What changed in this filing

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Item 7. Management’s Discussion and Analysis

2026-03-02 compared with 2025-02-27 · 164 added, 121 removed, 273 unchanged (51% of the section changed)

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We sell our products to all 50 states in the United States and certain provinces in Canada.

Our business can be affected by a number of economic factors, including the level of economic activity in the markets in which we operate.

The uncertainty of the economy negatively impacted the commercial and industrial new construction markets in 2020 and the first half of 2021.

Since mid-2021, nonresidential construction spending has been strong, recovering well beyond pre-2020 levels and finishing 2024 near record levels.

However, over the last 18-24 months, certain leading indicators, including architectural billings and construction starts, signal a slowing in construction spending within the next 12 months.

In 2024, the year-over-year growth rate of nonresidential construction spending slowed significantly, reinforcing the signals from these leading indicators.

Our AAON brand can be affected by a number of economic factors, including the level of economic activity in the markets in which we operate.

After the commercial and industrial new construction markets came to a standstill in 2020–2021, our core nonresidential end‑markets entered a period of robust growth, increasing by approximately 50.0% between 2022 and 2024.

By late 2024, however, these markets began to contract, and the softening continued through 2025, though at a moderate rate.

While leading indicators signal a stabilization in activity, we have not observed clear indications of a significant reacceleration.

Furthermore, signals from general economic indicators are mixed regarding the health of the general economy.

If the domestic economy were to slow or enter a recession, this could impact the replacement market, potentially resulting in a decline in our sales volume and profitability.

If the domestic economy were to slow or enter a recession, this could further impact our new construction markets and also weigh on the replacement market, potentially resulting in reduced sales volumes and profitability.

Sales in the commercial and industrial new construction markets generally lag behind the housing market, which 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 over which we have no control.

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

Our BASX brand is heavily dependent on the data center market.

The growing maturity and adoption of Artificial Intelligence and high-performance compute is driving profound innovation across the data center market, resulting in increased demand for our products and solutions.

Between 2022 and 2025, total put‑in‑place construction spending for data centers expanded by approximately 240.0%, and present indicators suggest continued strength with no meaningful signs of slowing in the foreseeable future.

In response, we have made substantial capital investments to expand our capacity and ensure we are fully equipped to support this accelerating growth trajectory.

We sell our products to property owners and contractors mainly through a network of independent manufacturers’ Representatives.

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and global economy.

For the year ended December 31, 2024, the prices for copper and galvanized steel increased by approximately 3.2% and 1.7%, respectively, while stainless steel and aluminum decreased 27.9% and 1.6%, respectively, from 2023.

At December 31, 2025, the price for copper increased by approximately 11.1%, while stainless steel and galvanized steel decreased approximately 13.0% and 3.4%, respectively.

The price for aluminum remained relatively flat, as compared to the price at December 31, 2024.

We attempt to limit the impact of price fluctuations on these materials by entering into cancellable and non-cancellable contracts with our major suppliers for periods of six to 18 months.

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In recent years, price increases have been more frequent due to the amount of inflation the business has endured.

In 2021, we implemented three price increases for AAON branded products.

In 2022, we implemented two significant price increases as well as a recurring 1% monthly price increase beginning June 1, 2022, and ending on April 1, 2023, for AAON branded products.

We reinstated a recurring 1% monthly price increase on October 1, 2023, and carried that through February 1, 2024, for AAON branded products.

We implemented a recurring 1.0% monthly price increase on October 1, 2023, and carried that through February 1, 2024, for AAON-branded products.

On January 1, 2025, we implemented a one-time 3.0% price increase for AAON-branded products.

On April 1, 2025, we implemented a 6.0% surcharge on all AAON-branded products as a result of the uncertainty of international tariffs.

BASX-branded products are priced by job and in most cases, provide the ability to increase the price if the order is outside normal lead times.

Additionally, we continue to experience challenges in a tight labor market, especially the hiring of both skilled and unskilled production labor.

