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Item 1. Business

2026-03-02 compared with 2025-02-27 · 165 added, 149 removed, 125 unchanged (72% of the section changed)

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Unless the context otherwise requires, references in this Annual Report to "AAON", the "Company", "we", "us", "our", or "ours" refer to AAON Nevada and our subsidiaries.

AAON is a leader in heating, ventilation, and air conditioning (“HVAC”) solutions for commercial and industrial indoor environments.

The Company’s unique approach to designing and manufacturing highly configurable equipment to meet exact needs creates a premier ownership experience with greater efficiency, performance, and long-term value.

AAON is headquartered in Tulsa, Oklahoma, where its world-class innovation center and testing capabilities enable continuous advancement toward a cleaner and more sustainable future.

AAON is a leader in heating, ventilation, air conditioning, and liquid cooling solutions for commercial and industrial indoor environments.

The Company designs and manufactures highly configurable equipment to meet specific customer requirements, delivering reliable performance, efficiency, and long-term value.

Through a strong commitment to research and development, advanced engineering capabilities, and decades of industry experience, the Company continues to elevate standards for climate management solutions.

Business Segments

The Company conducts its business through three business segments:

The Company operates through three reportable business segments:

AAON Oklahoma, AAON Coil Products, and BASX.

These segments are based on differences in products, manufacturing processes, and end markets, and reflect how management evaluates operating performance and allocates resources.

AAON Oklahoma:

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 Oklahoma engineers, manufactures, and sells highly configurable HVAC systems, designs and manufactures controls solutions, and sells aftermarket parts to customers through retail part stores and online.

AAON Oklahoma includes operations at the Company’s manufacturing facilities in Tulsa, Oklahoma;

Memphis, Tennessee;

and Parkville, Missouri, as well as two retail locations, the Norman Asbjornson Innovation Center (“NAIC”), and the Gary D.

Fields Customer Exploration Center.

The NAIC is a world-class research and development laboratory accredited by the Air Movement and Control Association International, Inc.

("AMCA"), where our products are continuously tested under extreme environmental conditions to ensure optimal performance, efficiency, and value.

Fields Customer Exploration Center showcases the engineering, design attributes, and premium build quality of our equipment alongside market alternatives.

AAON Coil Products:

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.

AAON Coil Products engineers and manufactures and sells semi-custom and custom HVAC systems as well as heating and cooling coils for use in HVAC systems, primarily for AAON Oklahoma, AAON Coil Products, and BASX.

AAON Coil Products operates from our Longview, Texas manufacturing facilities, which also produce BASX-branded products.

BASX engineers, manufactures, and sells a wide range of custom, high-performance cooling solutions for the rapidly growing hyperscale data center market;

ventilation solutions for cleanroom environments in the biopharmaceutical, semiconductor, medical, and agricultural sectors;

and highly customized air handlers and modular solutions for a variety of markets.

BASX operates from our manufacturing facilities in Redmond, Oregon, with additional support from facilities in Memphis, Tennessee, and Longview, Texas.

For more information on our business segments’ financial position and results of operations, refer to Note 23, “Segments,” of the Notes to Consolidated Financial Statements.

Business and Marketing Strategy

Our products serve the commercial, industrial, data center, and cleanroom markets within the HVAC equipment industry.

Our strategy involves mass semi-customization leveraging flexible computer-aided manufacturing systems to produce highly configurable equipment.

We differentiate from other HVAC manufacturers by combining the low unit costs of mass production processes with the flexibility of individual customization.

Through a collaborative effort with our network of independent sales representatives, we engineer and manufacture products and systems that best serve the buyer’s unique needs and applications.

Our go-to-market strategy is centered around customers and markets that demand HVAC equipment with extraordinary performance and durability, greater energy efficiency, and best overall value.

We manufacture equipment with more configurability than other “standard” offerings found in the HVAC equipment industry and we do not manufacture equipment that has not been pre-specified by our customers.

Since day one, AAON has been dedicated to manufacturing and product leadership with innovation through R&D with a specific emphasis on energy performance, durability, efficiency, and indoor air quality.

As a result of our strategy to engineer and manufacture innovative HVAC products of the highest performance, efficiency, and value, we are naturally committed to meeting regulatory and certification standards of the relevant standard setting bodies, including the Air-Conditioning, Heating, and Refrigeration Institute (“AHRI”);

The Company serves commercial, industrial, data center, and cleanroom markets with a differentiated approach to HVAC manufacturing.

Our business strategy centers on mass semi-customization, leveraging flexible, computer-aided manufacturing systems to deliver highly configurable equipment that combines the cost efficiency of scaled production with the precision of individual customization.

Our marketing strategy is guided by the Company’s core priorities:

Customers First:

We collaborate closely with our network of independent sales representatives to engineer and manufacture solutions tailored to each customer's specific requirements.

Unlike manufacturers of standardized equipment, we build to order, ensuring every system is pre-specified before production begins.

Our go-to-market

strategy targets customers and applications that demand exceptional performance, efficiency, and long-term value.

We compete on technical excellence and customer outcomes, not price.

Product Leadership:

Since our founding, our Company has maintained an unwavering commitment to manufacturing and product leadership through continuous research and development.

Our innovation efforts focus on advancing energy performance, equipment durability, system efficiency, and indoor air quality.

These pillars define our competitive position and drive our R&D investments.

Our commitment to engineering excellence requires rigorous adherence to industry standards and certifications, including those set by Air-Conditioning, Heating, and Refrigeration Institute (“AHRI”);

the American National Standards Institute (“ANSI”);

American Society of Heating, Refrigeration and Air-Conditioning Engineers (“ASHRAE”);

the Air Movement and Control Association (“AMCA”) and the International Organization for Standardization (“ISO”).

the AMCA and the International Organization for Standardization (“ISO”).

Sales and Representative Support:

We invest strategically in our representative network as an extension of our market capability.

This includes business planning collaboration, leadership development, technical training, and comprehensive service network development to ensure our representatives and their customers receive exceptional support throughout equipment lifecycles.

People and Culture:

Our ability to deliver product leadership and excellent customer experience depends on attracting and retaining top engineering, manufacturing, and commercial talent.

We maintain a culture focused on innovation, technical rigor, and operational excellence that enables us to compete against substantially larger manufacturers.

To date, our sales have been primarily derived from the domestic market.

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As a percentage of net sales, foreign sales accounted for approximately 2.6%, 2.5%, and 3.4% of our net sales in each of those years, respectively.

Aftermarket Support Strategy

We support customers through a comprehensive parts and service network.

Parts are available through our representative sales offices and two Tulsa-based retail stores.

Factory service organizations operate at each manufacturing facility, supplemented by representatives who maintain their own service capabilities to provide warranty work and ongoing customer support.

We invest strategically in building service capacity across our North American representative network.

This includes collaborating with representatives on business planning, leadership development, and technician training for both representatives and select contractors.

These efforts create a cohesive service ecosystem designed to meet the operational and maintenance requirements of our customer base throughout equipment lifecycles.

Products - AAON Brand

AAON branded products are manufactured for, and installed on or beside, commercial and industrial buildings of all sizes.

The total addressable market for AAON branded products is determined primarily by the number of new commercial and industrial building projects and the replacement demand from existing commercial and industrial buildings.

The commercial and industrial new construction markets are subject to cyclical fluctuations in that they generally lag behind the housing market.

The housing market, in turn, is influenced by cyclical factors such as interest rates, inflation, consumer spending habits, employment rates, the state of the economy and other macroeconomic factors.

When new construction is down, we emphasize the replacement market.

The ratio of sales for new construction versus replacement is related to various factors.

Generally, the cyclical nature of the new construction market impacts this ratio the most over an economic cycle.

Our flagship products consist of a single-unit system that generates heating and cooling in a self-contained cabinet, referred to in the industry as “unitary product.” The majority of our unitary products are installed on the rooftop of commercial and industrial buildings and structures.

These are known in the industry as "rooftop units," or (“RTUs”).

Other finished products include air-source heat pumps, air handling units, condensing units, makeup air units, energy recovery units, geothermal/water-source heat pumps, coils, and controls.

All AAON branded products are created by assembling a combination of sheet metal and tubing fabrication components and pre-manufactured/purchased components such as coils, compressors, fans, and control systems.

All products undergo rigorous end-of-line testing and inspection prior to being shipped to customers.

We offer three groups of RTUs:

the RQ Series, consisting of five cooling sizes ranging from two to five tons;

the RN Series, offered in 26 cooling sizes ranging from six to 140 tons;

and the RZ Series, which is offered in 15 cooling sizes ranging from 45 to 261 tons.

When configured as Air-Source Heat Pumps (“ASHP”), the RQ and RN Series (two to 50 tons), are capable of operating in ambient outside temperatures as low as zero degrees Fahrenheit.

This class of products, known as AAON Alpha Class™, is a critical, industry-leading solution that meets the increasing demand for commercial building decarbonization.

Utilizing unrivaled engineering prowess and cutting-edge compressor technology, AAON Alpha Class™ provides energy-efficient heating and cooling throughout the year in virtually any climate.

In addition to our flagship packaged RTUs, we offer a variety of products to meet various market needs:

Our SA, SB, and M2 Series consist of indoor packaged, water-cooled or geothermal/water-source heat pump self-contained units with cooling capacities of three to 70 tons.

Our condensing unit, the CF Series, is available from two to 70 tons and can be configured as an Alpha Class ASHP.

Our air handling units consist of the indoor H3 and V3 Series and the modular M2 Series, as well as air handling unit configurations of the RQ, RN, RZ, and SA Series units.

Our energy recovery option applicable to our RQ, RN, RZ, and SB units, as well as our H3, V3, and M2 Series air handling units, responds to the U.S.

Clean Air Act mandate to increase fresh air in commercial structures.

Our products are designed to compete on the higher quality end of standardized products.

Our RN, RQ, M2, and SB Series geothermal/water-source heat pumps are AHRI certified in accordance with ANSI/AHRI/ASHRAE/ISO 13256.

Our unitary air conditioners and heat pumps (RQ and RN Series) are certified with AHRI and the US Department of Energy (“DOE”) to ANSI/AHRI 210/240 up to five tons capacity and ANSI/AHRI 340/360 from five to 63 tons capacity.

Performance characteristics of our products range in cooling capacity from two to 261 tons and in heating capacity from 24,000 to 4,500,000 British Thermal Units (“BTUs”).

Many of our products far exceed DOE minimum efficiency standards and are among the highest efficiency products currently available in the market.

A typical commercial building installation requires one ton of air conditioning for every 300-400 square feet or, for a 100,000 square foot building, 250 tons of air conditioning, which can involve multiple units.

Our packaged RTUs with two stage, digital, or variable speed compressors are optimized with high-efficiency evaporator and condenser coils and variable speed fans, leading to an AHRI Certified performance up to 18.0 Seasonal Energy Efficiency Ratio 2 (“SEER2”) and 22.8 integrated energy efficiency ratio (“IEER”).

AAON H3/V3 Series energy recovery wheel air handling units provide energy-efficient 100% outside air ventilation by recovering energy that would otherwise be exhausted from a building.

In addition to the equipment we manufacture, we design and produce high-performance controls solutions that enhance our equipment’s unique features and capabilities.

Our controls division provides factory-developed and tested control options for Variable Air Volume, Make-Up Air, Single Zone VAV, Constant Volume, and Zoning systems associated with our products and other HVAC-related equipment.

We offer several controls options:

the Orion Controller, factory-installed customer provided controls, and terminal block for field-installed controls.

Most of our controls are Underwriters Laboratories category ZPVI2 compliant and BACnet Testing Laboratories certified which ensures our products meet internationally recognized standards for safety, traceability, conformance, and production quality.

Our economizer function is California Title 24 certified to minimize energy consumption.

Our proven sequences of operation optimize the performance of our HVAC units.

Out of the box, our controls are user-friendly and configurable to provide a variety of HVAC unit application options, in addition, we are able to customize our controls to meet customers’ unique requirements.

Market and Application

AAON-branded products serve commercial and industrial buildings of all sizes, installed on rooftops or alongside structures.

Our addressable market is driven by new construction activity and replacement demand from existing buildings.

The commercial and industrial construction cycle typically lags residential markets, which respond to macroeconomic factors including interest rates, inflation, employment, and overall economic conditions.

We balance our business across both new construction and replacement markets depending on economic cycles.

Core Product Architecture

Our flagship products are rooftop units (RTUs), self-contained heating and cooling systems installed on commercial and industrial building rooftops.

A typical commercial building installation requires one ton of air conditioning for every 300-400 square feet.

A 100,000 square-foot commercial building requires approximately 250 tons of cooling capacity, which we deliver through single or multiple units depending on application requirements.

We manufacture three RTU product lines covering the full commercial spectrum:

two-five ton cooling capacity

six-140 ton cooling capacity (26 sizes)

45-261 ton cooling capacity (15 sizes)

Beyond rooftop units, our product portfolio includes air handling units, condensing units, makeup air units, energy recovery units, geothermal and water-source heat pumps, coils, and factory controls.

All products are manufactured by assembling fabricated sheet metal and tubing components with pre-manufactured elements including coils, compressors, fans, and control systems.

Every unit undergoes rigorous end-of-line testing and inspection before shipment.

AAON Alpha Class™ Technology

When configured as air-source heat pumps (“ASHP”), our RQ, RN, and CF Series units operate in ambient temperatures as low as negative twenty degrees Fahrenheit.

This technology platform, AAON Alpha Class™, addresses accelerating demand for commercial building decarbonization.

By combining advanced engineering with leading-edge compressor technology, Alpha Class™ delivers energy-efficient heating and cooling year-round in virtually any climate.

Indoor and Specialized Systems

Our SA, SB, and M2 Series provide indoor packaged solutions with water-cooled or geothermal/water-source heat pump configurations ranging from three-70 tons cooling capacity.

Air handling units include the indoor H3 and V3 Series, the modular M2 Series, and air handling configurations of our RQ, RN, RZ, and SA Series units.

Energy recovery options available across multiple product lines support increased fresh air ventilation requirements outlined in ASHRAE Standard 90.1 (Energy Conservation) and Standard 62.1 (Ventilation & Indoor Air Quality).

Our H3/V3 Series energy recovery wheel air handling units deliver energy-efficient 100% outside air ventilation by capturing energy that would otherwise be exhausted.

Performance and Efficiency

Our products span cooling capacities from two-261 tons and heating capacities from 24,000 to 4,500,000 British Thermal Units (“BTUs”).

Many units substantially exceed DOE minimum efficiency standards and rank among the highest efficiency products available commercially.

Our packaged RTUs with two-stage, digital, or variable-speed compressors are optimized with high-efficiency evaporator and condenser coils and variable-speed fans, achieving AHRI Certified performance up to 18.0 SEER2 and 22.8 IEER.

Controls Integration

We design and manufacture high-performance controls solutions that enhance our equipment’s unique features and capabilities.

Our controls division develops factory-tested options for Variable Air Volume, Make-Up Air, Single Zone VAV, Constant Volume, and Zoning systems for both AAON products and other HVAC equipment.

Controls options include the VCCX Controller, factory-installed customer-provided controls, and terminal blocks for field-installed controls.

VCCX Controls are Underwriters Laboratories certified to UL 916 or UL 60730 and BACnet Testing Laboratories certified, meeting international standards for safety and traceability.

Our economizer function carries California Title 24 certification to support reduced energy consumption.

We continue to invest in advanced controls manufacturing capabilities designed to improve speed, precision, and consistency across production and testing processes.

These investments enhance efficiency, quality assurance, and accountability throughout manufacturing operations and support increased production capacity through the use of automation.

AAON controls are designed to be user-friendly and configurable for a wide range of HVAC applications.

In addition, controls can be customized to meet application-specific customer requirements, supporting system flexibility and integration across diverse operating environments.

Certifications and Standards

Our geothermal/water-source heat pumps (RN, RQ, M2, and SB Series) are AHRI certified in accordance with ANSI/AHRI/ASHRAE/ISO 13256.

Unitary air conditioners and heat pumps (RQ and RN Series) are certified with AHRI and the U.S.

Department of Energy to ANSI/AHRI 210/240 (up to five tons) and ANSI/AHRI 340/360 (five-63 tons).

When configured for Dedicated Outdoor Air Systems (DOAS), the RQ, RN, RZ, and CF paired with H3 or V3 products comply with AHRI Standard 920.

Products - BASX Brand

As a full complement to our AAON branded products, our BASX branded products are highly customized to meet the expectations of even the most discerning customers.

Our data center cooling solutions are focused on providing highly configurable, purpose-built equipment with an emphasis on efficiency, performance, speed of deployment, and build-quality.

High-performance air-cooled heat rejection solutions are provided with waterside economizers (with optional adiabatic assisted cooling) and are designed to integrate with high-density computing systems requiring direct to chip liquid cooling.

Additionally, our perimeter gallery thermal management solutions include direct evaporative coolers, fan coil walls, and computer room air handling (“CRAH”) units.

White space solutions for a close-coupled IT load management approach include overhead fan coils and in-row coolers.

Packaged solutions include coupled economizing chillers with integrated air handling and packaged direct expansion (“DX”) solutions with airside economizers.

Our cleanroom products are built to provide environmental control serving critical processes and high-fidelity control for precise industry requirements.

Process cooling solutions include recirculation air handling units and make up air handling units, including the integration of piping systems and controls.

Environmental control solutions include modular cleanroom environments, fan filter units, filtered ceiling grids with integral flush mount lighting, pressurized plenums with integral ceiling grids, and hospital surgical suites.

Our BASX branded custom air handling products are primarily used in commercial, industrial, healthcare, and institutional facilities employing chilled water cooling, packaged direct expansion, hydronic heating, indirect gas direct heat, humidification, dehumidification, filtration, and integrated controls.

BASX manufactures plenum fans for integration into air handling units and replacement applications.

BASX also offers integrated sound performance solutions.

Air Quality Products

ASHRAE, a professional association with a goal of advancing HVAC systems designs and construction, established an Epidemic Task Force in 2020 and determined several recommendations to mitigate the spread of the virus, including humidity control, air filtration, increased outdoor air ventilation, and air disinfection.

Humidity control - We continue to lead the market in developing energy-efficient humidity control with the use of variable capacity compressors and modulating hot gas reheat.

Designing HVAC systems with superior humidity control allows building management to maintain ASHRAE’s recommended ambient relative humidity levels of 40%-60%, the ideal level to inactivate viruses in the air and on surfaces.

Air Filtration - Our standard design uses a backward curved fan wheel, which can accommodate higher airflow and static pressure required for the ASHRAE recommended MERV 13 filtration, the minimum filter level for virus mitigation, with very little reconfiguration.

Prior to 2020, a vast majority of commercial buildings used filtration levels of MERV 4 to MERV 8, which has always been acceptable for filtering out typical particulates in the air stream.

Outdoor Air Ventilation - Our innovative use of energy recovery wheels and energy recovery plates combined with its superior humidity control design can help building management follow outdoor ventilation air recommendations while limiting an increase of energy usage and maintaining recommended humidity levels.

AAON’s Delta Class™ products provide industry leading cooling, dehumidification, and heating options for high percentage outdoor air applications to promote better indoor air quality while minimizing energy consumption.

On October 31st, 2022, the DOE released its final ruling concerning direct expansion-dedicated outdoor air systems (“DX-DOAS”).

These are systems that condition primarily fresh outside air streams to maintain space comfort and air quality.

On May 1, 2024, the DOE began regulating the efficiency of dedicated outdoor air units separately from other comfort cooling systems.

AHRI will begin certifying the performance of DX-DOAS equipment in 2025.

AAON perceives this as an advantage because our equipment is designed for higher energy efficiency and superior part load and dehumidification performance than competitors who focus on the initial sale price of their equipment or do not participate in the certification programs offered by AHRI.

Air Disinfection - Our basic design characteristics allow for an easy installation of ultraviolet lighting equipment.

In addition to this equipment offered as options in new units sold, our basic design characteristics allow for easy installation in units already used in the field.

Overall, we are well positioned to accommodate the heightened demand for features that can help mitigate virus transmission and improve indoor air quality.

The features that ASHRAE recommends require premium designs and configurations that are standard in our units.

As a result, we are able to incorporate air quality features into our units at a minimal price premium and with no delivery delay.

Representatives

As of December 31, 2024, we employ a sales staff of 81 individuals and utilize approximately 55 independent manufacturer representatives’ organizations (“Representatives”) having 132 offices to market our products primarily in the United States and Canada.

Sales are made directly to the contractor or end user, with shipments made from our Tulsa, Oklahoma, Longview, Texas, Parkville, Missouri, or Redmond, Oregon facilities to the job site.

Shipments from our new Memphis, Tennessee plant are expected to start in early 2025.

Historically, our products and sales strategy focused on niche markets and applications.

However, market trends related to the COVID-19 pandemic and indoor air quality, decarbonization and energy efficiency, and higher energy prices, have positioned us to focus on a wider spectrum of the nonresidential HVAC equipment industry.

The targeted markets for our equipment are customers seeking products of higher performance and better quality than those offered, and/or options not offered, by standardized manufacturers.

To support and service our customers and the ultimate consumer, we provide parts availability through our Representatives' sales offices, as well as our two Tulsa, Oklahoma operated retail parts stores, to serve the local markets.

We also have factory service organizations at each of our facilities.

Additionally, a number of the Representatives we utilize have their own service organizations, which, in connection with us, provide the necessary warranty work and/or normal service to customers.

We have a program focused on increasing service capabilities across our North America Representative network, to ensure we collectively support our customers across North America.

We work closely with our Representatives to develop and support business plans, develop leadership capabilities, and provide technician training to our representatives and selected contractors.

All of which creates a cohesive network of service organizations to better meet the operational and maintenance needs of our customer base.

Our product warranty policy is the earlier of one year from the date of first use or 18 months from the date of shipment for parts only, including controls;

Our BASX-branded products are highly customized to meet the technical and operational requirements of mission-critical environments.

BASX focuses on delivering purpose-built thermal management and air handling solutions for data centers, healthcare, cleanroom, and industrial applications, with an emphasis on reliability, efficiency, scalability, and integration flexibility.

Our data center cooling solutions are designed to support increasingly dense and complex computing environments, including AI and high-performance computing (“HPC”) workloads.

These solutions include direct evaporative coolers, fan coil walls, computer room air handling (“CRAH”) units, overhead fan coil units, and packaged air handling systems.

High-performance air-cooled heat rejection solutions are provided with waterside economizers and optional adiabatic-assisted cooling and are designed to integrate with both air-cooled and liquid-cooled IT architectures.

In 2025, BASX expanded its liquid cooling portfolio with the introduction of its proprietary Coolant Distribution Unit (“CDU”).

The BASX CDU serves as the critical interface between facility water systems and technology cooling loops, providing precise flow, temperature, and pressure control to server cold plates.

These systems are engineered with fully welded stainless-steel piping and are custom-dimensioned to fit specific facility layouts and hydraulic requirements.

The CDU platform supports rack densities exceeding 100 kilowatts and incorporates N+1 redundant, hot-swappable pumps and power supplies, multi-zone active leak detection, and automated isolation capabilities.

These features are designed to enhance system reliability, protect IT assets, and enable continuous operation in high-density AI and HPC deployments.

BASX also introduced a water-free Free Cooling Chiller platform designed for large-scale data center heat rejection in diverse and extreme climate conditions.

These rooftop-mounted systems operate in three modes:

full free cooling, partial free cooling with supplemental direct expansion, and full mechanical cooling.

By leveraging ambient air temperatures whenever possible, the system reduces reliance on refrigeration and eliminates water consumption.

This platform is optimized for hyperscale and colocation environments seeking to improve energy efficiency, reduce operating costs, and support sustainability objectives while maintaining performance in harsh winter and summer conditions.

Additionally, our perimeter and white space thermal management solutions include direct evaporative coolers, fan coil walls, CRAH units, in-row cooling systems, and overhead fan coil units.

Packaged solutions include coupled economizing chillers with integrated air handling and packaged direct expansion (“DX”) systems with airside economizers.

These offerings enable close-coupled IT load management and flexible deployment across new construction and retrofit applications.

Our cleanroom products are engineered to provide precise environmental control for critical manufacturing and research processes, including pharmaceutical, biotechnology, and semiconductor applications.

Process cooling solutions include recirculation and make-up air handling units, integrated piping systems, and advanced control platforms.

Environmental control solutions include modular cleanroom environments, fan filter units, filtered ceiling grids with integrated lighting, pressurized plenums, grid systems, and hospital surgical suites.

BASX-branded custom air handling products serve commercial, industrial, healthcare, and institutional facilities employing chilled water cooling, packaged direct expansion, hydronic heating, indirect gas heating, humidification, dehumidification, advanced filtration, and integrated building controls.

BASX also manufactures plenum fans for integration into air handling units and retrofit applications and offers integrated sound performance and vibration control solutions.

Key Customers

Our top customers operate primarily in the data center cooling and commercial air conditioning markets.

Data centers are purpose-built facilities that enable the processing, storage and distribution of data across both traditional workloads and high-density compute, including AI training and inference.

Examples of companies in this space include Microsoft, Amazon Web Services, Google Cloud, QTS and Applied Digital.

The commercial air conditioning market includes the design and manufacturing of HVAC systems for non-residential buildings such as offices, hospitals, schools, data centers, warehouses and manufacturing facilities.

Our channel partners and customers support the design, construction and service of such facilities including independent sales representatives like Texas AirSystems and related portfolio groups through sole or common ownership like Meriton, Ambient and Air Control Concepts.

For the years ended December 31, 2025, 2024, and 2023, the Company had three, two and three customers, respectively, that were 10 percent or greater concentrations of revenue.

We have earned the trust and business of these significant customers over many years of performing to their needs, which they have supported with long-standing multi-year programs.

The remaining majority of our business is comprised of thousands of customers and transactions through our extensive network of independent representatives.

This mitigates our concentration risk as we also continue expanding our customer base through targeted growth in adjacent end markets, new customer acquisitions and expanding share with existing customers.

At December 31, 2025 and December 31, 2024, the Company had three customers that were 10 percent or greater concentrations of accounts receivable.

The backlog consists of products for which a customer purchase order has been received and which has not yet been delivered.

Orders may be subject to cancellation or rescheduling by the customer.

Orders for the commercial air conditioning market have historically been firm with minimal risk of cancellation, in which case, cancellation charges apply up to the full price of the equipment.

Orders for the data center market have more risk and we often see shifts in timing, cancellations and re-issuances of orders, all subject to various cancellation terms and charges.

Lead times to fulfill orders for AAON-branded products is generally around 18 - 26 weeks.

Orders for BASX-branded product, including orders built at AAON Coil Products’ Longview location, are typically placed months in advance of requested delivery to secure production for those projects.

As a result, portions of the BASX-branded product backlog do not turn over within typical lead times for AAON-branded products.

We do not believe that the Company’s backlog estimates as of any date are necessarily indicative of our net sales for any future period.

Additionally, our current backlog estimates are subject to a number of risks, as further detailed in Item 1A.

Risk Factors, Risks Related to Our Business .

Our product warranty policy is the earlier of one year from the date of install first use or 18 months from the date of shipment for parts only, including controls;

18 months for data center cooling solutions and cleanroom systems;

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Our warranty policy for the RQ series covers parts for two years from the date of unit shipment.

Our warranty policy for the WH and WV Series geothermal/water-source heat pumps covers parts for five years from the date of installation.

The Company also sells extended warranties on parts for various lengths of time ranging from six months to ten years.

Revenue for these separately priced warranties is deferred and recognized on a straight-line basis over the separately priced warranty period.

Major Customers

For the years-ended December 31, 2024, 2023, and 2022, Texas AirSystems accounted for approximately 16.4%, 13.8%, and 12.4% of our sales, respectively.

Through portfolio groups, Meriton has an ownership interest in Texas AirSystems and certain other of our sales representatives.

The aggregate sales percentages through Meriton-affiliated groups that are in addition to Texas AirSystems’ sales for the years-ended December 31, 2024, 2023, and 2022 accounted for an additional 8.0%, 2.3%, and 1.4%, respectively.

Two other similar groups, Ambient and AIR Control Concepts, share common ownership of some of our other sales representatives through portfolio groups and for the year-ended December 31, 2024, aggregate sales through their portfolio groups accounted for approximately 14.9% and 9.2% of our sales, respectively.

In 2023, aggregate sales for Ambient and AIR Control Concepts accounted for approximately 11.5% and 10.2% of our sales, respectively.

Sales through the portfolio groups of either Ambient or AIR Control Concepts did not account for 10% or more of our sales for any years-ended prior to December 31, 2023.

No other customers or portfolio groups accounted for more than 10% or more of our sales for the years ended December 31, 2024, and 2023, respectively.

Our backlog as of February 1, 2025 was approximately $842.3 million.

Management considers the orders that make up the backlog to be firm commitments with minimal risk of cancellation.

This is consistent with historical trends as we rarely receive cancellations, even during recessionary times.

Nonetheless, orders are subject to cancellation, in which case, cancellation charges apply up to the full price of the equipment.

After an order is deemed firm and is entered into the backlog, lead times to fulfill orders for AAON branded products is generally around 10 - 12 weeks.

Orders for BASX branded product, including orders built at AAON Coil Products’ Longview location, are typically placed months in advance of requested delivery to secure production for those projects.

As a result, portions of the BASX branded product backlog do not turn over within typical lead times for AAON branded products.

Our AAON branded products primarily compete with Lennox (Lennox International, Inc.), Trane (Trane Technologies plc), York International (Johnson Controls International PLC), Carrier (Carrier Global Corporation), and Daikin (Daikin Industries).

Our BASX branded products primarily compete with Vertiv (Vertiv Holdings Co.), STULZ (STULZ Air Technology Systems, Inc.), Munters, Silent Aire (Johnson Controls International PLC), Nortek (Nortek Air Solutions), Modine (Modine Manufacturing Co.) and Engineered Air.

All of our publicly traded competitors are substantially larger and have greater resources than we do.

Our products compete on the basis of total value, quality, function, serviceability, efficiency, availability of product, reliability, product line recognition, and acceptability of sales outlets.

Historically, our premium equipment was sold at a higher average price compared to most of the competition.

In the replacement market and other owner-controlled purchases, we have been successful at taking market share due to the total value proposition and lower cost of ownership our products provide to building owners over the life span of the equipment.

In the new construction market where the contractor is the purchasing decision maker, we were often at a competitive disadvantage because of the emphasis placed on initial cost.

However, due to operational efficiency improvements we made over the last several years, the cost of our semi-custom equipment is more comparable to the standard equipment market.

As a result, the value proposition of our higher-quality equipment is now more attractive, making us more competitive in both the new construction and replacement markets.

The Company’s comfort cooling products primarily compete with Lennox (Lennox International, Inc.), Trane (Trane Technologies plc), York Light Commercial (Bosch Home Comfort Group), Johnson Controls (Johnson Controls International PLC), Carrier (Carrier Global Corporation), and Daikin (Daikin Industries).

Our thermal management products primarily compete with Vertiv (Vertiv Holdings Co.), STULZ (STULZ Air Technology Systems, Inc.), Munters, Silent Aire (Johnson Controls International PLC), Nortek (Nortek Air Solutions), and Modine (Modine Manufacturing Co.).

The Company competes against larger manufacturers with greater financial and operational resources and offerings ranging into the lower featured products needed for broader market appeal.

We compete on total value proposition rather than initial price, emphasizing product quality, performance, efficiency, serviceability, reliability, and lifecycle cost of ownership.

Our market position differs significantly between buyer segments.

In replacement markets and owner-controlled purchases, we have consistently gained market share by demonstrating superior total cost of ownership over equipment lifespans.

Building owners who control purchase decisions recognize the economic value of premium performance and extended durability.

The new construction market has historically presented greater competitive challenges due to contractor emphasis on initial equipment cost.

However, operational efficiency improvements achieved over recent years have narrowed the price gap between our semi-custom equipment and competitors' standardized offerings.

This enhanced cost

competitiveness, combined with our quality and performance advantages, has strengthened our position across both new construction and replacement market segments.

Sources and Availability of Raw Materials

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Working Capital Practices

Working capital practices in the industry center on inventories and accounts receivable.

Our management regularly reviews our working capital with a view of maintaining the lowest level consistent with requirements of anticipated levels of operation and expected supply chain restraints.

Given the complexity of our manufacturing operations, working capital is impacted by production cycle times, raw material volatility and customer delivery schedules.

We continue to invest in planning systems, plant scheduling and supplier collaboration to improve inventory turnover and reduce cycle time.

Our strategy includes aligning production with demand, reducing excess and obsolete inventory and improving procurement lead times.

Additionally, a significant portion of our revenue is recognized over time for contracts as we satisfy performance obligations.

As a result, we record contract assets when revenue recognized exceeds amounts billed to customers.

Contract assets represent our conditional right to consideration and are primarily driven by the timing of billing milestones relative to project progress.

The level of contract assets may fluctuate based on the timing of project execution, milestone billing schedules and customer acceptance provisions.

Although contract assets are expected to be billed and collected within the normal operation cycle, changes in project estimates, customer disputes or delays in achieving contractual milestones could impact the timing of cash collections.

We actively monitor contract asset aging, billing milestones and customer credit quality to manage liquidity and mitigate collection risk.

We negotiate prepayment terms to help manage credit risk and working capital needs which results in contract liabilities.

Our working capital requirements are generally met by cash flow from operations and a bank revolving credit facility, which currently permits borrowings up to $600.0 million and had a $398.3 million outstanding balance at December 31, 2025.

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We have also increased our investment in Controls by developing cutting-edge communication systems that enable our products to share information with both internal and external customers.

We have partnered with industry leaders to create our Internet of Things (“IoT”) solution and are beginning to utilize artificial intelligence tools to enhance efficiencies when developing our control algorithms and sequences of operation.

We have partnered with industry leaders to create our Internet of Things (“IoT”) solution and are beginning to utilize artificial intelligence (“AI”) tools to enhance efficiencies when developing our control algorithms and sequences of operation.

Additionally, we are developing new controls that leverage machine learning to continuously provide our customers with the most innovative solutions in the industry.

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We comply with industry regulations and requirements while pursuing responsible economic growth and profitability.

In 2024, we published our sixth annual Sustainability report sharing our approach in the material areas of stakeholder engagement, innovation and efficiency, environmental responsibility, climate change, occupational health and safety, talent attraction and retention, diversity and inclusion, community engagement and investment, corporate governance and ethics and compliance.

In 2025, we published our seventh annual Sustainability report sharing our approach in the material areas of stakeholder engagement, innovation and efficiency, environmental responsibility, climate change, occupational health and safety, talent attraction and retention, diversity and inclusion, community engagement and investment, corporate governance and ethics and compliance.

The report also highlights achievements and long-term targets related to greenhouse gas emissions, paint byproduct material recycling, and non-fossil fuel-consuming products.

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Approximately 36% of our energy portfolio is currently derived from renewable sources, and the Company’s Scope 1 and 2 emissions (emissions that occur from sources that are controlled or owned by an organization and emissions associated with the purchase of electricity, steam, heat, or cooling) are being tracked.

We opted into additional renewable energy at our Tulsa, Oklahoma, and Redmond, Oregon facilities in 2024, continued to invest and partner on projects that reduce GHG emissions globally and have transitioned to the lower global warming potential R-454B refrigerant.

We continue to develop and manufacture non-fossil fuel-consuming units to provide the most sustainable commercial HVAC equipment in the market and announced the zero-degree cold air-source heat pump in 2023 as a critical solution that meets the increasing demand for building decarbonization in cold climates.

We opted in to additional renewable energy at our Tulsa, Oklahoma, Memphis, Tennessee and Redmond, Oregon facilities in 2025, continued to invest and partner on projects that reduce GHG emissions globally and have transitioned to the lower global warming potential R-454B refrigerant.

We continue to develop and manufacture non-fossil fuel-consuming units to provide the most sustainable commercial HVAC equipment in the market.

In the area of energy efficiency and conservation, our Tulsa, Oklahoma and Longview, Texas facilities have transitioned to nearly 100% LED lighting in our facilities leading to considerable cost savings and reduced energy consumption.

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Energy efficiency has been a priority not only in product development, but also in overall capital investments which include the acquisition of new, energy-efficient equipment for the production floor, new high-speed overhead facility doors, the installation of new HVAC equipment, building control systems, the application of heat and light reflective material to production facilities, along with other behavioral-based energy efficiency changes.

We are tracking our energy usage intensity before and

after these updates.

We also opened the Exploration Center in 2024, a net-zero facility powered by solar and geothermal energy.

We are tracking our energy usage intensity before and after these updates.

In the area of material management, we focus on recycling, reducing, reusing and sourcing more environmentally friendly materials into our processes.

At our Tulsa, Oklahoma and Longview, Texas facilities, we recycled over 15,715 tons, 13,678 tons, and 14,928 tons of metal in 2024, 2023, and 2022, respectively.

At our Tulsa, Oklahoma Redmond, Oregon and Longview, Texas facilities, we recycled over 17,328 tons, 15,715 tons, and 13,678 tons of metal in 2025, 2024, and 2023, respectively.

Also, through our partnership with a waste-to-energy facility, we successfully diverted over 3,960 tons, 3,020 tons, and 694 tons of waste from landfills in 2025, 2024, and 2023, respectively.

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Management considers its relations with our employees to be good.

The following table represents the number of our direct employees and contract personnel we employed on each respective date:

As of As of As of

February 24, 2025 February 20, 2024 February 22, 2023

AAON Oklahoma 2,747 2,663 2,474

AAON Coil Products 1,043 586 681

BASX 1,022 607 511

Total employees 4,812 3,856 3,666

As of February 24, 2026, we employed approximately 5,897 employees, compared to 3,856 employees as of February 24, 2025 and 3,666 employees as of February 20, 2024.

Our employees have a variety of specialized experience, training and skills that provide the expertise required to service our customers.

Our key human capital measures include employee safety, turnover, absenteeism, and production.

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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-K

Item 1. Business