AAON, INC.

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 $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.

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 $9.1 million and $27.9 million the three and nine months ended September 30, 2025, respectively, as compared to $10.1 million and $24.6 million for the three and nine months ended September 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 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.

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 September 30, 2025, the price (year to date average) for copper increased 14.3% while stainless steel decreased 26.8%, 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 September 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 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.

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. The third quarter of 2025 is the first period for us to see any significant financial impact from tariffs. On April 1, 2025 we instituted a 6.0% tariff surcharge on AAON branded orders which we began to see realization of in the third quarter of 2025. To date, we estimate that the amount of surcharge realized has not covered the additional costs from the tariffs, but expect this to change by the end of the year as we fully realize our surcharge.

Previous 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.

Current wording

At September 30, 2025, our consolidated backlog is $1,320.1 million, an increase of 103.8%, or $672.4 million, as compared to September 30, 2024. Backlog was up from a year ago for both AAON Products and BASX Products with BASX Products increasing 119.5%, or $488.2 million, when compared to September 30, 2024. Most of these orders were associated with the BASX branded data center liquid cooling solutions.

Previous wording

•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 wording

•We continue to see strong demand and growth of the BASX brand with increases in net sales of $61.1 million and $217.3 million for the three and nine months ended September 30, 2025, respectively. This growth is primarily driven by data center demand for our liquid cooling solutions.

Previous wording

•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 wording

•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 $4.1 million and $102.4 million for the three and nine months ended September 30, 2025, respectively.

Previous wording

•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 wording

•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 second quarter. All of our segments saw sequential increases in net sales in the third quarter as we overcame the challenges associated with our ERP implementation.

Previous 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.

Current wording

•We continue to invest in the future growth of the Company as evidenced by our $138.9 million in capital expenditures in 2025, an increase of $25.1 million or 22.1% when compared to 2024.

Previous wording

•We completed the repurchase of 0.4 million shares for $30.0 million during the six months ended June 30, 2025.

Current wording

•We completed the repurchase of 0.4 million shares for $30.0 million during the nine months ended September 30, 2025.

Previous wording

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 wording

Total net sales increased $57.0 million, or 17.4%. AAON Oklahoma had net sales of $238.7 million, an increase of 4.3% compared to the same period in the prior year. This increase was driven by the strong backlog entering the quarter and a successful ramp up of production. Sales were up 99.4%, at AAON Coil Products primarily driven by growth in BASX branded products of $45.9 million for a large liquid cooling data center. AAON branded products declined $10.9 million due to disruptions caused by the change in ERP systems. BASX net sales were up 19.2% to $75.2 million due to the continued demand for data center solutions and increasing production out of our Memphis facility.

Previous wording

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 wording

Gross profit decreased $7.3 million or 6.4% and from 34.9% of sales to 27.8% of sales. AAON Oklahoma’s decrease in gross profit is driven by the impact of tariffs and the additional overhead from our Memphis plant. Memphis is part of AAON Oklahoma, building intercompany sales for the BASX segment at cost. As such, the sales and gross profit from orders completed in Memphis are reflected in the BASX segment, but the additional overhead cost of running the plant is reflected in the AAON Oklahoma segment. Memphis contributed $4.5 million in cost of sales to the AAON Oklahoma segment. AAON Coil Products gross profit margin decreased from 35.3% to 16.1% as a result of slower production from implementing our ERP system at the beginning of the second quarter.

Previous 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.

Current wording

Selling, general and administrative expenses increased $14.6 million for the three months ended September 30, 2025, from the prior year period. Warranty is up $4.2 million due to an increase in our historical claims. 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. Other includes an increase in expense of $3.2 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 24.5%.

Current wording

The Company’s estimated annual 2025 effective tax rate, excluding discrete events, is expected to be approximately 24.1%. Discrete events such as excess tax benefits related to stock compensation and various tax credits consistently provide a benefit, keeping our actual effective rate lower than the stated 24.1%.

Previous wording

Segment Operating Results for Six Months Ended June 30, 2025 and Six Months Ended June 30, 2024

Current wording

Segment Operating Results for Nine Months Ended September 30, 2025 and Nine Months Ended September 30, 2024

Previous wording

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 wording

Total net sales increased $114.9 million, or 12.7%. AAON Oklahoma had net sales of $585.7 million, a decrease of 11.9% 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 145.2% for AAON Coil Products primarily driven by growth in BASX branded products of $152.2 million for liquid cooling data centers. AAON branded products declined $20.4 million due to disruptions caused by our ERP implementation. BASX net sales were up 42.2% to $209.4 million due to the continued demand for data center solutions and increasing production out of our Memphis facility.

Previous wording

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 wording

Gross profit decreased $43.5 million or 13.6% and from 35.4% of sales to 27.1% 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 is part of AAON Oklahoma, building intercompany sales for the BASX segment at cost. As such, the sales and gross profit from orders completed in Memphis are reflected in the BASX segment, but the additional overhead cost of running the plant is reflected in the AAON Oklahoma segment. Memphis contributed $9.3 million in cost to the AAON Oklahoma segment. AAON Coil Products gross profit margin decreased from 37.1% to 25.4% and is a result of slower production from implementing our ERP system at the beginning of the second quarter.

Previous wording

Six-month average raw material cost per pound as of June 30:

Current wording

Nine-month average raw material cost per pound as of September 30:

Previous wording

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 wording

Selling, general and administrative expenses increased $33.9 million for the nine months ended September 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 $7.1 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 $8.9 million for technology related consulting fees along with increased expenses related to travel and other consulting expenses.

Previous 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.

Current wording

Working Capital - Our unrestricted cash increased $1.0 million from December 31, 2024 to September 30, 2025. Our restricted cash decreased $5.3 million due to funding requirements related to our Longview, Texas expansion.

Previous 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.

Current wording

As of September 30, 2025 and December 31, 2024, we had $360.1 million and $76.5 million outstanding under the Amended Revolver, respectively. We have one standby letter of credit totaling $0.7 million as of September 30, 2025 and one standby letter of credit totaling $0.3 million as of December 31, 2024. At September 30, 2025, we have $139.2 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 and six months ended June 30, 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 nine months ended September 30, 2025 and 2024.

Previous 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.

Current wording

At September 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 September 30, 2025, our leverage ratio was 1.73 to 1.0, which meets the requirement of not being above 3 to 1.

Previous 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.

Current wording

40 - 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 six months ended June 30, 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 nine months ended September 30, 2025 and 2024. For additional details, see the consolidated financial statements.

Previous wording

Current payment terms for BASX jobs primarily require the Company to fund the upfront working capital resulting in cash outflows related to our contract assets.

Current wording

Current payment terms for BASX-branded jobs primarily require the Company to fund the upfront working capital resulting in cash outflows related to our contract assets.

Previous 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,

Current wording

Capital expenditures during the nine months ended September 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

The capital expenditure program for 2025 is estimated to be approximately $220.0 million. 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

The capital expenditure program for 2025 is estimated to be approximately $180.0 million. Many of these projects are subject to review and cancellation at the discretion of our CEO and Board of Directors without incurring substantial charges.

Previous 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.

Current wording

During the nine months ended September 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 $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.

Current wording

In 2023, the Company executed a five-year purchase commitment for refrigerants. Payments made in satisfaction of the purchase commitment were approximately $1.6 million and $3.8 million the three and nine months ended September 30, 2025, respectively, as compared to $3.1 million and $9.7 million for the three and nine months ended September 30, 2024, respectively. Estimated minimum future payments are $5.3 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 six months ended June 30, 2025.

Current wording

There have been no material changes in the Company’s critical accounting policies during the nine months ended September 30, 2025.