What changed in this filing

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Item 1. Financial Statements

2025-05-01 compared with 2024-11-07 · 304 added, 381 removed, 636 unchanged (52% of the section changed)

2 unchanged sentences

Consolidated Balance Sheets

September 30, 2024 December 31, 2023

March 31, 2025 December 31, 2024

Assets (in thousands, except share and per share data)

5 unchanged sentences

Inventories, net 198,852 187,420

Contract assets 95,120 45,194

Contract assets, net 188,656 135,421

Prepaid expenses and other 9,438 7,308

3 unchanged sentences

Right of use assets 14,751 15,436

Deferred tax assets — 836

Other long-term assets 808 242

2 unchanged sentences

Current liabilities:

Debt, short-term $ 16,000 $ 16,000

Accounts payable 77,155 44,645

2 unchanged sentences

Total current liabilities 206,617 174,905

Revolving credit facility, long-term 55,677 38,328

Debt, long-term 236,417 138,891

Deferred tax liabilities 5,140 —

5 unchanged sentences

Preferred stock, $ .001 par value, 5,000,000 shares authorized, no shares issued

Common stock, $ .004 par value, 200,000,000 shares authorized 2 , 81,246,902 and 81,508,381 issued and outstanding at September 30, 2024 and December 31, 2023, respectively

Common stock, $ .004 par value, 200,000,000 shares authorized, 81,348,131 and 81,436,594 issued and outstanding at March 31, 2025 and December 31, 2024, respectively

Additional paid-in capital 39,020 68,946

3 unchanged sentences

1 Held by variable interest entities (Note 18)

2 Effective July 9, 2024, our authorized common shares increased from 100,000,000 to 200,000,000 (Note 16)

The accompanying notes are an integral part of these consolidated financial statements.

2 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2024 2023 2024 2023

(in thousands, except share and per share data)

3 unchanged sentences

Selling, general and administrative expenses 51,293 45,288

Loss (gain) on disposal of assets 1 ( 25 ) ( 15 ) ( 13 )

Gain on disposal of assets ( 40 ) ( 16 )

Income from operations 35,111 46,970

15 unchanged sentences

Consolidated Statements of Stockholders' Equity

Nine Months Ended September 30, 2024

Three Months Ended March 31, 2025

Common Stock Paid-in Retained

1 unchanged sentence

(in thousands)

Balance at December 31, 2023

Balances at December 31, 2024

81,437 $ 326 $ 68,946 $ 755,310 $ 824,582

2 unchanged sentences

stock awards granted

Contingent shares issued (Note 16)

243 1 6,363 — 6,364

Share-based compensation — — 4,021 — 4,021

1 unchanged sentence

Dividends — — — ( 8,095 ) ( 8,095 )

Balance at September 30, 2024 81,247 $ 325 $ 59,398 $ 737,133 $ 796,856

Nine Months Ended September 30, 2023

Balances at March 31, 2025 81,348 $ 325 $ 39,020 $ 776,507 $ 815,852

Three Months Ended March 31, 2024

Common Stock Paid-in Retained

5 unchanged sentences

stock awards granted

Share-based compensation — — 12,102 — 12,102

Stock repurchased and retired ( 423 ) ( 2 ) ( 26,209 ) — ( 26,211 )

Dividends — — — ( 19,946 ) ( 19,946 )

Balance at September 30, 2023 81,232 $ 325 $ 109,874 $ 572,285 $ 682,484

Three Months Ended September 30, 2024

Common Stock Paid-in Retained

Shares Amount Capital Earnings Total

(in thousands)

Balances at June 30, 2024 80,951 $ 324 $ 49,174 $ 691,000 $ 740,498

Net income — — — 52,625 52,625

Stock options exercised and restricted 342 1 9,823 — 9,824

stock awards granted

Share-based compensation — — 4,363 — 4,363

Stock repurchased and retired ( 46 ) — ( 3,962 ) — ( 3,962 )

Dividends — — — ( 6,492 ) ( 6,492 )

Balance at September 30, 2024 81,247 $ 325 $ 59,398 $ 737,133 $ 796,856

Three Months Ended September 30, 2023

Common Stock Paid-in Retained

Shares Amount Capital Earnings Total

(in thousands)

Balances at June 30, 2023 81,569 $ 326 $ 128,636 $ 531,149 $ 660,111

Net income — — — 48,078 48,078

Stock options exercised and restricted 66 1 2,006 — 2,007

stock awards granted

Contingent shares issued (Note 17)

243 1 6,363 — 6,364

Share-based compensation — — 3,957 — 3,957

1 unchanged sentence

Dividends — — — ( 6,556 ) ( 6,556 )

Balance at September 30, 2023 81,232 $ 325 $ 109,874 $ 572,285 $ 682,484

Balances at March 31, 2024 82,118 $ 329 $ 139,184 $ 645,295 $ 784,808

The accompanying notes are an integral part of these consolidated financial statements.

1 unchanged sentence

Consolidated Statements of Cash Flows

Nine Months Ended

September 30,

Three Months Ended

Operating Activities (in thousands)

$ 29,292 $ 39,016

Adjustments to reconcile net income to net cash provided by operating activities:

Adjustments to reconcile net income to net cash (used in) provided by operating activities:

Depreciation and amortization 18,943 13,437

1 unchanged sentence

Amortization of right of use assets 25 12

Provision for (recoveries of) credit losses on accounts receivable, net of adjustments

Provision for credit losses on accounts receivable, net of adjustments

Provision for excess and obsolete inventories, net of write-offs

Share-based compensation 4,021 3,957

Gain on disposition of assets

( 15 ) ( 13 )

Foreign currency transaction loss

Interest income on note receivable

( 14 ) ( 15 )

Other ( 45 ) ( 10 )

Deferred income taxes 5,976 ( 740 )

9 unchanged sentences

Accrued liabilities and other long-term liabilities ( 2,412 ) ( 1,044 )

Net cash provided by operating activities

Net cash (used in) provided by operating activities

( 9,214 ) 92,370

2 unchanged sentences

Proceeds from sale of property, plant and equipment 40 16

Software development expenditures ( 14,436 ) —

Acquisition of intangible assets ( 3,717 ) ( 4,055 )

Principal payments from note receivable 12 13

2 unchanged sentences

Financing Activities

Borrowings of debt 235,925 115,130

Payments of debt ( 138,411 ) ( 153,458 )

Proceeds from financing obligation, net of issuance costs — 4,186

Payment related to financing costs — ( 417 )

Borrowings under revolving credit facility 410,503 444,072

Payments under revolving credit facility ( 393,154 ) ( 436,656 )

Stock options exercised 4,356 9,844

2 unchanged sentences

Cash dividends paid to stockholders ( 8,095 ) ( 6,556 )

Net cash used in financing activities

Net cash provided by (used in) financing activities

55,471 ( 34,312 )

31 unchanged sentences

We reevaluate our estimates and assumptions as needed, but at a minimum on a quarterly basis.

The most significant estimates include, but are not limited to, inventory valuation, inventory reserves, warranty accrual, medical insurance accrual, income taxes, useful lives of property, plant, and equipment, estimated future use of leased property, share-based compensation, revenue percentage of completion and estimated costs to complete.

The most significant estimates include, but are not limited to, inventory valuation, inventory reserves, warranty accrual, income taxes, useful lives of property, plant, and equipment, estimated future use of leased property, share-based compensation, revenue percentage of completion and estimated costs to complete.

Actual results could differ materially from those estimates.

Inflation and Labor Market

In 2023, we saw the slowing of inflation and some stabilization of raw material and component prices.

Due to our favorable liquidity position, we continue to make strategic purchases of materials when we see opportunities.

We continue to monitor and manage increases in the cost of raw materials through price increases for our products.

We have also experienced supply chain challenges related to specific manufacturing parts, which we have managed through our strong vendor relationships as well as expanding our list of vendors.

Macroeconomic Conditions

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.

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.

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:

1 unchanged sentence

• In March 2025, we awarded annual merit raises for an overall 4.0% increase to wages.

We continue to implement human resource initiatives to retain and attract labor to further increase production capacity.

