What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2026-05-07 compared with 2025-11-06 · 119 added, 222 removed, 224 unchanged (60% of the section changed)

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We do not assume any obligation to update or revise any forward-looking statements to reflect changed assumptions, the occurrence of anticipated or unanticipated events, new information or circumstances or otherwise, except as required by law.

Description of the Company

AAON is a leader in HVAC solutions for commercial and industrial indoor environments.

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

Foreign sales were approximately $9.1 million and $27.9 million the three and nine months ended September 30, 2025, respectively, as compared to $10.1 million and $24.6 million for the three and nine months ended September 30, 2024, respectively.

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

Both the new construction and replacement markets are cyclical.

If the domestic economy were to slow or enter a recession, this could result in a decrease in our sales volume and profitability.

Sales in the commercial and industrial new construction markets generally lag 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.

Foreign sales were approximately $11.2 million for the three months ended March 31, 2026, as compared to $11.3 million for the three months ended March 31, 2025.

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 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.

Sales in the replacement markets are driven by various factors, including general economic growth, the Company's new product introductions, fluctuations in the average age of existing equipment in the market, government regulations and stimulus, change in market demand between more customized, higher performing HVAC equipment and lower priced standard equipment, as well as many other factors.

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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We also purchase from domestic manufacturers certain components, including coils, compressors, motors, and electrical controls.

The price levels of our raw materials fluctuate given that the market continues to be volatile and unpredictable as a result of the uncertainty related to the U.S.

economy and global economy.

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

The price (year to date average) for galvanized steel and aluminum remained relatively flat, as compared to the price (year to date average) at September 30, 2024.

The price levels of our raw materials fluctuate due to various economic factors within the U.S.

and global economy.

At March 31, 2026, the price for copper and aluminum increased by approximately 7.1% and 18.8%, respectively, while stainless steel and galvanized steel decreased approximately 11.6% and 3.5%, respectively.

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.

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 January 1, 2025, we implemented a 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.

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

To date, we estimate that the amount of surcharge realized has not covered the additional costs from the tariffs, but expect this to change by the end of the year as we fully realize our surcharge.

Due to our favorable liquidity position, we are well positioned to make strategic purchases of materials when we see opportunities or potential disruptions in our supply chain.

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:

• In March 2024, we awarded annual merit raises for an overall 3.3% increase to wages.

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

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

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The following table shows our historical backlog levels:

September 30,

2026 December 31,

2024 September 30,

2025 March 31,

(in thousands)

AAON Products $ 423,316 $ 327,343 $ 239,067

BASX Products 896,824 539,747 408,627

AAON-branded Products $ 509,806 $ 526,350 $ 403,863

BASX-branded Products 1,619,649 1,302,145 623,006

Total Backlog $ 2,129,455 $ 1,828,495 $ 1,026,869

At September 30, 2025, our consolidated backlog is $1,320.1 million, an increase of 103.8%, or $672.4 million, as compared to September 30, 2024.

Backlog was up from a year ago for both AAON Products and BASX Products with BASX Products increasing 119.5%, or $488.2 million, when compared to September 30, 2024.

At March 31, 2026, our consolidated backlog is $2,129.5 million, an increase of 107.4%, or $1,102.6 million, as compared to March 31, 2025.

Backlog was up from a year ago for both AAON-branded products and BASX-branded products with BASX-branded products increasing 160.0%, or $996.6 million, when compared to March 31, 2025.

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

Consolidated Results of Operations

Three months ended September 30, Nine months ended September 30,

2025 2024 2025 2024

(in thousands)

Three Months Ended March 31,

(in thousands, except per share data)

Net sales $ 496,936 $ 322,054

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Selling, general and administrative expenses 67,906 51,293

Loss (gain) on disposal of assets 36 1 (4) (15)

Gain on disposal of assets — (40)

Income from operations 57,059 35,111

The following are recent highlights and items that impacted our results of operations, cash flows and financial condition:

• We continue to see strong demand and growth of the BASX brand with increases in net sales of $61.1 million and $217.3 million for the three and nine months ended September 30, 2025, respectively.

This growth is primarily driven by data center demand for our liquid cooling solutions.