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 source raw materials domestically, but historically have seen those suppliers increase prices when tariffs are increased.

Additionally, while we source most components domestically, our vendors may be impacted by tariffs if they use foreign parts and materials and often pass any additional costs as a result of tariffs through to us.

We expect to continue to pass along some of these costs to our customers, but the increased price of our products could adversely affect the demand, which could have an adverse effect on our business and our earnings.

The third quarter of 2025 is the first period for us to see any significant financial impact from tariffs.

On April 1, 2025 we instituted a 6.0% tariff surcharge on AAON-branded orders which we began to see realization of in the third quarter of 2025.

Early in 2025, the amount of surcharge realized had not covered the additional costs from the tariffs, but had changed by the end of the year as we fully realized our surcharge.

We make strategic purchases of materials when we see opportunities or potential disruptions in our supply chain.

We have experienced supply chain challenges related to specific manufacturing parts, which could be exacerbated by the trade conflict.

We manage our supply chain challenges through strong vendor relationships as well as expanding our list of available vendors.

Additionally, we continue to experience challenges in a tight labor market, especially the hiring of production labor.

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

We have implemented the following wage increases to remain competitive and to attract and retain employees:

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

We will continue to implement human resource initiatives to retain and attract labor to further improve productivity and production efficiencies.

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.

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

The following table shows our historical backlog levels:

December 31, 2024 December 31, 2023

2025 December 31,

(in thousands)

$ 867,090 $ 510,028

Our backlog increased approximately 70.0%, to $867.1 million at December 31, 2024, compared to December 31, 2023.

Backlog was up from a year ago at all three segments, with the largest increase at the AAON Coil Products segment, which received over $200.0 million of orders in the fourth quarter.

Most of these orders were associated with the BASX branded data center liquid cooling solutions and will be manufactured at our Longview, TX facility.

AAON-branded Products $ 526,350 $ 327,343

BASX-branded Products 1,302,145 539,747

Total Backlog $ 1,828,495 $ 867,090

At December 31, 2025, our consolidated backlog is $1,828.5 million, an increase of 110.9%, or $961.4 million, as compared to December 31, 2024.

Backlog was up from a year ago for both AAON-branded products and BASX-branded products with BASX-branded products increasing 141.3%, or $762.4 million, when compared to December 31, 2024.

Most of these orders were associated with the BASX-branded data center liquid cooling solutions.

Consolidated Results of Operations

Years Ended December 31,

(in thousands)

(in thousands, except per share data)

Net sales $ 1,442,076 $ 1,200,635

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Income from operations 146,248 209,118

Interest expense (17,726) (2,905)

Other income, net 230 378

Income before taxes 128,752 206,591

Income tax provision 21,159 38,032

Net income $ 107,593 $ 168,559

The following are highlights of our results of operations, cash flows, and financial condition:

• Net sales for 2024 grew 2.7% to $1,200.6 million due to an increase in sales of our BASX branded products.

BASX branded products increased 35.1%, or $58.5 million when compared to 2023, offset by a decrease of our AAON branded products of 2.6%, or $26.4 million when compared to 2023.

• Net sales for 2025 grew 20.1% to $1,442.1 million driven by the strong demand and growth of our BASX-branded products.

BASX-branded products increased 143.5%, or $322.8 million when compared to 2024.

• Net sales of AAON-branded products decreased 8.3%, or $81.4 million when compared to 2024.

The AAON brand experienced a softer market in 2025 due to macroeconomic factors like higher interest rates

and slowing construction starts.

Supply chain issues were also a constraint in 2025 due to the refrigerant change that went into effect January 1, 2025 and more recently due to coils.

• The Company went live with its new Enterprise Resource Planning (“ERP”) system on April 1, 2025 at its Longview, Texas facility.

The adoption of this new system caused some disruptions due to changes in processes for the AAON Coil Products segment.

To a lesser extent, the impact to the coil production at AAON Coil Products also impacted AAON Oklahoma’s ability to ramp up production, which contributed to lower net sales and gross profit margins for that segment.

The Company also went live with its ERP at its Memphis, Tennessee facility on November 1, 2025 with minimal disruption.

• We have a strong balance sheet with a leverage ratio of 1.77 and available borrowings under our Revolver of $201.0 million.

• We completed the purchase of a building in Memphis, Tennessee for $63.4 million funded with our new Term Loan of $80.0 million, both of which closed in December 2024.

• We continue to invest in the future growth of the Company as evidenced by our $213.2 million in capital expenditures in 2024, an increase of $91.4 million or 87.6% when compared to 2023.

• We continue to invest in the future growth of the Company as evidenced by our $204.9 million in capital expenditures, including the acquisition of intangible assets in 2025.

• We completed the repurchase of $39.7 million of shares for the year ended December 31, 2025.

We report our financial results based on three reportable segments:

AAON Oklahoma, AAON Coil Products, and BASX, which are further described in Item 1 and Item 8.

The Company’s chief 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 gross profit.

AAON Oklahoma, AAON Coil Products, and BASX, which are further described in “Segments” (Note 23) within our notes to the consolidated financial statements.

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 gross profit.

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

Segment Operating Results for the Years Ended December 31, 2025 and 2024

For the years ended December 31,

2024 Percent of Sales 1

2023 Percent of Sales 1

December 31, 2025 Percent of Sales 1

December 31, 2024 Percent of Sales 1

$ Change % Change

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Total net sales increased $241.4 million, or 20.1%.

BASX increased by 25.1%, or $39.8 million, and AAON Coil Products increased 28.1%, or $31.6 million, both primarily related to demand from the BASX branded data center products.

AAON Oklahoma sales decreased 4.4%, or $39.2 million due to challenges from the industry-regulated refrigerant transition and nonresidential construction activity that experienced weakened demand throughout 2024 as compared to 2023.

Gross profit as a percent of sales decreased to 33.1% during 2024 as compared to 34.1% in 2023.

As noted above, realization of price increases has improved our margin profile along with the slowing of inflation;

however, the price increases were offset by flat volumes and lower overhead absorption for the AAON Oklahoma segment.

In addition, the AAON Coil Products and BASX segments experienced temporary inefficiencies associated with facility construction to increase future production capacity for increased demand of BASX branded data center products.

In order to retain our existing employees, we have increased our starting wage rate considerably in recent years and continue to award periodic wage increases to our employees.

We occasionally increase the price of our products to help offset any inflationary headwinds.

In 2022, we implemented a recurring 1% monthly price increase beginning June 1, 2022, and ending on April 1, 2023.

We reinstated the recurring 1% monthly price increase on October 1, 2023, through February 1, 2024.

As shown in the table below, we have experienced year-over-year fluctuations in the cost of several raw materials.

AAON Oklahoma had net sales of $801.2 million, a decrease of 6.7% compared to the same period in the prior year.

This decrease was driven by supply chain issues from the refrigerant transition at the beginning of the year and coil supply shortages in the second quarter due to our ERP implementation at our Longview, Texas facility which slowed production of coils made for our Tulsa plant.

Sales were up 126.1% for AAON Coil Products primarily driven by growth in BASX-branded products of $202.3 million for liquid cooling data centers.

AAON-branded products at AAON Coil Products declined $20.9 million due to disruptions caused by our ERP implementation.

BASX net sales were up 59.3% to $315.5 million due to the continued demand for data center solutions and increasing production out of our Memphis facility.

Gross profit decreased $11.4 million or 2.9% and from 33.1% of sales to 26.7% of sales.

AAON Oklahoma’s decrease in gross profit is primarily driven by the lower volumes discussed above from the first half of the year that resulted in sub optimal overhead absorption.

Additionally, our new plant in Memphis is part of AAON Oklahoma, building intercompany sales for the BASX segment at cost.

As such, the sales and gross profit from orders completed in Memphis are reflected in the BASX segment, but the additional overhead cost of running the plant is reflected in the AAON Oklahoma segment.

Memphis contributed $16.1 million in cost to the AAON Oklahoma segment.

AAON Coil Products gross profit margin increased slightly from 19.2% in 2024 to 21.4% in 2025.

AAON Coil Products had disruptions caused by our ERP system implementation at the beginning of the second quarter.

Progress was made during the remainder of the year and the higher volume data center work help to offset the negative impacts of these disruptions.

The increase in BASX gross profit is due to better overhead absorption from the increased sales volumes coming from our Memphis facility.

Raw Material Costs

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Professional fees 7,615 8,809 0.5 % 0.7 %

Memphis incentive fee 6,105 — 0.4 % — %

Donations 1,495 1,682 0.1 % 0.1 %

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Total SG&A $ 239,480 $ 188,014 16.6 % 15.7 %

Selling, general and administrative expenses increased 9.6%, or $16.5 million, during 2024 as compared to the prior year.

As a percentage of sales, selling, general and administrative increased from 14.7% to 15.7%.

Depreciation and amortization increased 49.3%, or $6.8 million, as compared to 2023, due to increased investments in back office technology and automation.

Other expenses increased 34.5%, or $10.3 million, due to increased travel, consulting expenses, and closing costs related to the 2023 New Market Tax Credit (Note 18).

Professional fees decreased 42.7%, or $6.6 million, due to the 2023 litigation settlement (Note 19 ) .

Selling, general and administrative expenses increased $51.5 million for the year ended December 31, 2025, from the prior year period.

Profit sharing is down as a result of our lower earnings in the period.

Salaries and benefits have increased as we add additional headcount to help build out our organizational capacity for future growth.

Depreciation and amortization increased $7.2 million during the period due to increased investments from our ERP implementation.

We incurred approximately $6.1 million in incentive fees due to our real estate broker associated with the acquisition of our Memphis, Tennessee plant for a percentage of the incentives awarded to us by various entities.

Other includes an increase in expense of $17.4 million for technology related consulting fees along with increased expenses related to travel and other consulting expenses.

Years Ended December 31, Effective Tax Rate

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Income tax provision $ 21,159 $ 38,032 16.4 % 18.4 %

The Company’s estimated annual 2024 effective tax rate, excluding discrete events, was 24.7%.

The decrease year over year in the overall effective tax rate was primarily due to the excess tax benefit of $16.4 million for the year ended December 31, 2024, as compared to $8.9 million during the same period in 2023.

The excess tax benefit is related to the timing of stock option exercises and restricted stock vestings as a result of our high stock price during the year ended December 31, 2024.

The Company’s estimated annual 2025 effective tax rate, excluding discrete events, is expected to be approximately 22.5 %.

Discrete events such as excess tax benefits related to stock compensation and various tax credits consistently provide a benefit, keeping our actual effective rate lower than the stated 22.5 %.

Liquidity and Capital Resources

Our working capital and capital expenditure requirements are generally met through net cash provided by operations and the use of the revolving bank line of credit based on our current liquidity at the time.

Working Capital - Our unrestricted cash and cash equivalents decreased $0.3 million from December 31, 2023, to December 31, 2024.

As of December 31, 2024, we had $6.5 million in cash and cash equivalents and restricted cash.

Outstanding Debt - On December 16, 2024, we amended our Amended and Restated Loan Agreement dated November 24, 2021 (as amended, “Amended Loan Agreement”) to include an $80.0 million term loan (“Term Loan”) in addition to the $200.0 million revolving credit facility (the “Revolver”).

Working Capital - Our unrestricted cash and cash equivalents remained stable from December 31, 2024, to December 31, 2025.

Our restricted cash decreased $5.3 million due to funding requirements related to our Longview, Texas expansion.

Outstanding Debt - On December 16, 2024, we entered into the Third Amendment and Restated Loan Agreement dated November 24, 2021, to include an $80.0 million term loan payable in equal monthly installments, plus interest, over 60 months, expiring December 16, 2029 (“Term Loan”).

The agreement provided for a $200.0 million revolving credit facility and an option to increase the maximum borrowings to $300.0 million.

In April 2025, we increased our available Revolver to $230.0 million, an increase of $30.0 million, to fund our additional working capital needs.

On May 29, 2025, we entered into the Fifth Amendment to the Amended and Restated Loan Agreement dated November 24, 2021 (as amended, “Amended Loan Agreement”) whereby the remaining balance of the Term Loan, approximately $72.0 million, was rolled into the amended Revolving Loan (“Amended Revolver”), the capacity of which was increased from $230.0 million to $500.0 million.

The Amended Revolver is prepayable without penalty.

On December 29, 2025, we entered into the Sixth Amendment to the Amended and Restated Loan Agreement.

The terms of the Amendment increased the amount of the borrowing capacity on the Revolver from $500.0 million to $600.0 million by exercising the $100.0 million accordion feature.

The Amended Revolver is prepayable without penalty.

The Revolver expires on May 27, 2030.

As of December 31, 2025, and December 31, 2024, we had an outstanding balance under the Revolver of $398.3 million and $76.5 million, respectively.

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

We had one standby letter of credit totaling $0.7 million and $0.3 million as of December 31, 2025, and December 31, 2024, respectively.

Borrowings available under the Revolver at December 31, 2025, were $201.0 million.

The Revolver expires on May 27, 2027.

As of December 31, 2024, we had an outstanding balance under the Term Loan of $78.4 million.

No amounts were outstanding under the Term Loan at December 31, 2023.

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

The Term Loan had no outstanding balance as of December 31, 2025 and a balance of $78.4 million as of December 31, 2024 respectively.

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

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

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 years ended December 31, 2024, 2023, and 2022, respectively.

Fees associated with the unused portion of the committed amount are included in interest expense on our consolidated statements of income for the years ended December 31, 2025, 2024, 2023.

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

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Revolver 5.7% 6.3% 6.3%

Term loan * 1

1 Funds were borrowed on December 16, 2024.

No borrowings outstanding during the years ended December 31, 2023 and 2022

No borrowings outstanding during the year ended December 31, 2025.

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.

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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%.

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.

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.

This financing arrangement is secured by equipment at the Company’s Longview, Texas facilities and a guarantee from the Company, including an unconditional guarantee of the NMTCs.

The Company’s seven-year compliance period ends in 2026, at which time the Company expects the put/call feature of the transaction to be exercised, forgiving a portion of the debt.

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”).

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

Upon closing 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 twenty-five years, bearing an interest rate of 1.0%.

Upon closing 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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Agreement Execution Date Authorized Repurchase $ Expiration Date

March 13, 2020 $20 million 1

November 9, 2022

November 3, 2022 $50 million 1

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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 December 31, 2025, approximately $30 million of shares have been repurchased, and approximately $70.0 million remains under the current board authorization.

The Company also repurchases shares of AAON, Inc.

stock from certain of its employees for payment of statutory tax withholdings on stock transactions.

All other repurchases from directors or employees are contingent upon Board approval.

All repurchases are done at current market prices.

stock related to our LTIP plans (Note 15) at current market prices.

Our repurchase activity is as follows:

2025 2024 2023

(in thousands, except share and per share data)

Program Shares

Total $ $ per share

Program Shares Total $ $ per share Shares Total $ $ per share Shares Total $ $ per share

Open market 371,139 $ 29,992 $ 80.81 1,353,564 $ 100,034 $ 73.90 402,873 $ 25,009 $ 62.08

Employees 92,444 8,037 86.94 21,904 1,302 59.44

LTIP Shares 98,134 9,730 99.15 92,444 8,037 86.94 21,904 1,302 59.44

Total 469,273 $ 39,722 $ 84.65 1,446,008 $ 108,071 $ 74.74 424,777 $ 26,311 $ 61.94

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Dividend Annualized Dividend

Declaration Date 1

Record Date Payment Date per Share

Declaration Date Record Date Payment Date per Share

March 1, 2023 March 13, 2023 March 31, 2023 $0.08 $0.32

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November 13, 2024 November 29, 2024 December 19, 2024 $0.08 $0.32

1 Effective with the cash dividend declared on March 1, 2023 (paid on March 31, 2023), the Company moved from semi-annual cash dividends to quarterly cash dividends.

On July 7, 2023, the Board of Directors declared a three-for-two stock split of the Company’s common stock that was 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).

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

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

May 13, 2025 June 6, 2025 June 27, 2025 $0.10 $0.40

August 14, 2025 September 5, 2025 September 26, 2025 $0.10 $0.40

November 10, 2025 November 26, 2025 December 18, 2025 $0.10 $0.40

Based on historical performance and current expectations, we believe our cash and cash equivalents balance, the projected cash flows generated from our operations, our existing committed revolving credit facility (or comparable financing), and our expected ability to access capital markets will satisfy our working capital needs, capital expenditures and other liquidity requirements associated with our operations in 2026 and the foreseeable future.

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Statement of Cash Flows

The table below reflects a summary of our net cash flows provided by operating activities, net cash flows used in investing activities, and net cash flows provided by financing activities for the years indicated.

The following table reflects the major categories of cash flows for the year ended December 31, 2025 and 2024.

For additional details, see the consolidated financial statements.

Years Ended December 31,

(in thousands)

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Extended warranties 831 1,835

Accrued liabilities and other long-term liabilities 13,259 15,086

Accrued liabilities & other long-term liabilities 31,873 13,259

Net cash provided by operating activities 534 192,532

192,532 158,895

Investing Activities

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Acquisition of intangible assets (14,329) (17,491)

Proceeds from government incentive grant 12,000 —

Net cash used in investing activities (192,417) (213,075)

Financing Activities

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

Payment related to financing costs (1,395) (664)

Borrowings of debt 915,391 717,897

717,897 597,111

Payments of debt (672,204) (601,091)

(601,091) (629,787)

Proceeds from financing obligation, net of issuance costs 4,186 6,061

Payment related to financing costs (664) (398)

Stock options exercised 17,144 31,861

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Cash dividends paid to stockholders (32,603) (26,084)

Net cash provided by (used in) financing activities $ 18,034 $ (46,510)

Net cash provided by financing activities $ 186,608 $ 18,034

Cash Flows from Operating Activities

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Collections and payments cycles are on a normal pattern and fluctuate due to timing of receipts and payments.

In early 2022, the Company began increasing the purchase of inventory to take advantage of favorable pricing opportunities and also to mitigate the impact of future supply chain disruptions on our operations;

however, as inflationary and supply chain disruptions have decreased, the Company has been able to reduce overall inventory levels.

At the end of 2024, we made significant purchases of inventory related to data center orders.

Historically, the Company increases the purchase of inventory to take advantage of favorable pricing opportunities and also to mitigate the impact of future supply chain disruptions on our operations.

Additionally, we continue to make significant purchases of inventory related to data center orders.

These purchases are allocated to customer jobs and show as increases to our contract assets.

Payment terms for BASX jobs may require upfront cash to fund the job resulting in cash inflows related to our contract liabilities and cash inflows fluctuate due to job timing and scheduling.

The decrease in cash flows from income taxes is primarily due to the 2017 Tax Cuts & Jobs Act, which requires research and development expenses incurred after December 31, 2021, to be capitalized and amortized over five years.

This defers our current period income tax deduction which increased our income tax payments due at the end of 2022.

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

Similarly, some BASX-branded jobs require down payments, resulting in cash inflows related to our contract liabilities.

2025 saw significant increases in accounts receivable in the back half of the year with customers that have longer terms than the typical 30 day AAON-branded terms.

The Company experienced carrying working capital for extended periods of time during this period of growth and expansion at our Longview and Memphis plants.

Cash Flows from Investing Activities

The capital expenditures increase during 2024 related to our continued investment in our production capabilities.

Purchases during 2024 include additional infrastructure and machinery for both replacement and growth.

We added 237,500 square feet to our Longview, Texas facility primarily for the production of BASX branded data center products.

We also completed the addition of a new Weld Shop in Redmond, Oregon that created more capacity in our manufacturing building.

In Parkville, Missouri, we built an SMT production line to produce our own control boards.

We have also made investments to purchase and develop software for internal use in anticipation of future Company growth.

Many of these projects are subject to review and cancellation at the discretion of our CEO and Board of Directors without incurring substantial charges.

In December 2024, the Company purchased a new 787,000 square foot facility in Memphis, Tennessee, which will accommodate incremental demand for both BASX and AAON products over the next several years, at the same time providing more geographic diversification across our manufacturing footprint.

The purchase price for the facility was approximately $63.4 million.

Capital expenditures during the year ended December 31, 2025, relate to additional infrastructure and machinery for both replacement and production growth, finalizing our new production space in our Redmond, Oregon and Longview, Texas locations, additional equipment and production capacity in Parkville, Missouri, and new equipment for our Memphis, Tennessee facility.

We have also made investments to purchase or develop software for internal use in anticipation of future Company growth.

Our capital expenditure program for 2026 is estimated to be approximately $190.0 million.

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Cash Flows from Financing Activities

The change in cash from financing activities in 2024 is primarily related to borrowings under our revolving credit facility to manage our working capital needs, especially strategic purchases of inventory to avoid supply chain delays and the funding of certain capital expenditures, offset by repayments we were able to make due to increased operating results and financial condition.

Additionally, we repurchased approximately 1.4 million shares for approximately $108.1 million during 2024 (Note 17).

The change in cash from financing activities in 2025 is primarily related to borrowings under our revolving credit facility to manage our working capital needs, especially strategic purchases of inventory to avoid supply chain delays and the funding of certain capital expenditures, offset by repayments we were able to make due to our operating results and financial condition.

During the year ended December 31, 2025, we repurchased $30.0 million under our open market share repurchase programs.

Furthermore, cash flows from financing activities is historically affected by the timing of stock options exercised by our employees.

Commitments and Contractual Agreements

We are occasionally party to short-term, cancellable and occasionally non-cancellable, contracts with major suppliers for the purchase of raw material and component parts.

We expect to receive delivery of raw materials for use in our manufacturing operations.

We are occasionally party to short-term and long-term, cancellable and occasionally non-cancellable, contracts with suppliers for the purchase of raw material and component parts.

We expect to receive delivery of raw material and component parts for use in our manufacturing operations.

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 December 31, 2025, except as described below.

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

The Company made payments of $11.7 million and $10.1 million on this contract in 2024 and 2023, respectively.

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

In 2025 and 2024, the Company made payments of $ 5.6 million and $ 11.7 million on this contract, respectively.

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

In 2025, the Company executed three one-year purchase commitments for raw materials.

Estimated minimum future payments are $ 27.4 million for 2025.

We had no other material contractual purchase obligations as of December 31, 2025.

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We discuss these estimates with the Audit Committee of the Board of Directors periodically.

Revenue - 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 incurring significant costs to the Company and the agreements contain an enforceable right to payment including a reasonable profit margin, the Company recognizes revenue over time as progress is made toward satisfying the performance obligations of each contract.

Revenue - 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 incurring significant costs to the Company and the agreements containing an enforceable right to payment including a reasonable profit margin, the Company recognizes revenue over time as progress is made toward satisfying the performance obligations of each contract.

The measurement and recognition of revenue requires us to make judgments and estimates, including the determination of whether we should recognize revenue as we perform or upon the completion of our performance obligation, as these determinations impact the timing and amount of our reported revenue.

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A considerable amount of management judgment and assumptions are required in performing the impairment tests.

New Accounting Pronouncements

Recent Accounting Pronouncements

Changes to U.S.

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ASUs not listed below were assessed and determined to be either not applicable or are expected to have minimal impact on our consolidated financial statements and notes thereto.

In October 2023, the FASB issued ASU 2023-06, Disclosure Improvements:

Codification Amendments in Response to SEC’s Disclosure Update and Simplification Initiative.

The new guidance is intended to update a variety of disclosure requirements.

The effective date for each amendment will be the date on which the SEC’s removal of that related disclosure from Regulation S-X or Regulation S-K becomes effective.

Early adoption is prohibited.

Upon adoption, this ASU is not expected to have a material impact on the Company’s financial statements and related disclosures.

In November 2023, the FASB issued ASU No.

2023-07, Segment Reporting (Topic 280).

The new guidance improves reportable segment disclosures primarily through enhanced disclosures about significant segment expenses and by requiring current annual disclosures to be provided in interim periods.

The amendments in this ASU are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted.

We adopted this standard for fiscal year ended 2024.

Upon adoption, this ASU did not have a material impact on the Company’s financial statements and related disclosures.

Newly Adopted Accounting Standards

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740).

The new guidance is intended to enhance the transparency and decision usefulness of income tax disclosures.

The amendments in this ASU are effective for annual periods beginning after December 15, 2024.

Upon adoption, this ASU is not expected to have a material impact on the Company’s financial statements and related disclosures.

We adopted this standard in the fourth quarter of 2025.

Upon adoption, this ASU did not have a material impact on the Company’s consolidated financial statements.

Recently Issued Accounting Standards

In November 2024, the FASB issued ASU No.

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Upon adoption, this ASU is not expected to have a material impact on the Company's financial statements and related disclosures.

In July 2025, the FASB issued ASU 2025‑05, Financial Instruments – Credit Losses (Topic 326):

Measurement of Credit Losses for Accounts Receivable and Contract Assets.

The new guidance provides a practical expedient that allows entities, when estimating expected credit losses on current accounts receivable and current contract assets, to assume that economic conditions as of the balance sheet date will not change over the remaining life of those assets.

The amendments in this ASU are effective for annual reporting periods beginning after December 15, 2025, including interim periods within those annual periods, with early adoption permitted, and are required to be applied prospectively.

Upon adoption, this ASU is not expected to have a material impact on the Company's financial statements and related disclosures.

In September 2025, the FASB issued ASU 2025‑06, Intangibles – Goodwill and Other – Internal‑Use Software (Subtopic 350‑40):

Targeted Improvements to the Accounting for Internal‑Use Software.

The new guidance modernizes and simplifies the accounting for internal‑use software, including eliminating the existing three‑stage (preliminary project, application development, and post‑implementation/operation) model, and introduces revised criteria for capitalization that better reflect current agile and iterative software development practices, including considerations for software with significant development uncertainty.

The amendments in this ASU are effective for annual reporting periods beginning after December 15, 2026, including interim periods within those annual periods, with various transition alternatives and early adoption permitted.

We are currently evaluating the impact of this ASU on the Company’s financial statements and related disclosures and do not expect it to have a material impact.

In December 2025, the FASB issued ASU 2025‑10, Government Grants (Topic 832):

Accounting for Government Grants Received by Business Entities.

The new guidance provides authoritative recognition, measurement, presentation, and disclosure requirements for government grants to business entities in the form of monetary assets or tangible nonmonetary assets, largely leveraging the recognition and measurement framework in IAS 20, and reduces diversity in practice that had arisen from analogies to other GAAP.

For public business entities, the amendments in this ASU are effective for annual reporting periods beginning after December 15, 2028, including interim periods within those annual periods;

for all other entities, the guidance is effective for annual periods beginning after December 15, 2029, including interim periods within those annual periods, with early adoption permitted.

We are currently evaluating the impact of this ASU on the Company’s financial statements and related disclosures and do not expect it to have a material impact.

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 7. Management’s Discussion and Analysis