Beginning in 2023, initiatives included changing our employee paid time off policy, historically awarded in arrears at the beginning of each quarter, to accrue ratably over each pay period.

Additionally, we enhanced our benefits for short-term disability, life insurance, paid parental leave, and paid military leave.

Despite efforts to mitigate the impact of inflation, supply chain issues and the tight labor market, future disruptions, while temporary, could negatively impact our consolidated financial position, results of operations and cash flows.

Despite efforts to mitigate the potential business impacts of trade conflict, supply chain challenges, and a tight labor market, future increases in the cost of materials, parts, components, or labor, in addition to supply chain disruptions, while temporary, could negatively impact our consolidated financial position, results of operations, and cash flows.

Accounting Policies

2 unchanged sentences

The carrying amounts of cash and cash equivalents, receivables, accounts payable, and accrued liabilities approximate fair value because of the short-term maturity of the items.

The carrying amount of the Company’s revolving line of credit, and other payables, approximate their fair values either due to their short term nature, the variable rates associated with the debt or based on current rates offered to the Company for debt with similar characteristics.

The carrying amount of the Company’s debt, and other payables, approximate their fair values either due to their short-term nature, the variable rates associated with the debt or based on current rates offered to the Company for debt with similar characteristics.

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date.

9 unchanged sentences

Assessing the significance of a particular input to a fair value measurement requires judgment, considering factors specific to the asset or liability.

Definite-Lived Intangible Assets

Our definite-lived intangible assets include various trademarks, service marks, and technical knowledge acquired in business combinations or asset acquisitions.

We amortize our definite-lived intangible assets on a straight-line basis over the estimated

useful lives of the assets.

We evaluate the carrying value of our amortizable intangible assets for potential impairment when events and circumstances warrant such a review.

Amortization is computed using the straight-line method over the following estimated useful lives:

Intellectual property 6 - 30 years

Customer relationships 14 years

Software Development Costs

3 unchanged sentences

The useful life of our internal-use software development costs is generally one to six years .

Definite-Lived Intangible Assets

Our definite-lived intangible assets include customer relationships, internal-use software and other intellectual property acquired in business combinations or asset acquisition.

We amortize our definite-lived intangible assets on a straight-line basis over the estimated useful lives of the assets.

We evaluate the carrying value of our amortizable intangible assets for potential

impairment when events and circumstances warrant such a review.

Amortization is computed using the straight-line method over the following estimated useful lives:

Intellectual property 6 - 30 years

Customer relationships 14 years

Goodwill and Indefinite-Lived Intangible Assets

Goodwill represents the excess of the consideration paid for the acquired businesses over the fair value of the individual assets acquired, net of liabilities assumed.

Goodwill at March 31, 2025, is expected to be tax deductible in future periods.

Indefinite-lived intangible assets consist of trademarks and trade names.

Goodwill and indefinite-lived intangible assets are not amortized, but instead are evaluated for impairment at least annually.

7 unchanged sentences

The following tables show disaggregated net sales by reportable segment (Note 21) by major source, net of intercompany sales eliminations.

Three Months Ended September 30, 2024

AAON Oklahoma AAON Coil Products BASX Total

(in thousands)

Rooftop units $ 203,172 $ — $ — $ 203,172

Condensing units — 16,548 — 16,548

Air handlers — 15,829 414 16,243

Cleanroom systems — — 6,966 6,966

Data center cooling solutions — 599 54,561 55,160

Water-source heat pumps — 1,403 — 1,403

Part sales 20,113 1 984 21,098

5,602 852 208 6,662

$ 228,887 $ 35,232 $ 63,133 $ 327,252

Three Months Ended September 30, 2023

AAON Oklahoma AAON Coil Products BASX Total

(in thousands)

Rooftop units $ 221,417 $ — $ — $ 221,417

Condensing units — 7,636 — 7,636

Air handlers — 9,862 7,558 17,420

Outdoor mechanical rooms — 62 — 62

Cleanroom systems — — 5,355 5,355

Data center cooling solutions — 3,284 25,726 29,010

Water-source heat pumps — 3,898 — 3,898

Part sales 17,756 4 371 18,131

7,281 1,023 737 9,041

$ 246,454 $ 25,769 $ 39,747 $ 311,970

1 Other sales include freight, extended warranties and miscellaneous revenue.

Nine Months Ended September 30, 2024

Segment Brands Produced Brand Products

AAON Oklahoma AAON Rooftop units and aftermarket parts

AAON Coil Products AAON / BASX Condensing units, air handling products, data center cooling solutions, and geothermal/water-source heat pumps

BASX BASX Data center cooling solutions, cleanroom products, and air handling products

Three months ended March 31, 2025

AAON Oklahoma AAON Coil Products BASX Total

(in thousands)

Rooftop units $ 598,079 $ — $ — $ 598,079

Condensing units — 43,814 — 43,814

Air handlers — 38,303 4,972 43,275

Cleanroom systems — — 25,506 25,506

Data center cooling solutions — 1,731 114,141 115,872

Water-source heat pumps — 4,558 — 4,558

Part sales 53,404 7 2,168 55,579

13,271 2,439 524 16,234

AAON Products $ 161,838 $ 27,655 $ — $ 189,493

BASX Products — 66,368 66,193 132,561

$ 161,838 $ 94,023 $ 66,193 $ 322,054

Nine Months Ended September 30, 2023

Three months ended March 31, 2024

AAON Oklahoma AAON Coil Products BASX Total

(in thousands)

Rooftop units $ 597,508 $ — $ — $ 597,508

Condensing units 61 34,243 — 34,304

Air handlers — 34,693 13,196 47,889

Outdoor mechanical rooms 208 274 — 482

Cleanroom systems — — 35,063 35,063

Data center cooling solutions — 6,524 56,079 62,603

Water-source heat pumps 3,128 10,064 — 13,192

Part sales 47,623 5 862 48,490

18,142 3,459 748 22,349

AAON Products $ 210,140 $ 24,041 $ — $ 234,181

BASX Products — 206 27,712 27,918

$ 210,140 $ 24,247 $ 27,712 $ 262,099

1 Other sales include freight, extended warranties and miscellaneous revenue.

Aftermarket part sales were $ 15.2 million and $ 15.6 million for the three months ended March 31, 2025 and 2024, respectively.

The Company recognizes revenue, presented net of sales tax, when it satisfies the performance obligation in its contracts.

For certain manufactured equipment contracts and parts sales, the primary performance obligation in such a contract is delivery of the requested manufactured equipment.

We satisfy the performance obligation when the control is passed to the customer, generally at time of shipment.

Final sales prices are fixed based on purchase orders.

Sales allowances and customer incentives are treated as reductions to sales and are provided for based on historical experiences and current estimates.

Due to the highly customized nature of many of the Company’s products and each product not having an alternative use to the Company without significant costs to the Company, the Company recognizes revenue over time as progress is made toward satisfying the performance obligations of each contract.

The Company has formal cancellation policies and generally does not accept returns on these units.

As a result, many of the Company’s products do not have an alternative use and therefore, for these products we recognize revenue over the time it takes to produce the unit.

As a result, many of the Company’s products do not have an alternative use and have an enforceable right to payment, including a reasonable profit margin, and therefore, for these products, we recognize revenue over the time it takes to produce the unit.

Contract costs include direct materials, direct labor, installation, freight and delivery, commissions and royalties.

3 unchanged sentences

The aggregate of costs incurred and income recognized on uncompleted contracts in excess of billings is shown as a contract asset within our consolidated balance sheets, and the aggregate of billings on uncompleted contracts in excess of related costs incurred and income recognized is shown as a contract liability within our consolidated balance sheets.

The Company recognizes revenue, presented net of sales tax, when it satisfies the performance obligation in its contracts.

For certain manufactured equipment contracts and part sales, the primary performance obligation is delivery.

We satisfy the performance obligation when the control is passed to the customer, generally at time of shipment.

Final sales prices are fixed based on purchase orders.

Sales allowances and customer incentives are treated as reductions to sales and are provided for based on historical experiences and current estimates.

Historically, sales of our products were moderately seasonal with the peak period being May-October of each year due to timing of construction projects being directly related to warmer weather.

However, in recent years, given the increases in demand of our product, changes in product mix and increases in our backlog, sales have become more constant throughout the year.

Historically, sales of our AAON products are moderately seasonal with the peak period being May-October of each year due to timing of construction projects being directly related to warmer weather.

Product Warranties

6 unchanged sentences

We are responsible for billings and collections resulting from all sales transactions, including those initiated by our independent manufacturer representatives (“Representatives”).

Representatives are national companies that are in the business of providing HVAC units and other related products and services to customers.

Representatives are national companies that are in the business of providing heating, ventilation, and air conditioning (“HVAC”) units and other related products and services to customers.

The end user customer orders a bundled group of products and services from the Representative and expects the Representative to fulfill the order.

These additional products and services may include controls purchased from another manufacturer to operate the unit, start-up services, and curbs for supporting the unit (“Third Party Products”).

All are associated with the purchase of a HVAC unit but may be provided by the Representative or another third party.

Only after the specifications are agreed to by the Representative and the customer, and the decision is made to use a Company HVAC unit, will we receive notice of the order.

These other related products and services may include controls purchased from another manufacturer to operate the unit, start-up services, and curbs for supporting the unit (“Third Party Products”).

All are associated with the purchase of an HVAC unit but may be provided by the Representative or another third party.

Only after the specifications are agreed to by the Representative and the customer, and the decision is made to use an AAON HVAC unit, will we receive notice of the order.

We establish the amount we must receive for our HVAC unit (“minimum sales price”), but do not control the total order price that is negotiated by the Representative with the end user customer.

1 unchanged sentence

The total order price includes our minimum sales price and an additional amount which may include both the Representatives’ fee and amounts due for additional products and services required by the customer.

The Company is considered the principal for the equipment we design and manufacture and records that revenue.

The Company is considered the principal for the equipment we design and manufacture and records that revenue gross.

The Company has no control over the Third Party Products to the end customer and the Company is under no obligation related to the Third Party Products.

1 unchanged sentence

The Representatives’ fee and Third Party Products amounts (“Due to Representatives”) are paid only after all amounts associated with the order are collected from the customer.

The amount of payments to our Representatives were $ 10.7 million and $ 20.1 million for the three months ended September 30, 2024 and 2023, respectively, and $ 31.7 million and $ 46.4 million for the nine months ended September 30, 2024 and 2023, respectively.

The Company has various lease arrangements for certain manufacturing and warehousing facilities, equipment rental, as well as administrative facilities.

Lease expiration dates, including expected renewal options, range from April 2025 to November 2033.

The discount rates used to calculate the present value of lease payment range from 1.3 % to 6.6 % as of September 30, 2024.

Currently, all leases are classified as operating leases.

The following table presents the balances by lease type:

Operating Leases Balance Sheet Classification September 30, 2024 December 31, 2023

The amount of payments to our Representatives were $ 12.7 million and $ 10.8 million for the three months ended March 31, 2025 and 2024, respectively.

Contract Assets and Liabilities

Opening and closing balances of contract assets and contract liabilities are as follows:

2025 December 31,

2024 March 31,

2024 December 31,

(in thousands) (in thousands)

Contract assets $ 189,055 $ 135,820 $ 50,581 $ 45,194

Allowance for credit losses 399 399 — —

Contract assets, net 188,656 135,421 50,581 45,194

Contract liabilities ( 16,421 ) ( 14,913 ) ( 16,527 ) ( 13,757 )

Total, net $ 172,235 $ 120,508 $ 34,054 $ 31,437

Costs and estimated earnings on uncompleted contracts and related billings are as follows:

2025 March 31,

(in thousands)

Costs incurred on uncompleted contracts $ 157,050 $ 106,424

Estimated earnings 119,699 79,612

276,749 186,036

Contract billings to date 111,891 152,157

Allowance for credit losses 399 —

Completed contracts, unbilled 7,776 175

Total, net $ 172,235 $ 34,054

Revenue recognized in the reporting period that was included in the contract liability balance at the beginning of the period for the three months ended March 31, 2025 and 2024 was $ 1.6 million and $ 5.2 million, respectively.

Typically, we expect to satisfy performance obligations relating to uncompleted in-process contracts within one year or less, however, timing of performance obligations can vary from timing of payment, production scheduling and timing of customer installation requirements.

Increases in contract assets are mainly due to the increased production and increased demand of our BASX branded products.

The Company has lease arrangements for certain administrative, manufacturing and warehousing facilities and equipment.

Lease expiration dates, including expected renewal options, range from April 2025 to November 2033, with the weighted average remaining term being 6.4 years.

The discount rates used to calculate the present value of lease payment range from 1.3 % to 6.6 % as of March 31, 2025.

All leases are classified as operating leases.

Balance Sheet Classification March 31, 2025 December 31, 2024

(in thousands)

Right of use assets Right of use assets $ 14,751 $ 15,436

Lease liability, short-term Accrued liabilities 2,298 2,021

Lease liability, long-term Other long-term liabilities 13,788 10,201

Current lease liability Accrued liabilities 2,442 2,481

Noncurrent lease liability Other long-term liabilities 12,971 13,592

Since 2018, the Company has leased the manufacturing, engineering and office space used by our operations in Parkville, Missouri.

The lease provides approximately 86,000 square feet of manufacturing and office space.

The lease expires December 31, 2032.

In November 2022, the Company entered into a lease agreement for land and facilities in Tulsa, Oklahoma which provides an additional 198,000 square feet to support our operations.

The lease term is through December 2032.

In November 2022, the Company entered into a lease arrangement for additional storage facilities in Tulsa, Oklahoma to support our operations.

The lease added an additional 198,000 square feet to our operations.

In January 2024, we amended the lease for an additional 157,550 square feet for operations and parts distribution.

The amended lease term will expire November 30, 2029.

The amended lease term will expire January 2039.

In July 2023, the Company entered into a lease agreement with a start date of September 2023, for land and approximately 72,000 square feet of facilities in Redmond, Oregon to support our manufacturing operations.

The lease term is approximately five years with additional renewal options.

We also lease several properties near our Redmond, Oregon location.

In the aggregate, these leases contain approximately 104,500 square feet of additional warehouse space.

These leases have expiring terms from February 2025 to November 2033.

Total undiscounted future lease payments are as follows:

The lease term will expire November 2033 with additional renewal options.

In April 2025, we amended the lease for an additional 28,000 square feet.

We also lease six properties near our Redmond location.

In the aggregate, these leases contain approximately 61,000 square feet of additional warehouse space, office space, as well as outside storage.

These leases have expiring terms from April 2025 to May 2028.

Total future lease payments as of March 31, 2025, are as follows:

(in thousands)

Thereafter 4,917

Total minimum lease obligations $ 18,561

present value of minimum lease payments 3,148

current portion 2,442

Lease obligations, long-term $ 12,971

Accounts Receivable

Accounts receivable and the related allowance for credit losses are as follows:

September 30,

2025 December 31,

2024 March 31,

2024 December 31,

(in thousands)

2 unchanged sentences

$ 164,977 $ 147,434 $ 109,662 $ 138,108

Three Months Ended Nine Months Ended

September 30,

2024 September 30,

2023 September 30,

2024 September 30,

Three Months Ended

2025 March 31,

Allowance for credit losses:

1 unchanged sentence

Balance, beginning of period $ 1,038 $ 323

Provisions for (recoveries of) expected credit

( 354 ) 79 820 ( 92 )

Provisions for expected credit 98 112

losses, net of adjustments

5 unchanged sentences

The components of inventories and related changes in the allowance for excess and obsolete inventories account are as follows:

September 30,

2025 December 31,

6 unchanged sentences

$ 198,852 $ 187,420

Three Months Ended Nine Months Ended

September 30,

2024 September 30,

2023 September 30,

2024 September 30,

Three Months Ended

2025 March 31,

Allowance for excess and obsolete inventories:

6 unchanged sentences

Our property, plant and equipment consist of the following:

September 30,

2025 December 31,

9 unchanged sentences

Depreciation expense is as follows:

Three Months Ended Nine Months Ended

September 30,

2024 September 30,

2023 September 30,

2024 September 30,

Three Months Ended

2025 March 31,

(in thousands)

3 unchanged sentences

Our intangible assets consist of the following:

September 30,

2025 December 31,

9 unchanged sentences

Amortization expense is as follows:

Three Months Ended Nine Months Ended

September 30,

2024 September 30,

2023 September 30,

2024 September 30,

Three Months Ended

2025 March 31,

(in thousands)

Amortization expense $ 2,075 $ 1,706

The weighted-average amortization period for definite-lived intangible assets are as follows as of March 31, 2025:

Intellectual property 17.3

Customer relationships 10.7

Capitalized internal-use software 3.4

Definite-lived intangible assets 11.2

Total future amortization expense for finite-lived intangible assets was estimated as follows:

5 unchanged sentences

The changes in the carrying amount of goodwill were as follows:

Nine Months Ended

September 30,

2024 September 30,

Three Months Ended

2025 March 31,

(in thousands)

4 unchanged sentences

Supplemental Cash Flow Information

Three Months Ended Nine Months Ended

September 30,

2024 September 30,

2023 September 30,

2024 September 30,

Three Months Ended

2025 March 31,

Supplemental disclosures:

1 unchanged sentence

Interest paid $ 2,513 $ 395

Income taxes paid $ 12,194 $ 12,081 $ 40,864 $ 45,724

Income taxes paid, Federal — $ —

Income taxes paid, State 538 $ 311

Operating activities - other:

Gain on disposition of assets

$ ( 40 ) $ ( 16 )

Foreign currency transaction (gain) loss

Interest income on note receivable

Total, other $ ( 45 ) $ ( 10 )

Non-cash investing and financing activities:

1 unchanged sentence

Contingent shares issued (Note 17)

$ — $ — $ 6,364 $ —

The Company has product warranties with various terms from one year from the date of first use or 18 months for parts, data center cooling solutions, and cleanroom systems to 25 years for certain heat exchangers.

2 unchanged sentences

Changes in the warranty accrual are as follows:

Three Months Ended Nine Months Ended

September 30,

2024 September 30,

2023 September 30,

2024 September 30,

Three Months Ended

2025 March 31,

Warranty accrual:

4 unchanged sentences

Balance, end of period $ 23,610 $ 21,349

Warranty expense by reportable segment (Note 21) is as follows:

Three Months Ended

2025 March 31,

(in thousands)

AAON Oklahoma $ 2,167 $ 2,958

AAON Coil Products 399 180

Total $ 3,211 $ 3,398

Accrued Liabilities and Other Long-Term Liabilities

Accrued liabilities were comprised of the following:

September 30,

2025 December 31,

8 unchanged sentences

Donations, short-term 470 599

Accrued income taxes — 1,170

Employee vacation time 12,515 12,084

5 unchanged sentences

Other long-term liabilities were comprised of the following:

September 30,

2025 December 31,

2 unchanged sentences

Extended warranties 7,043 7,151

Donations and other — 524

$ 20,014 $ 20,743

Revolving Credit Facility

On May 27, 2022, we amended our $ 100.0 million Amended and Restated Loan Agreement dated November 24, 2021 (as amended, “Revolver”), to provide for maximum borrowings of $ 200.0 million.

As of September 30, 2024, and December 31, 2023 we had $ 55.7 million and $ 38.3 million outstanding under the Revolver, respectively.

We have one standby letter of credit totaling $ 0.3 million as of September 30, 2024, and two standby letters of credit totaling $2.3 million as of December 31, 2023.

Borrowings available under the Revolver at September 30, 2024 were $ 144.0 million.

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”).

The Amended Loan Agreement provides for a $ 200.0 million revolving credit facility (the “Revolver”) 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.

2025 December 31,

(in thousands)

Total Revolver commitment $ 200,000 $ 200,000

Revolver borrowings outstanding 177,981 76,467

Standby letter of credit 654 300

Borrowings available under the Revolver $ 21,365 $ 123,233

The Revolver expires on May 27, 2027.

We have amended the Revolver to allow for the occurrence of transactions associated with the New Markets Tax Credit transactions (Note 17).

2025 December 31,

(in thousands)

Term loan, short-term $ 16,000 $ 16,000

Term loan, long-term 58,436 62,424

Total Term Loan $ 74,436 $ 78,424

The Term Loan is payable in equal monthly installments, plus interest, over 60 months, expiring December 16, 2029.

Interest Rates

Any outstanding loans under the Revolver bear interest at the daily compounded secured overnight financing rate (“SOFR”) plus the applicable margin.

The outstanding amount under the Term Loan bears interest at the SOFR plus a credit spread adjustment of 0.10 % per annum plus the Applicable Margin.

Applicable margin, ranging from 1.25 % - 1.75 %, is determined quarterly based on the Company’s leverage ratio.

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The applicable fee percentage is determined quarterly based on the Company’s leverage ratio.

The weighted average interest rate on borrowings outstanding on the Revolver was 6.6 % for both the three and nine months ended September 30, 2024 as compared to 6.5 % and 6.3 % for the three and nine months ended September 30, 2023, respectively.

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, 2024 and 2023.

If SOFR cannot be determined pursuant to the definition, as defined by the Revolver agreement, any outstanding affected loans will be deemed to have been converted into alternative base rate ("ABR") loans.

Fees associated with the unused portion of the committed amount are included in interest expense on our consolidated statements of income and were not material for the three months ended March 31, 2025 and 2024, respectively.

Weighted average interest rate of our borrowings outstanding are as follows:

2025 March 31,

Revolver 5.6 % 6.6 %

Term loan 5.7 % * 1

1 Funds were borrowed on December 16, 2024.

No borrowings outstanding during the three months ended March 31, 2024

If SOFR cannot be determined pursuant to the definition, as defined by the Amended Loan Agreement, any outstanding effected loans will be deemed to have been converted into alternative base rate (“ABR”) loans.

ABR loans would bear interest at a rate per annum equal to the highest of (a) the Prime Rate in effect on such day, (b) the Federal Funds Rate in effect on such day plus 0.50 %, or (c) daily simple SOFR for a one-month tenor in effect on such day plus 1.00 %.

At September 30, 2024, we were in compliance with our covenants, as defined by the Revolver.

As of December 16, 2024, as defined by the Amended Loan Agreement, if the SOFR cannot be determined any outstanding balance will bear interest at the Prime Rate in effect on such day.

At March 31, 2025, we were in compliance with our covenants, as defined by the Amended Loan Agreement.

Our financial covenants require that we meet certain parameters related to our leverage ratio.

At September 30, 2024, our leverage ratio was 0.19 to 1.0, which meets the requirement of not being above 3 to 1.

The provision (benefit) for income taxes consists of the following:

Three Months Ended Nine Months Ended

September 30,

2024 September 30,

2023 September 30,

2024 September 30,

At March 31, 2025, our leverage ratio was 0.95 to 1.0, which meets the requirement of not being above 3 to 1.

The provision for income taxes consists of the following:

Three Months Ended

2025 March 31,

(in thousands)

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The reconciliation of the Federal statutory income tax rate to the effective income tax rate is as follows:

Three Months Ended Nine Months Ended

September 30,

2024 September 30,

2023 September 30,

2024 September 30,

Three Months Ended

2025 March 31,

Federal statutory rate 21.0 % 21.0 %

5 unchanged sentences

Research and development credits ( 2.4 ) ( 1.4 )

Change in valuation allowance (Oklahoma Investment Credit) — — — ( 2.0 )

Other 1.1 0.3

Effective tax rate 9.8 % 16.6 %

We have historically earned investment tax credits from the state of Oklahoma’s manufacturing property investment program.

We use the flow-through method to account for investment tax credits earned on eligible tangible asset expenditures.

Under this method, the investment tax credits are recognized as a reduction to our Oklahoma income tax expense in the year they are used.

As part of our expansion projects in Oklahoma, we identified a separate, more advantageous Oklahoma credit program (not income tax related) which resulted in us discontinuing our accumulation of credits for Oklahoma’s manufacturing property investment program after the 2022 tax year.

Because the Company will not generate additional excess credits after our 2022 tax year, we will be able to use our credit carryforwards against future taxable income and the related valuation allowance was reversed resulting in a one-time benefit of $ 3.1 million to the income tax provision for the nine months ended September 30, 2023.

As of September 30, 2024, we have investment tax credit carryforwards of approximately $ 0.6 million.

These credits have estimated expirations from the year 2039 through 2043.

The Company recorded an excess tax benefit of $ 7.2 million for the three months ended March 31, 2025, as compared to $ 4.4 million during the same period in 2024, respectively.

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.

In accordance with the 2017 Tax Cuts & Jobs Act, under Internal Revenue Code Section 162(m), the tax deduction for covered executives of public companies is limited to $1.0 million per individual.

Because of the increase in our stock price and timing of executive stock option exercises this resulted in an increase to the income tax provision of approximately $ 1.2 million and $ 2.6 million for the three and nine months ended September 30, 2024, respectively.

In accordance with the 2017 Tax Cuts & Jobs Act, under Internal Revenue Code Section 174, research and development expenses incurred after December 31, 2021 are required to be capitalized and amortized over 5 years.

The amortization requirements for tax purposes is a mid-year convention, meaning that the tax amortization is 10% in the year of acquisition, 20% in the following 4 years, and 10% in the final year.

Because of the increase in our stock price and timing of executive stock option exercises this resulted in an increase to the income tax provision of $ 2.3 million and $ 0.5 million for the three months ended March 31, 2025 and 2024, respectively.

We also earn research and development tax credits as defined under Section 41 of the Internal Revenue Code.

To qualify for the research and development tax credits, we perform annual studies that identify, document, and support eligible expenses related to qualified research and development activities.

Eligible expenses include but are not limited to supplies, materials, contractor expenses and internal employee wages.

In accordance with the 2017 Tax Cuts & Jobs Act, under Internal Revenue Code Section 174, research and development expenses incurred after December 31, 2021, are required to be capitalized and amortized over five years.

The amortization requirements for tax purposes is a mid-year convention, resulting in tax amortization of 10% in the year of acquisition, 20% in the following four years, and 10% in the final year.

The amount of income tax that we pay annually is dependent on various factors, including the timing of certain deductions.

These deductions can vary from year to year and, consequently, the amount of income taxes paid in future years will vary from the amounts paid in prior years.

The Company's estimated annual 2025 effective tax rate, excluding discrete events, is approximately 25.4 %.

We file income tax returns in the U.S., state and foreign income tax return jurisdictions.

We file income tax returns in the U.S., state and foreign income tax jurisdictions.

We are subject to U.S.

income tax examinations for tax years 2021 to present, and to non-U.S.

income tax examinations for the tax years 2021 to present, and to non-U.S.

income tax examinations for the tax years 2020 to present.

In addition, we are subject to

state and local income tax examinations for the tax years 2020 to present.

In addition, we are subject to state and local income tax examinations for tax years 2020 to present.

The Company continues to evaluate its need to file returns in various state jurisdictions.

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The 3.7 million shares issued and outstanding under the 2016 Plan are only eligible for issuance under the 2024 Plan upon forfeiture, expiration, or cancellation.

Under the 2024 Plan and previously under the 2016 Plan (collectively, the "Plans"), shares can be granted in the form of stock options, stock appreciation rights, restricted stock awards, performance awards, dividend equivalent rights, and other awards.

Under the Plans, the exercise price of shares granted may not be less than 100 % of the fair market value at the date of the grant.

The Plans are administered by the Compensation Committee of the Board of Directors or such other committee of the Board of Directors as is designated by the Board of Directors (the “Committee”).

Under the 2024 Plan and previously under the 2016 Plan (collectively, the “LTIP Plans”), shares can be granted in the form of stock options, stock appreciation rights, restricted stock awards, performance awards, dividend equivalent rights, and other awards.

Under the LTIP Plans, the exercise price of shares granted may not be less than 100% of the fair market value at the date of the grant.

The LTIP Plans are administered by the Compensation Committee of the Board of Directors or such other committee of the Board of Directors as is designated by the Board of Directors (the “Committee”).

Membership on the Committee is limited to independent directors.

The Committee may delegate certain duties to one or more officers of the Company as provided in the Plans.

The Committee determines the persons to whom awards are to be made, determines the type, size and terms of awards, interprets the Plans, establishes and revises rules and regulations relating to the Plans and makes any other determinations that it believes necessary for the administration of the Plans.

The following weighted average assumptions were used to determine the fair value of the stock options granted on the original grant date for expense recognition purposes for options granted during the nine months ended September 30, 2024 and 2023, using a Black Scholes-Merton Model:

Nine months ended

September 30,

2024 September 30,

The Committee may delegate certain duties to one or more officers of the Company as provided in the LTIP Plans.

The Committee determines the persons to whom awards are to be made, determines the type, size and terms of awards, interprets the LTIP Plans, establishes and revises rules and regulations relating to the LTIP Plans and makes any other determinations that it believes necessary for the administration of the LTIP Plans.

The following weighted average assumptions were used to determine the fair value of the stock options granted on the original grant date for expense recognition purposes for options granted during the three months ended March 31, 2025 and 2024, using a Black Scholes-Merton Model:

Three months ended

2025 March 31,

Senior Leadership 1 :

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Volatility is based on historical volatility of our stock over time periods equal to the expected life at grant date.

The following is a summary of stock options vested and exercisable as of September 30, 2024:

The following is a summary of stock options vested and exercisable as of March 31, 2025:

Prices Number

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( 15,477 ) 68.85

Outstanding at September 30, 2024

Outstanding at March 31, 2025

3,169,068 $ 45.71

Exercisable at September 30, 2024

Exercisable at March 31, 2025

2,334,469 $ 35.07

The total pre-tax compensation cost related to unvested stock options not yet recognized as of September 30, 2024, is $ 10.8 million and is expected to be recognized over a weighted average period of approximately 2.0 years.

The total intrinsic value of options exercised during the nine months ended September 30, 2024 and 2023, was $ 45.7 million and $ 27.6 million, respectively.

The cash received from options exercised during the nine months ended September 30, 2024 and 2023, was $ 25.6 million and $ 25.3 million, respectively.

The total pre-tax compensation cost related to unvested stock options not yet recognized as of March 31, 2025, is $ 17.0 million and is expected to be recognized over a weighted average period of approximately 2.4 years.

The total intrinsic value of options exercised during the three months ended March 31, 2025 and 2024, was $ 13.1 million and $ 14.2 million, respectively.

The cash received from options exercised during the three months ended March 31, 2025 and 2024, was $ 4.4 million and $ 9.8 million, respectively.

The impact of these cash receipts is included in financing activities in the accompanying consolidated statements of cash flows.

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common stock on the respective grant dates, reduced for the present value of dividends.

At September 30, 2024, unrecognized compensation cost related to unvested restricted stock awards was approximately $ 5.9 million, which is expected to be recognized over a weighted average period of approximately 1.8 years.

At March 31, 2025, unrecognized compensation cost related to unvested restricted stock awards was approximately $ 8.7 million, which is expected to be recognized over a weighted average period of approximately 2.3 years.

A summary of the unvested restricted stock awards is as follows:

4 unchanged sentences

( 1,301 ) 72.94

Unvested at September 30, 2024

Unvested at March 31, 2025

145,409 $ 73.86

We have awarded performance restricted stock units ("PSUs") to certain officers and employees under our 2016 Plan.

We have awarded performance restricted stock units (“PSUs”) to certain officers and employees under our LTIP Plans.

Unlike our restricted stock awards, these PSUs are not considered legally outstanding and do not accrue dividends during the vesting period.

These PSUs vest based on the level of achievement with respect to the Company's total shareholder return ("TSR") benchmarked against similar companies included in the capital goods sector of the S&P SmallCap 600 Index.

These PSUs vest based on the level of achievement with respect to the Company's total shareholder return (“TSR”) benchmarked against similar companies included in the capital goods sector of the S&P SmallCap 600 Index (S&P 400 and S&P 600 within the building products industry group for awards granted after March 1, 2025).

The TSR measurement period is three years .

At the end of the measurement period, each award will be converted into common stock at 0 % to 200 % of the PSUs held, depending on overall TSR as compared to the S&P SmallCap 600 Index benchmark companies.

The total pre-tax compensation cost related to unvested PSUs not yet recognized as of September 30, 2024, is $ 6.0 million and is expected to be recognized over a weighted average period of approximately 1.7 years.

The following weighted average assumptions were used to determine the fair value of the PSUs granted on the original grant date for expense recognition purposes for PSUs granted during the nine months ended September 30, 2024 and 2023, using a Monte Carlo Model:

Nine months ended

September 30,

2024 September 30,

At the end of the measurement period, each award will be converted into common stock at 0 % to 200 % of the PSUs held, depending on overall TSR as compared to the benchmark companies.

The total pre-tax compensation cost related to unvested PSUs not yet recognized as of March 31, 2025, is $ 6.3 million and is expected to be recognized over a weighted average period of approximately 1.7 years.

The following weighted average assumptions were used to determine the fair value of the PSUs granted on the original grant date for expense recognition purposes for PSUs granted during the three months ended March 31, 2025 and 2024, using a Monte Carlo Model:

Three months ended

2025 March 31,

Expected (annual) dividend rate $ 0.40 $ 0.32

10 unchanged sentences

169,348 $ 68.12

47,965 106.24

Additional payout 1

( 135,209 ) 29.83

( 5,957 ) 69.81

Unvested at September 30, 2024 2

Unvested at March 31, 2025 2

136,056 $ 89.56

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As part of the December 2021 acquisition of BASX, the Company granted 39,899 awards to key employees of BASX (“Key Employee Awards”).

Unlike our restricted stock awards under the 2016 Plan, the Key Employee Awards are not considered legally outstanding and do not accrue dividends during the vesting period.

Unlike our restricted stock awards under the LTIP Plans, the Key Employee Awards are not considered legally outstanding and do not accrue dividends during the vesting period.

The issuance of the Key Employee Awards was contingent upon BASX meeting certain post-closing earn-out milestones during each of the years ending 2021, 2022 and 2023 as defined by the BASX acquisition membership interest purchase agreement (“MIPA Agreement”) and continued employment with the Company.

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A summary of share-based compensation is as follows:

Three Months Ended Nine Months Ended

September 30,

2024 September 30,

2023 September 30,

2024 September 30,

Three Months Ended

2025 March 31,

Grant date fair value of awards during the period:

8 unchanged sentences

Restricted stock 1,125 1,126

Key Employee Awards — 261 — 775

Total $ 4,021 $ 3,957

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Share-based compensation expense is recognized on a straight-line basis over the service period of the related share-based compensation award.

Historically, stock options and restricted stock awards, granted to employees, vested at a rate of 20 % per year.

Restricted stock awards granted to directors historically vested one-third each year or, if granted on or after May 2019, vest over the shorter of directors' remaining elected term or one-third each year.

As of March 2021, all new grants of stock options and restricted stock awards, granted to employees, vest at a rate of 33.3 % per year.

Stock options and restricted stock awards, granted to employees, vested at a rate of 33.3 % per year.

Restricted stock awards granted to directors historically vest over the shorter of directors' remaining elected term or one-third each year.

Forfeitures are accounted for as they occur.

Historically, if the employee or director is retirement eligible (as defined by the applicable LTIP, 2016 Plan or 2024 Plan) or becomes retirement eligible during the service period of the related share-based compensation award, the service period (and compensation expense recognition) is the lesser of 1) the grant date, if retirement eligible on grant date, or 2) the period between grant date and retirement eligible date.

All stock options and restricted stock awards granted on or after March 1, 2020 to retirement eligible employees or directors contain a one-year employment requirement (minimum service period) or the entire award is forfeited.

All share-based compensation awards granted contain a one -year employment requirement (minimum service period) or the entire award is forfeited.

If the employee or director is retirement eligible (as defined by the Long Term Incentive Plans) or becomes retirement eligible during service period of the related share-based compensation award, the service period is the lesser of 1) the grant date (plus one year), if retirement eligible on grant date, or 2) the period between grant date (plus one year) and retirement eligible date.

Forfeitures are accounted for as they occur.

The PSUs cliff vest on December 31, at the end of the third year from the date of grant.

The PSUs cliff vest at the end of their respective service period.

Share-based compensation expense is recognized on a straight-line basis over the service period of PSUs.

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Administrative expenses are paid for by Plan participants.

The Company paid no administrative expenses during the nine months ended September 30, 2024 and 2023.

The Company paid no administrative expenses during the three months ended March 31, 2025 and 2024.

The Company matches 175.0 % up to 6.0 % of employee contributions of eligible compensation.

Additionally, Plan participant forfeitures are used to reduce the cost of the Company contributions.

Three Months Ended Nine Months Ended

September 30,

2024 September 30,

2023 September 30,

2024 September 30,

Three Months Ended

2025 March 31,

(in thousands)

1 unchanged sentence

Profit Sharing Bonus Plans

We maintain a discretionary profit sharing bonus plan under which approximately 8.5 % of pre-tax profit (10% prior to January 1, 2024) from the Company is paid to eligible employees on a quarterly basis in order to reward employee productivity.

We maintain a discretionary profit sharing bonus plan under which approximately 8.5 % of pre-tax profit from the Company is paid to eligible employees on a quarterly basis in order to reward employee productivity.

Eligible employees are regular full-time non-exempt employees of the Company who are actively employed and working on the first and last day of the calendar quarter.

BASX employees are eligible to participate in the discretionary profit sharing bonus plan on January 1, 2024.

Prior to January 1, 2024, BASX had a separate employee incentive program (EIP) under which 5 % of BASX's pre-tax profit, plus certain add backs, is paid ratably to eligible employees based on days-of-pay during the fiscal year.

Eligible employees are regular full-time and part-time employees who have worked during the year and are still employed when the EIP payment is made following the end of the fiscal year, excluding members of BASX's senior leadership team and any employee paid commissions or royalties.

This incentive program ended December 31, 2023.

Three Months Ended Nine Months Ended

September 30,

2024 September 30,

2023 September 30,

2024 September 30,

Three Months Ended

2025 March 31,

(in thousands)

Profit sharing bonus plan and employee incentive plan expense $ 6,242 $ 6,954 $ 17,319 $ 17,772

Profit sharing bonus plan $ 3,297 $ 4,600

Employee Medical Plan

W e self-insure for our employees' health insurance, and make medical claim payments up to certain stop-loss amounts.

We self-insure for our employees’ health insurance, and make medical claim payments up to certain stop-loss amounts.

We estimate our self-insurance liabilities using an analysis provided by our claims administrator and our historical claims experience.

2 unchanged sentences

In addition, the Company matches 175.0 % of a participating employee's allowed contributions to a qualified health saving account to assist employees with health insurance plan deductibles.

BASX employees joined the Company's medical plan and benefits on January 1, 2024.

BASX was insured for healthcare coverage through a third party through December 31, 2023.

Eligible employees are regular full-time employees who are actively employed and working.

Participants are expected to pay a portion of the premium costs for coverage of the benefits provided under the Plans.

In addition, the Company contributes certain amounts for BASX's employees enrolled in a high deductible plan to a qualified health savings account to assist employees with health insurance plan deductibles.

This healthcare coverage ended December 31, 2023.

Three Months Ended Nine Months Ended

September 30,

2024 September 30,

2023 September 30,

2024 September 30,

Three Months Ended

2025 March 31,

(in thousands)

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Dilutive common shares consist primarily of stock options and restricted stock awards.

The following table sets forth the computation of basic and diluted earnings per share for the nine months ended September 30, 2024 and 2023:

Three Months Ended Nine Months Ended

September 30,

2024 September 30,

2023 September 30,

2024 September 30,

The following table sets forth the computation of basic and diluted earnings per share for the three months ended March 31, 2025 and 2024:

Three Months Ended

2025 March 31,

(in thousands, except share and per share data)

5 unchanged sentences

Effect of dilutive shares related to contingent consideration 2

— — 63,002 141,071

Diluted weighted average shares

19 unchanged sentences

June 14, 2024

February 27, 2025 $ 100 million

1 Repurchases made in accordance with Rule 10b5-1 of the Securities Exchange Act of 1934, as amended.

2 Repurchases made in accordance with Rule 10b-18 of the Securities Exchange Act of 1934, as amended.

3 Expiration Date is at Board’s discretion.

The Company is authorized to effectuate repurchases of the Company’s common stock on terms and conditions approved in advance by the Board.

As of March 31, 2025, approximately $ 70.0 million remains under the current board authorization.

4 As of March 31, 2025, approximately $ 30.0 million of shares have been repurchased in accordance with Rule 10b-18 of the Securities Exchange Act of 1934, as amended.

The Company also repurchases shares of AAON, Inc.

1 unchanged sentence

Our repurchase activity is as follows:

Nine Months Ended

September 30, 2024 September 30, 2023

Three Months Ended

March 31, 2025 March 31, 2024

(in thousands, except share and per share data)

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March 5, 2025 March 18, 2025 March 28, 2025 $ 0.10 $ 0.40

May 24, 2024 June 7, 2024 June 28, 2024 $ 0.08 $ 0.32

August 15, 2024 September 6, 2024 September 27, 2024 $ 0.08 $ 0.32

On July 7, 2023, the Board of Directors declared a three-for-two stock split of the Company's common stock to be paid in the form of a stock dividend.

Stockholders of record at the close of business on July 28, 2023 received one additional share for every two shares they held as of that date on August 16, 2023 (ex-dividend date August 17, 2023).

Cash was paid in lieu of fractional shares (approximately $ 0.5 million).

All share and per share information has been updated to reflect the effects of this stock split.

The retroactive effect of the stock split resulted in an approximately $ 0.1 million reclass between common stock and retained earnings within stockholders' equity on the consolidated balance sheet.

Contingent Shares Issued in BASX Acquisition

As discussed above, the Company declared a three-for-two stock split effective August 16, 2023.

All share and per share information has been updated to reflect the effect of this stock split.

In December 2021, we closed on the acquisition of BASX.

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As a result of the shares issued in March 2024, the tax basis exceeded the book basis for consideration paid resulting in a deferred tax asset and an increase to additional paid-in capital of $ 6.4 million, respectively, on our consolidated balance sheet.

The deferred tax asset is expected to be amortized over fifteen years.

We previously issued 0.6 million shares in March 2023, related to the earn-out milestone for the year ended 2022.

The deferred tax asset is expected to be amortized over 15 years.

All shares have been issued as private placements exempt from registration with the SEC under Rule 506(b) and are included in common stock on the consolidated statements of stockholders' equity.

Authorized Shares Outstanding

An amendment to the Company's Articles of Incorporation to increase its total authorized common shares from 100,000,000 to 200,000,000 was approved by our stockholders on May 21, 2024 at the Company's Annual Meeting.

On July 9, 2024, a Certificate of Amendment was filed with the Nevada Secretary of State to effectuate the increase in authorized shares.

New Markets Tax Credit

2 unchanged sentences

In connection with the 2019 NMTC transaction, the Company received a $ 23.0 million NMTC allocation for the Project and secured low-interest financing and the potential for future debt forgiveness related to the 2019 Project.

Upon closing of the 2019 NMTC transaction, the Company provided an aggregate of approximately $ 15.9 million to the 2019 Investor, in the form of a loan receivable, with a term of twenty-five years , bearing an interest rate of 1.0 %.

Upon closing of the 2019 NMTC transaction, the Company provided an aggregate of approximately $ 15.9 million to the 2019 Investor, in the form of a loan receivable, with a term of 25 years, bearing an interest rate of 1.0 %.

This $ 15.9 million in proceeds plus capital contributed from the 2019 Investor was used to make an aggregate $ 22.5 million loan to a subsidiary of the Company.

5 unchanged sentences

2023 New Markets Tax Credit

On April 25, 2023, the Company entered into a transaction with a subsidiary of an unrelated third-party financial institution (the “2023 Investor”) and a certified Community Development Entity under a qualified New Markets Tax Credit (“2023 NMTC”) program pursuant to Section 45D of the Internal Revenue Code of 1986, as amended, related to an investment in plant and equipment to facilitate the expansion of our Longview, Texas manufacturing operations (the “2023 Project”).

On April 25, 2023, the Company entered into a transaction with a subsidiary of an unrelated third-party financial institution (the “2023 Investor”) and a certified Community Development Entity under a qualified New Markets Tax Credit (“2023 NMTC”) program pursuant to Section 45D of the Internal Revenue Code of 1986, as amended, related to an investment in plant and equipment to facilitate the second expansion of our Longview, Texas manufacturing operations (the “2023 Project”).

In connection with the 2023 NMTC transaction, the Company received a $ 23.0 million NMTC allocation for the 2023 Project and secured low-interest financing and the potential for future debt forgiveness related to the expansion of its Longview, Texas facilities.

Upon closing of the 2023 NMTC transaction, the Company provided an aggregate of approximately $ 16.7 million to the Investor, in the form of a loan receivable, with a term of twenty-five years , bearing an interest rate of 1.0 %.

Upon closing of the 2023 NMTC transaction, the Company provided an aggregate of approximately $ 16.7 million to the 2023 Investor, in the form of a loan receivable, with a term of 25 years, bearing an interest rate of 1.0 %.

This $ 16.7 million in proceeds plus capital contributed from the 2023 Investor was used to make an aggregate $ 23.8 million loan to a subsidiary of the Company.

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2024 New Markets Tax Credit

On February 27, 2024, the Company entered into a transaction with a subsidiary of an unrelated third-party financial institution (the “2024 Investor”) and a certified Community Development Entity under a qualified New Markets Tax Credit (“2024 NMTC”) program pursuant to Section 45D of the Internal Revenue Code of 1986, as amended, related to an investment in real estate to facilitate 2023 Project.

In connection with the 2024 NMTC transaction, the Company received a $ 15.5 million NMTC allocation for the 2023 Project and secured low interest financing and the potential for future debt forgiveness related to the expansion of its Longview, Texas facilities.

Upon closing of the 2024 NMTC transaction, the Company provided an aggregate of approximately $ 11.0 million to the Investor, in the form of a loan receivable, with a term of twenty-five years , bearing an interest rate of 1.0 %.

Upon closing of the 2024 NMTC transaction, the Company provided an aggregate of approximately $ 11.0 million to the 2024 Investor, in the form of a loan receivable, with a term of 25 years, bearing an interest rate of 1.0 %.

This $ 11.0 million in proceeds plus capital contributed from the 2024 Investor was used to make an aggregate $ 16.0 million loan to a subsidiary of the Company.

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Commitments and Contingencies

Havtech Litigation

On January 24, 2022, one of the Company’s former independent sales representative firms, Havtech, LLC (and its affiliate, Havtech Parts Division, LLC, collectively “Plaintiffs”), filed a complaint (the “Complaint”) in the Circuit Court for Howard County, Maryland ( Havtech, LLC, et al., v.

AAON, Inc., et al.

The Complaint challenged the Company’s termination of its business relationship with the Plaintiffs.

The Company removed the action to the United States District Court for the District of Maryland (Northern Division) and moved to dismiss the Complaint.

Plaintiffs’ First Amended Complaint (“First Amended Complaint”) was entered by the court on July 28, 2022.

The First Amended Complaint asserts that the Company improperly terminated Plaintiffs and seeks damages alleged to be no less than $ 48.6 million, plus fees and costs.

The Company filed its Answer to the First Amended Complaint on January 31, 2023.

On September 28, 2023, the parties attended a court ordered settlement conference and agreed to resolve the case for $ 7.5 million.

A settlement agreement was entered into on October 25, 2023 and the case has been dismissed with prejudice.