• The AAON brand has experienced challenges with a softer rooftop market due to macroeconomic factors like higher interest rates and slowing construction starts.

Additionally, the refrigerant change that went into effect on January 1, 2025 created supply chain constraints for components with the new refrigerant that challenged the first quarter and lingered into the second quarter.

As a result, net sales for the AAON brand were down $4.1 million and $102.4 million for the three and nine months ended September 30, 2025, respectively.

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

The adoption of this new system has caused some disruptions due to changes in processes.

These disruptions primarily impacted the AAON Coil Products segment with decreased net sales and gross profit margins during the three months ended, June 30, 2025.

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

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

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

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

Interest expense (5,055) (2,802)

Other income, net 77 174

Income before taxes 52,081 32,483

Income tax provision 12,266 3,191

Net income $ 39,815 $ 29,292

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

• Net sales for the three months ended March 31, 2026 grew 54.3% to $496.9 million driven by the strong demand and growth of our BASX-branded products.

BASX-branded products increased 72.4%, or $96.0 million when compared to the three months ended March 31, 2025.

• Income from operations as a percent of sales increased to 11.5% compared to 10.9% a year ago, reflecting higher production volumes and improving execution.

• We have a strong balance sheet with a leverage ratio of 1.71 and available borrowings under our Revolver of $173.5 million.

We report our financial results based on three reportable segments:

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

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

Segment Operating Results for the Three Months Ended March 31, 2026 and 2025

Three Months Ended

September 30,

2025 Percent of Sales 1

September 30,

2024 Percent of Sales 1

$ Change % Change

(in thousands)

AAON Oklahoma $ 238,748 62.1 % $ 228,887 69.9 % $ 9,861 4.3 %

AAON Coil Products 70,246 18.3 % 35,232 10.8 % 35,014 99.4 %

BASX 75,244 19.6 % 63,133 19.3 % 12,111 19.2 %

Net sales $ 384,238 $ 327,252 $ 56,986 17.4 %

Cost of Sales 2

AAON Oklahoma $ 163,519 68.5 % 144,768 63.2 % $ 18,751 13.0 %

AAON Coil Products 58,914 83.9 % 22,811 64.7 % 36,103 158.3 %

BASX 54,944 73.0 % 45,515 72.1 % 9,429 20.7 %

Cost of sales $ 277,377 72.2 % $ 213,094 65.1 % $ 64,283 30.2 %

Gross Profit 2

AAON Oklahoma $ 75,229 31.5 % $ 84,119 36.8 % $ (8,890) (10.6) %

AAON Coil Products 11,332 16.1 % 12,421 35.3 % (1,089) (8.8) %

BASX 20,300 27.0 % 17,618 27.9 % 2,682 15.2 %

Gross profit $ 106,861 27.8 % $ 114,158 34.9 % $ (7,297) (6.4) %

1 Cost of sales and gross profit for each segment are calculated as a percentage of the respective segment’s net sales.

Total cost of sales and total gross profit are calculated as a percentage of total net sales.

2 Presented after intercompany eliminations.

Total net sales increased $57.0 million, or 17.4%.

AAON Oklahoma had net sales of $238.7 million, an increase of 4.3% compared to the same period in the prior year.

This increase was driven by the strong backlog entering the quarter and a successful ramp up of production.

Sales were up 99.4%, at AAON Coil Products primarily driven by growth in BASX branded products of $45.9 million for a large liquid cooling data center.

AAON branded products declined $10.9 million due to disruptions caused by the change in ERP systems.

BASX net sales were up 19.2% to $75.2 million due to the continued demand for data center solutions and increasing production out of our Memphis facility.

Gross profit decreased $7.3 million or 6.4% and from 34.9% of sales to 27.8% of sales.

AAON Oklahoma’s decrease in gross profit is driven by the impact of tariffs and the additional overhead from our Memphis plant.

Memphis is part of AAON Oklahoma, building intercompany sales for the BASX segment at cost.

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

Memphis contributed $4.5 million in cost of sales to the AAON Oklahoma segment.

AAON Coil Products gross profit margin decreased from 35.3% to 16.1% as a result of slower production from implementing our ERP system at the beginning of the second quarter.

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

Raw Material Costs

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

2025 2024 % Change

Copper $ 6.41 $ 5.32 20.5 %

Galvanized steel $ 0.60 $ 0.60 — %

Stainless steel $ 1.68 $ 2.33 (27.9) %

Aluminum $ 2.45 $ 2.47 (0.8) %

Selling, General and Administrative Expenses

Three Months Ended Percent of Sales

September 30,

2025 September 30,

(in thousands)

Warranty $ 8,905 $ 4,670 2.3 % 1.4 %

Profit sharing 3,937 6,242 1.0 % 1.9 %

Salaries & benefits 19,628 14,974 5.1 % 4.6 %

Stock compensation 3,238 2,806 0.8 % 0.9 %

Advertising 686 1,012 0.2 % 0.3 %

Depreciation & amortization 6,836 5,835 1.8 % 1.8 %

Insurance 2,097 2,148 0.5 % 0.7 %

Professional fees 2,301 1,189 0.6 % 0.4 %

Memphis incentive fee — — — % — %

Donations 302 59 0.1 % — %

Other 15,300 9,702 4.0 % 3.0 %

Total SG&A $ 63,230 $ 48,637 16.5 % 14.9 %

Selling, general and administrative expenses increased $14.6 million for the three months ended September 30, 2025, from the prior year period.

Warranty is up $4.2 million due to an increase in our historical claims.

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

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

Other includes an increase in expense of $3.2 million for technology related consulting fees along with increased expenses related to travel and other consulting expenses.

Three Months Ended Effective Tax Rate

September 30,

2025 September 30,

(in thousands)

Income tax provision $ 7,660 $ 11,885 19.9 % 18.4 %

The Company’s estimated annual 2025 effective tax rate, excluding discrete events, is expected to be approximately 24.1%.

Discrete events such as excess tax benefits related to stock compensation and various tax credits consistently provide a benefit, keeping our actual effective rate lower than the stated 24.1%.

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

Nine Months Ended

September 30,

2025 Percent of Sales 1

September 30,

2024 Percent of Sales 1

March 31, 2026 Percent of Sales 1

March 31, 2025 Percent of Sales 1

$ Change % Change

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2 Presented after intercompany eliminations.

Total net sales increased $114.9 million, or 12.7%.

AAON Oklahoma had net sales of $585.7 million, a decrease of 11.9% compared to the same period in the prior year.

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

Sales were up 145.2% for AAON Coil Products primarily driven by growth in BASX branded products of $152.2 million for liquid cooling data centers.

AAON branded products declined $20.4 million due to disruptions caused by our ERP implementation.

BASX net sales were up 42.2% to $209.4 million due to the continued demand for data center solutions and increasing production out of our Memphis facility.

Gross profit decreased $43.5 million or 13.6% and from 35.4% of sales to 27.1% of sales.

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

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

Memphis contributed $9.3 million in cost to the AAON Oklahoma segment.

AAON Coil Products gross profit margin decreased from 37.1% to 25.4% and is a result of slower production from implementing our ERP system at the beginning of the second quarter.

Total net sales increased $174.9 million, or 54.3% driven by growth across all segments.

AAON Oklahoma saw significant improvement with an increase of $82.1 million in net sales driven by increased production out of the Tulsa facility and a stronger backlog heading into 2026.

AAON-branded products struggled in the first quarter of 2025 due to the change in refrigerant.

The $23.6 million increase in net sales for AAON Coil Products is due to sales of BASX-branded products for liquid cooling data center orders.

BASX net sales are up $69.2 million due to the production of BASX-branded products from our Memphis facility.

Gross profit as a percentage of sales is stable at 25.1% compared to 26.8% in the same period a year ago.

AAON Oklahoma gross profit margin is up slightly to 26.3% due to realization of price increases and increased volume out of the Tulsa facility.

However, AAON Oklahoma also carries the overhead related to the Memphis plant as all Memphis sales are intercompany transactions done at cost and are reflected within the BASX segment.

The approximate overhead related to the Memphis plant is $9.8 million .

BASX gross profit margin remained flat year-over-year with additional costs related to outsourcing which limited the benefits realized by the additional volume.

Raw Material Costs

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

Three-month average raw material cost per pound as of March 31:

2026 2025 % Change

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Selling, General and Administrative Expenses

Nine Months Ended Percent of Sales

September 30,

2025 September 30,

Three Months Ended March 31, Percent of Sales

2026 2025 2026 2025

(in thousands)

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Total SG&A $ 67,906 $ 51,293 13.7 % 15.9 %

Selling, general and administrative expenses increased $33.9 million for the nine months ended September 30, 2025, from the prior year period.

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

Selling, general and administrative expenses as a percentage of sales are down year-over-year from 15.9% in 2025 to 13.7% in 2026.

The dollar increase of $16.6 million is primarily driven by higher salaries and benefits, including profit sharing and stock compensation.

Profit sharing is up as a result of our higher earnings in the period.

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

Depreciation and amortization increased $7.1 million during the period due to increased investments from our ERP implementation.

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

Other includes an increase in expense of $8.9 million for technology related consulting fees along with increased expenses related to travel and other consulting expenses.

Nine Months Ended Effective Tax Rate

September 30,

2025 September 30,

Three Months Ended March 31, Effective Tax Rate

2026 2025 2026 2025

(in thousands)

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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 increased $1.0 million from December 31, 2024 to September 30, 2025.

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

Working Capital - Our unrestricted cash and cash equivalents remained stable from December 31, 2025 to March 31, 2026.

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”).

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The Amended Revolver is prepayable without penalty.

As of September 30, 2025 and December 31, 2024, we had $360.1 million and $76.5 million outstanding under the Amended Revolver, respectively.

We have one standby letter of credit totaling $0.7 million as of September 30, 2025 and one standby letter of credit totaling $0.3 million as of December 31, 2024.

At September 30, 2025, we have $139.2 million of borrowings available under the Amended Revolver.

The Amended Revolver expires May 27, 2030.

The Term Loan had no outstanding balance as of September 30, 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.

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

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 March 31, 2026, and December 31, 2025, we had an outstanding balance under the Revolver of $425.2 million and $398.3 million, respectively.

We had two standby letters of credit totaling $1.3 million and one standby letter of credit totaling $0.7 million as of March 31, 2026, and December 31, 2025, respectively.

Borrowings available under the Revolver at March 31, 2026, were $173.5 million.

Any outstanding loans under the Revolver bear interest at the daily compounded secured overnight financing rate (“SOFR”) plus the applicable margin, with a 10 basis point credit spread adjustment.

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

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

Fees associated with the unused portion of the committed amount are included in interest expense on our consolidated statements of income for the three and nine months ended September 30, 2025 and 2024.

Fees associated with the unused portion of the committed amount are included in interest expense on our consolidated statements of income for the three and three months ended March 31, 2026 and 2025.

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

Three months ended Nine months ended

September 30,

2025 September 30,

2024 September 30,

2025 September 30,

Three Months Ended March 31,

Revolver 5.3% 5.6%

Term loan —% * 1

1 Funds were borrowed on December 16, 2024.

No borrowings outstanding during the nine months ended September 30, 2024.

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

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

At September 30, 2025, we were in compliance with our financial covenants, as defined by the Amended Loan Agreement.

At March 31, 2026, we were in compliance with our financial covenants, as defined by the Revolver.

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

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

At March 31, 2026, our leverage ratio was 1.71 to 1.0, which meets the requirement of not being above 3 to 1.

2019 New Markets Tax Credit - On October 24, 2019, the Company entered into a transaction with a subsidiary of an unrelated third-party financial institution (the “2019 Investor”) and a certified Community Development Entity under a qualified New Markets Tax Credit (“2019 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 “2019 Project”).

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

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 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

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.

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 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”).

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This financing arrangement is secured by a guarantee from the Company, including an unconditional guarantee of the NMTCs.

The unused net proceeds from the closing of the 2023 NMTC are included in restricted cash on our consolidated balance sheets required to be used for the 2023 Project.

2024 New Markets Tax Credit

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

The net proceeds from the closing of the 2023 NMTC are included in restricted cash on our consolidated balance sheets required to be used for the 2023 Project.

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

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 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.

This financing arrangement is secured by a guarantee from the Company, including an unconditional guarantee of NMTCs.

The net proceeds from the closing of the 2024 NMTC are included in restricted cash on our consolidated balance sheets required to be used for the 2024 Project.

2026 New Markets Tax Credit - On April 16, 2026 the Company entered into a transaction with a subsidiary of an unrelated third-party financial institution (the “2026 Investor”) and a certified Community Development Entity under a qualified New Markets Tax Credit (“2026 NMTC”) program pursuant to Section 45D of the Internal Revenue Code of 1986, as amended, related to an investment in our Memphis, TN facility.

In connection with the 2026 NMTC transaction, the Company received a $50.5 million NMTC allocation for the 2026 Project and secured low interest financing and the potential for future debt forgiveness related to the 2026 Project.

Upon closing of the 2026 NMTC transaction, the Company provided an aggregate of approximately $35.2 million to the 2026 Investor, in the form of a loan receivable, with a term of 27 years, bearing an interest rate of 1.2%.

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This financing arrangement is secured by a guarantee from the Company, including an unconditional guarantee of the NMTCs.

The unused net proceeds from the closing of the 2024 NMTC are included in restricted cash on our consolidated balance sheets required to be used for the 2023 Project.

The net proceeds from the closing of the 2026 NMTC were $12.9 million.

Stock Repurchase - The Board has authorized stock repurchase programs for the Company.

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Our open market repurchase programs are as follows:

Effective Date Authorized Repurchase $ Expiration Date

November 3, 2022 $50 million 1

February 27, 2024

February 27, 2024 $50 million 1

June 4, 2024 $50 million 2

June 14, 2024

Agreement Execution Date Authorized Repurchase $ Expiration Date

February 25, 2025 $100 million ** 1

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

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

1 Expiration Date is at Board's discretion.

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

As of September 30, 2025, approximately $30.0 million of shares have been repurchased, and approximately $70.0 million remains under the current board authorization.

As of March 31, 2026, 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.

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Our repurchase activity is as follows:

Nine Months Ended

September 30, 2025 September 30, 2024

Three Months Ended March 31,

(in thousands, except share and per share data)

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LTIP Shares 34,568 3,203 92.66 82,664 8,312 100.55

93,176 9,300 99.81 87,981 7,455 84.73

464,315 $ 39,292 $ 84.62 1,441,545 $ 107,489 $ 74.57

1 Includes stock repurchased for payment of statutory tax withholding and/or stock repurchased to cover the strike price of stock options.

Dividends - At the discretion of the Board, we pay cash dividends.

Total 34,568 $ 3,203 $ 92.66 453,803 $ 38,304 $ 84.41

Dividends - At the discretion of the Board of Directors, we pay cash dividends.

Board approval is required to determine the date of declaration and amount for each cash dividend payment.

Our recent cash dividends are as follows:

Declaration Date Record Date Payment Date Dividend

per Share Annualized Dividend

Our recent dividends are as follows:

Dividend Annualized Dividend

Declaration Date Record Date Payment Date per Share

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

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March 5, 2026 March 18, 2026 March 30, 2026 $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

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 2027 and the foreseeable future.

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Statement of Cash Flows

The following table reflects the major categories of cash flows for the nine months ended September 30, 2025 and 2024.

The following table reflects the major categories of cash flows for the three months ended March 31, 2026 and 2025.

For additional details, see the consolidated financial statements.

Nine Months Ended

September 30,

2025 September 30,

Three Months Ended March 31,

(in thousands)

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Accrued liabilities & other long-term liabilities 4,483 (2,412)

Net cash (used in) provided by operating activities

(18,784) 191,687

Net cash provided by (used in) operating activities 33,994 (9,214)

Investing Activities

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Acquisition of intangible assets (7,808) (3,717)

Grant proceeds received 1,650 —

Net cash used in investing activities (51,285) (50,388)

(138,623) (113,748)

Financing Activities

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Cash dividends paid to stockholders (8,146) (8,095)

Net cash provided by (used in) financing activities

$ 153,160 $ (80,297)

Cash Flows Provided by Operating Activities

Net cash provided by financing activities $ 17,152 $ 55,471

Cash Flows from Operating Activities

The Company currently manages cash needs through working capital as well as drawing on its line of credit.

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

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

Cash Flows Used in Investing Activities

Capital expenditures during the nine months ended September 30, 2025, relate to additional infrastructure and machinery for both replacement and production growth, finalizing our new production space in our Redmond, Oregon and Longview, Texas locations, additional equipment and production capacity in Parkville, Missouri, and new equipment for our Memphis,

Tennessee facility.

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

The capital expenditure program for 2025 is estimated to be approximately $180.0 million.

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.

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

Capital expenditures during the three months ended March 31, 2026, relate to continued build out of our Memphis, Tennessee facility and maintenance of our Tulsa facility.

We continue to make investments to purchase and 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.

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

Cash Flows Provided by Financing Activities

Cash Flows from Financing Activities

The change in cash from financing activities in 2026 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 nine months ended September 30, 2025, we repurchased $30.0 million under our open market share repurchase programs.

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

Commitments and Contractual Obligations

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

Commitments and Contractual Agreements

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.

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

We had no material contractual purchase obligations as of September 30, 2025, except as described below.

We had no material contractual purchase obligations as of March 31, 2026, except as described below.

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

Payments made in satisfaction of the purchase commitment were approximately $1.6 million and $3.8 million the three and nine months ended September 30, 2025, respectively, as compared to $3.1 million and $9.7 million for the three and nine months ended September 30, 2024, respectively.

Estimated minimum future payments are $5.3 million, $10.5 million, and $11.2 million for 2025, 2026, and 2027, respectively.

Critical Accounting Policies

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

For the three months ended March 31, 2026 and 2025, the Company made payments of $3.2 million and $0.6 million on this contract, respectively.

Estimated minimum future payments are $7.3 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 $23.3 million for 2026.

We had no other material contractual purchase obligations as of March 31, 2026.

Critical Accounting Estimates

There have been no material changes in the Company’s critical accounting policies during the three months ended March 31, 2026.

Recent Accounting Pronouncements

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• naturally-occurring events, pandemics, and other disasters causing disruption to our manufacturing operations, product deliveries and production capacity;

• changes in U.S.

or foreign trade policies, including additional tariffs or global trade conflicts;

• the impact caused by inflationary cost pressures, national or global health issues, such as the coronavirus pandemic (“COVID-19”), any variants or similar outbreaks (including the response thereto) and their effects on, among other things, demand for our products, supply chain disruptions, our liquidity and financial position, results of operations, stock price, payment of dividends, our ability to secure new orders, our ability to convert backlog to revenue and impacts to the operations status of our facilities;

• natural disasters and extreme weather conditions, including, without limitation, their effects on locations where our products are manufactured;

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• general economic, market or business conditions;

• tightening of labor markets and the ability to hire employees for continued growth

• creditworthiness of our customers and their access to capital;

• changing technologies;

including, without limitation, our ability to effectively integrate artificial intelligence (AI) in our business:

• the material failure, interruption of service, compromised data or information technology security, phishing emails, cybersecurity breaches or other impacts to our information technology and related systems and networks (including any of the foregoing of third-party vendors and other contractors who provide information technology or other services);

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• economic, market or business conditions in the specific industry and market in which our businesses operate;

• geopolitical events, including armed conflicts, and their impact on market conditions, including supply chain disruption, pricing and the global economy

• future levels of capital expenditures, research and development and indebtedness, including, without limitation, our ability to reduce indebtedness and risks associated with the same;

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Except as required by federal securities laws, we undertake no obligation to update any forward-looking statement to reflect events, occurrences or developments after the date on which such statement is made.

For a discussion of risks and uncertainties which could cause actual results to differ from those contained in the forward-looking statements, please see Item 1A “Risk Factors” included in our Annual Report on Form 10-K, and as otherwise disclosed from time to time in our other filings with the SEC.

For a discussion of risks and uncertainties which could cause actual results to differ from those contained in the forward-looking statements, please see Item 1A “Risk Factors” included in this Quarterly Report on Form 10-Q, and as otherwise disclosed from time to time in our other filings with the SEC.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis