 million, an increase of 53.1%, or $345.3 million, as compared to June 30, 2024. Backlog was up from a year ago for both AAON Products and BASX Products with BASX Products increasing 27.0%, or $106.6 million, when compared to June 30, 2024. Most of these orders were associated with the BASX branded data center liquid cooling solutions.
Previous wording
•We continue to invest in the future growth of the Company as evidenced by our $50.4 million in capital expenditures in 2024, an increase of $11.7 million or 30.2% when compared to 2024.
Current wording
•We continue to invest in the future growth of the Company as evidenced by our $89.6 million in capital expenditures in 2025, an increase of $14.1 million or 18.7% when compared to 2024.
Previous wording
•We completed the repurchase of 0.4 million shares for $30.0 million during the three months ended March 31, 2025.
Current wording
•We completed the repurchase of 0.4 million shares for $30.0 million during the six months ended June 30, 2025.
Previous wording
Selling, general and administrative expenses increased $6.0 million for the three months ended March 31, 2025, from the prior year period. Depreciation and amortization increased $3.0 million during the three months ended March 31, 2025, due to increased investments in back office technology and automation. Professional fees decreased $3.1 million during the three months ended March 31, 2025, due to various professional, regulatory, and legal corporate requirements incurred in 2024. Other expenses increased $6.6 million or 82.2% during the three months ended March 31, 2025, due to increased travel, consulting expenses, and approximately $2.7 million of incentive fees due to our real estate broker associated with the acquisition of our Memphis, Tennessee plant for a percentage of the incentives awarded to us by various entities.
Current wording
Selling, general and administrative expenses increased $13.3 million for the three months ended June 30, 2025, from the prior year period. Profit sharing is down as a result of our lower earnings in the quarter. Salaries and benefits have increased as we add additional headcount to help build out our organizational capacity for future growth. Depreciation and amortization increased $3.1 million during the three months ended June 30, 2025, due to increased investments from our ERP implementation. We incurred approximately $3.4 million in incentive fees due to our real estate broker associated with the acquisition of our Memphis, Tennessee plant for a percentage of the incentives awarded to us by various entities. Other includes an increase in expense of $3.4 million for technology related consulting fees along with increased expenses related to travel and other consulting expenses.
Previous wording
The Company’s estimated annual 2025 effective tax rate, excluding discrete events, is expected to be approximately 25.4%.
Current wording
The Company’s estimated annual 2025 effective tax rate, excluding discrete events, is expected to be approximately 24.5%.
Previous wording
During the three months ended March 31, 2025, the Company recorded an excess tax benefit of $7.2 million as compared to $4.4 million during the same period in 2024. The excess tax benefit is related to the timing of stock option exercises as a result of our high stock price during the three months ended March 31, 2025 and 2024, respectively.
Current wording
During the three months ended June 30, 2025, the Company recorded an excess tax benefit of $4.1 million as compared to $1.3 million during the same period in 2024. The excess tax benefit is related to the timing of stock option exercises as a result of our high stock price during the three months ended June 30, 2025 and 2024, respectively.
Previous wording
Working Capital - Our unrestricted cash increased $1.0 million from December 31, 2024 to March 31, 2025. Our restricted cash decreased $5.1 million due to funding requirements related to our Longview, Texas expansion.
Current wording
Working Capital - Our unrestricted cash remained stable at a nominal amount from December 31, 2024 to June 30, 2025. Our restricted cash decreased $5.2 million due to funding requirements related to our Longview, Texas expansion.
Previous wording
As of March 31, 2025 and December 31, 2024, we had $178.0 million and $76.5 million outstanding under the Revolver, respectively. We have one standby letter of credit totaling $0.7 million as of March 31, 2025 and one standby letter of credit totaling $0.3 million as of December 31, 2024. At March 31, 2025, we have $21.4 million of borrowings available under the Revolver. The Revolver expires May 27, 2027. We have amended the Revolver to allow for the occurrence of transactions associated with the New Markets Tax Credit transactions (Note 18).
Current wording
As of June 30, 2025 and December 31, 2024, we had $317.3 million and $76.5 million outstanding under the Amended Revolver, respectively. We have one standby letter of credit totaling $0.7 million as of June 30, 2025 and one standby letter of credit totaling $0.3 million as of December 31, 2024. At June 30, 2025, we have $182.1 million of borrowings available under the Amended Revolver. The Amended Revolver expires May 27, 2030.
Previous wording
Fees associated with the unused portion of the committed amount are included in interest expense on our consolidated statements of income for the three months ended March 31, 2025 and 2024.
Current wording
Fees associated with the unused portion of the committed amount are included in interest expense on our consolidated statements of income for the three and six months ended June 30, 2025 and 2024.
Previous wording
At March 31, 2025, we were in compliance with our financial covenants, as defined by the Amended Loan Agreement. These covenants require that we meet certain parameters related to our leverage ratio. At March 31, 2025, our leverage ratio was 0.95 to 1.0, which meets the requirement of not being above 3 to 1.
Current wording
At June 30, 2025, we were in compliance with our financial covenants, as defined by the Amended Loan Agreement. These covenants require that we meet certain parameters related to our leverage ratio. At June 30, 2025, our leverage ratio was 1.4 to 1.0, which meets the requirement of not being above 3 to 1.
Previous wording
36 - the Company. This financing arrangement is secured by equipment at the Company’s Longview, Texas facilities, and a guarantee from the Company, including an unconditional guarantee of the NMTCs.
Current wording
38 - the Company. This financing arrangement is secured by equipment at the Company’s Longview, Texas facilities, and a guarantee from the Company, including an unconditional guarantee of the NMTCs.
Previous wording
The following table reflects the major categories of cash flows for the three months ended March 31, 2025 and 2024. For additional details, see the consolidated financial statements.
Current wording
The following table reflects the major categories of cash flows for the six months ended June 30, 2025 and 2024. For additional details, see the consolidated financial statements.
Previous wording
The Company currently manages cash needs through working capital as well as drawing on its line of credit. Collections and payments cycles are on a normal pattern and fluctuate due to timing of receipts and payments. Historically, the Company increased the purchase of inventory to take advantage of favorable pricing opportunities and also to mitigate the impact of future supply chain disruptions on our operations; however, we continue to make significant purchases of inventory related to data center orders. These purchases are allocated to customer jobs and show as increases to our contract assets.
Current wording
The Company currently manages cash needs through working capital as well as drawing on its line of credit. Collections and payments cycles are on a normal pattern and fluctuate due to timing of receipts and payments. Historically, the Company increases the purchase of inventory to take advantage of favorable pricing opportunities and also to mitigate the impact of future supply chain disruptions on our operations. Additionally, we continue to make significant purchases of inventory related to data center orders. These purchases are allocated to customer jobs and show as increases to our contract assets.
Previous wording
Capital expenditures during the three months ended March 31, 2025, relate to additional infrastructure and machinery for both replacement and production growth, finalizing our new production space in our Redmond, Oregon and Longview, Texas locations, additional equipment and production capacity in Parkville, Missouri, and new equipment for our Memphis,
Current wording
Capital expenditures during the six months ended June 30, 2025, relate to additional infrastructure and machinery for both replacement and production growth, finalizing our new production space in our Redmond, Oregon and Longview, Texas locations, additional equipment and production capacity in Parkville, Missouri, and new equipment for our Memphis,
Previous wording
Tennessee facility. We have also made investments to purchase or develop software for internal use in anticipation of future Company growth. Many of these projects are subject to review and cancellation at the discretion of our CEO and Board of Directors without incurring substantial charges.
Current wording
Tennessee facility. We have also made investments to purchase or develop software for internal use in anticipation of future Company growth.
Previous wording
During the three months ended March 31, 2025, we repurchased $30.0 million under our open market share repurchase programs. Furthermore, cash flows from financing activities is historically affected by the timing of stock options exercised by our employees.
Current wording
During the six months ended June 30, 2025, we repurchased $30.0 million under our open market share repurchase programs. Furthermore, cash flows from financing activities is historically affected by the timing of stock options exercised by our employees.
Previous wording
In 2023, the Company executed a five-year purchase commitment for refrigerants. Payments made in satisfaction of the purchase commitment were approximately $0.6 million and $3.6 million the three months ended March 31, 2025 and 2024, respectively. Estimated minimum future payments are $8.5 million, $10.5 million, and $11.2 million for 2025, 2026, and 2027, respectively.
Current wording
In 2023, the Company executed a five-year purchase commitment for refrigerants. Payments made in satisfaction of the purchase commitment were approximately $1.5 million and $2.1 million the three and six months ended June 30, 2025, respectively, as compared to $3.0 million and $6.6 million for the three and six months ended June 30, 2024, respectively. Estimated minimum future payments are $7.0 million, $10.5 million, and $11.2 million for 2025, 2026, and 2027, respectively.
Previous wording
There have been no material changes in the Company’s critical accounting policies during the three months ended March 31, 2025.
Current wording
There have been no material changes in the Company’s critical accounting policies during the six months ended June 30, 2025.
Rearranged current paragraphs (2)
Current report — wording carried from elsewhere
Six-month average raw material cost per pound as of June 30:
Current report — wording carried from elsewhere
During the six months ended June 30, 2025, the Company recorded an excess tax benefit of $9.0 million as compared to $6.7 million during the same period in 2024. The excess tax benefit is related to the timing of stock option exercises as a result of our high stock price during the six months ended June 30, 2025 and 2024, respectively.