The final payment was made on October 26, 2023.

Other Matters

5 unchanged sentences

These contracts are not accounted for as derivative instruments because they meet the normal purchase and normal sales exemption.

We had no material contractual purchase obligations as of September 30, 2024, except as noted below.

We had no material contractual purchase obligations as of March 31, 2025, except as noted below.

In 2023, the Company executed a five-year purchase commitment for refrigerants.

Payments made in satisfaction of the purchase commitment were approximately $ 3.1 million and $ 9.7 million the three and nine months ended September 30, 2024, respectively, as compared to $ 2.4 million and $ 7.5 million for the three and nine months ended September 30, 2023, respectively.

Estimated minimum future payments are $ 2.2 million, $ 9.1 million, $ 10.5 million, and $ 11.2 million for 2024, 2025, 2026, and 2027, respectively.

We had no other material contractual purchase obligations as of September 30, 2024.

In November 2024, the Company entered into a definitive agreement to purchase a new 787,000 square foot facility in Memphis, Tennessee, which will accommodate incremental demand from the data center market over the next several years, at the same time providing more geographic diversification across our manufacturing footprint.

The purchase price for the facility is approximately $ 63.0 million.

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.

Related Parties

The following is a summary of transactions and balances with related parties:

Three Months Ended Nine Months Ended

September 30,

2024 September 30,

2023 September 30,

2024 September 30,

Three Months Ended

2025 March 31,

(in thousands)

1 unchanged sentence

Payments to affiliates 509 615

September 30,

2025 December 31,

7 unchanged sentences

• The Company periodically makes part sales and makes payments to a board member related to a consulting agreement.

The consulting agreement expired in May 2024.

• The Company periodically rents space partially owned by the CEO for various Company meetings.

• The Company leases flight time of an aircraft partially owned by our President/COO and Vice President.

• The Company leases flight time of an aircraft partially owned by our President/COO and another member of our senior leadership .

The Company has determined that it has three reportable segments for financial reporting purposes.

Management evaluates the performance of its business segments primarily on gross profit.

The Company's chief operating decision maker ("CODM"), our CEO, allocates resources and assesses the performance of each operating segment using information about the operating segment's net sales and income from operations.

The CODM does not evaluate operating segments using asset or liability information.

AAON Oklahoma:

AAON Oklahoma designs, manufactures, sells and services standard, semi-custom and custom heating, ventilation and air conditioning ("HVAC") systems, designs and produces controls solutions for all of our HVAC units and sells retail parts to customers through our two retail part stores in Tulsa, Oklahoma as well as online.

Through our Norman Asbjornson Innovation Center ("NAIC") research and development laboratory facility in Tulsa, Oklahoma, the Company is able to test units under various environmental conditions.

AAON Oklahoma includes the operations of our Tulsa, Oklahoma and Parkville, Missouri facilities, our NAIC research and development laboratory facility and two retail parts locations.

AAON Oklahoma engineers, manufactures and sells semi-custom and custom HVAC systems, designs and manufactures controls solutions, and sells aftermarket parts to customers through retail part stores and online.

AAON Oklahoma includes the operations of our Tulsa, Oklahoma, Memphis, Tennessee and Parkville, Missouri manufacturing facilities, two retail locations, and the Norman Asbjornson Innovation Center (“NAIC”) research and development laboratory accredited by the Air Movement and Control Association International, Inc.

With the NAIC, a world-class research and development (“R&D”) laboratory in Tulsa, Oklahoma, our products are continuously tested under a variety of extreme environmental conditions to ensure they deliver the ultimate performance, efficiency, and value.

Also located in Tulsa, Oklahoma, our cutting-edge Exploration Center showcases the engineering, design attributes, and premium build quality of our equipment side-by-side the market alternatives.

AAON Coil Products:

AAON Coil Products designs and manufactures a selection of our standard, semi-custom and custom HVAC systems.

AAON Coil Products also designs and manufactures various heating and cooling coils to be used in HVAC systems, mostly for the benefit of AAON Oklahoma and AAON Coil Products.

AAON Coil Products consists of operations at our Longview, Texas facilities.

BASX provides product development design and manufacturing of custom engineered air handling systems including high efficiency data center cooling solutions, cleanroom HVAC systems, commercial/industrial HVAC systems and modular solutions.

Additionally, BASX designs and manufactures cleanroom environmental control systems to support hospital surgical suites, pharmaceutical process facilities, semiconductor and electronics manufacturing, laboratory and isolation modular cleanrooms for facility flexibility.

BASX consists of operations at our Redmond, Oregon facility.

The following table summarizes certain financial data related to our segments.

AAON Coil Products engineers and manufactures a selection of our semi-custom, and custom HVAC systems as well as a variety of heating and cooling coils to be used in HVAC systems, mostly for the benefit of AAON Oklahoma, AAON Coil Products, and BASX.

AAON Coil Products consists of operations at our Longview, Texas manufacturing facilities.

BASX branded products are also manufactured in Longview.

BASX engineers, manufactures, and sells an array of custom, high-performance cooling solutions for the rapidly growing hyperscale data center market, ventilation solutions for cleanroom environments in the bio-pharmaceutical, semiconductor, medical and agriculture markets, and highly custom, air handlers and modular solutions for a vast array of markets.

BASX consists of operations at our Redmond, Oregon manufacturing facilities.

The Company’s chief operating decision maker (“CODM”), our CEO, allocates resources and assesses the performance of each operating segment using information about the operating segment’s net sales, cost of sales, and gross profit directly attributable to our segments.

The CODM does not evaluate operating segments using asset or liability information.

Due to the integrated nature of our Company as well as the increasing production of both AAON and BASX branded products across different segments, other costs and expenses, such as selling, general and administrative including corporate expense, are evaluated and resources allocated at a consolidated level.

The following table summarizes certain financial data related to our segments and significant segment expenses and other segment items regularly reviewed by our CODM.

Transactions between segments are recorded based on prices negotiated between the segments.

The Gross Profit amounts shown below are presented after elimination entries.

Three Months Ended Nine Months Ended

September 30,

2024 September 30,

2023 September 30,

2024 September 30,

Net Sales (in thousands)

The cost of sales and gross profit amounts shown below are presented after elimination entries.

Three Months Ended

2025 March 31,

(in thousands)

AAON Oklahoma

1 unchanged sentence

Inter-segment sales 3,839 1,671

Eliminations ( 3,839 ) ( 1,671 )

Net sales 161,838 210,140

Cost of sales 1

123,865 131,729

Gross profit 37,973 78,411

AAON Coil Products

1 unchanged sentence

Inter-segment sales 6,206 9,331

Eliminations ( 6,206 ) ( 9,331 )

Net sales 94,023 24,247

Cost of sales 1

61,538 16,107

Gross profit 32,485 8,140

External sales $ 66,193 $ 27,712

2 unchanged sentences

Net sales 66,193 27,712

AAON Oklahoma $ 84,119 $ 94,174 $ 246,400 $ 231,403

AAON Coil Products 12,421 8,307 33,719 22,948

BASX 17,618 13,628 39,375 32,930

Cost of sales 1

50,287 22,021

Gross profit 15,906 5,691

September 30,

Consolidated gross profit $ 86,364 $ 92,242

1 Presented after intercompany eliminations.

The reconciliation between consolidated gross profit to consolidated income from operations is as follows:

Consolidated gross profit $ 86,364 $ 92,242

Selling, general and administrative expenses 51,293 45,288

Gain on disposal of assets ( 40 ) ( 16 )

Consolidated income from operations $ 35,111 $ 46,970

The following table presents long-lived assets by reportable segment, which includes property and equipment, net and operating lease assets:

2025 December 31,

Long-lived assets 1

(in thousands)

Long-lived assets (in thousands)

AAON Oklahoma $ 337,104 $ 321,597

2 unchanged sentences

Total long-lived assets $ 567,028 $ 525,792

1 Property, plant and equipment, net & right of use assets

The following table presents intangible assets and goodwill, net, by reportable segment:

Intangible assets, net and goodwill

4 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements