AAON (NASDAQ:AAON) executives told investors the company exited 2025 with strong demand across both its AAON and BASX brands, while acknowledging that temporary operational issues—particularly at its Tulsa facility and the ramp of a new Memphis plant—pressured margins late in the year. Management emphasized that 2025 included “transformational investments” in capacity, supply chain, leadership, and systems that it expects to translate into improved operating performance and margin expansion as those headwinds fade.
Data center demand drives BASX growth and backlog
President and CEO Matt Tobolski said the data center market remains AAON’s “most robust and dynamic growth opportunity.” In 2025, BASX-branded sales increased 143% to $548 million and backlog rose 141% to $1.3 billion, with a full-year BASX book-to-bill of 2.4. Tobolski attributed momentum to BASX’s “custom airside and liquid cooling solutions,” noting customers are increasingly seeking highly engineered systems for AI-driven data centers.
During Q&A, Tobolski said BASX backlog includes longer-duration, multi-phase programs that do not follow typical commercial HVAC lead-time dynamics. He added that project timing can shift based on broader supply network constraints in the data center ecosystem, meaning some backlog can “move in or move out” even if AAON’s own production execution remains strong.
AAON brand outperformed a down market, national accounts strengthened
Tobolski said AAON-branded performance held up despite a 16% decline in overall industry volumes during 2025. AAON-branded sales fell 8% for the year, while bookings grew about 12%, driven in part by an 86% increase in national accounts. He described that performance as deliberate market share gains tied to customers recognizing total cost of ownership benefits.
Fourth-quarter results showed a rebound in AAON-branded sales, which Thompson said rose 9.5% year-over-year. Tobolski added that the increase was supported by a 42% rise in Alpha Class heat pump sales, calling it the strongest quarterly AAON-branded growth since the second quarter of 2024. AAON-branded bookings in the quarter increased 20% year-over-year, and management said AAON backlog rose 61% from the prior-year period.
Asked about the commercial HVAC market backdrop, Tobolski said the company’s indicators point to a “flattish” market in 2026, with AAON’s outperformance driven by its Alpha Class air source heat pump and national accounts strategy rather than a broader market recovery.
Fourth-quarter financials: strong sales, margins pressured by Memphis ramp
Thompson reported fourth-quarter net sales rose 42.5% year-over-year to $424.2 million, driven primarily by 138.8% growth in BASX-branded sales and higher Memphis utilization. Gross margin was 25.9%, slightly below 26.1% a year earlier. Thompson attributed the modest contraction primarily to unabsorbed fixed costs at the new Memphis facility, though she said utilization and productivity are rising and should provide “meaningful operating leverage” in 2026.
Fourth-quarter non-GAAP adjusted EBITDA margin was 15.2%, down from 15.8% in the prior-year period, while diluted EPS was $0.39, up 30% from the fourth quarter of 2024.
- AAON Oklahoma segment: Sales increased 11.1% to $215.5 million; gross margin declined to 27.5% from 30.7%, reflecting $6.4 million of incremental overhead tied to Memphis.
- Coil Products segment (Longview): Sales rose 93.6% year-over-year; gross margin improved to 21.3% from 16.1%. Thompson cited improved operating leverage and favorable mix from higher-margin BASX sales, partly offset by a five-day shutdown for a wall-to-wall inventory count.
- BASX segment: Sales climbed 109.1% to $106.1 million; gross margin expanded to 27.1% from 18.8%.
Tobolski said the “softer than expected” fourth-quarter margin was primarily driven by lower production at Tulsa. He cited normal seasonality plus temporary supply chain constraints that reduced throughput. He told analysts that Tulsa production volumes accelerated “substantially” in January and February, which he expects to support margin improvement, although he also noted first-quarter offset from product mix in Longview as AAON-branded volumes ramp there.
Balance sheet, cash flow, and capital spending
On the balance sheet, Thompson said cash, cash equivalents, and restricted cash totaled $1.2 million at December 31, 2025. Debt was $398.3 million, and the leverage ratio was 1.77.
Cash flow from operations was a source of $0.5 million in 2025, compared with $192.5 million in 2024. Thompson said the year reflected “substantial capacity and working capital investments” to support backlog growth. She said cash flow from operations improved on a quarterly basis, turning positive in Q3 and Q4 with sequential improvement, and that the company expects improvement to continue in 2026 on higher earnings and better working capital efficiency.
Thompson also pointed to efforts to negotiate down payments on upcoming jobs, reflected in contract liabilities, to improve liquidity and working capital management. Regarding debt, she said balances will “remain elevated for most of the year” and may decline somewhat in the back half of 2026, with interest expense expected to remain higher given the current debt level.
Capital expenditures in 2025 (including software development) decreased 3.9% to $204.9 million. The company plans 2026 capital spending of $190 million.
2026 outlook: growth and margin expansion, with quarterly variability
For 2026, Tobolski guided to sales growth of 18% to 20% and gross margin of 29% to 31%, while cautioning that margin progression is expected to be uneven by quarter as capacity ramps and product mix normalizes. The company expects SG&A at about 16% of sales and depreciation and amortization expense of $95 million to $100 million.
In Q&A, Tobolski said the 2026 growth outlook assumes BASX revenue growth “about half” of the 40%–50% range the company had discussed previously, with more of the incremental growth coming from AAON-branded recovery—particularly increased throughput in Tulsa as supply reliability improves.
On pricing, Tobolski said AAON took two pricing actions in 2025—a price increase early in the year and a later surcharge related to tariffs and broader cost dynamics—while noting there were not major pricing actions in the back half of 2025. He characterized 2026 growth expectations as primarily volume-driven.
Management also discussed its ERP rollout, noting it revised implementation sequencing to prioritize stability and customer deliveries. Tobolski said Redmond is scheduled for the back half of 2026 and Tulsa is expected in 2027, framing the timing shift as an operational discipline decision to focus on throughput and reducing lead times rather than a problem with system performance.
About AAON (NASDAQ:AAON)
AAON, Inc (NASDAQ: AAON) is a U.S.-based designer and manufacturer of heating, ventilation and air conditioning (HVAC) equipment for commercial and industrial applications. The company’s product portfolio focuses on rooftop packaged units, water-source heat pumps, chillers and custom-engineered solutions that cater to a wide array of building types, from office complexes and schools to data centers and healthcare facilities.
AAON’s core offerings include rooftop units available in gas, electric and dual-fuel configurations, precision air-conditioning systems for temperature- and humidity-sensitive environments, and modular chillers suited for both indoor and outdoor installations.
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