AAON — Second Quarter 2026 Earnings Summary

Financial Performance

• Net sales increased 101.2% year-over-year to a record $627.0 million for the quarter, compared to $311.6 million in Q2 2025; year-to-date sales reached $1.12 billion.
• Gross profit rose 84.3% to $152.5 million for the quarter (24.3% margin), compared to $82.7 million (26.6% margin) in Q2 2025; year-to-date gross profit was $277.5 million.
• Operating income surged 192.1% to $68.9 million for the quarter, compared to $23.6 million in Q2 2025; year-to-date operating income was $125.9 million.
• GAAP diluted EPS increased 257.9% to $0.68 for the quarter, compared to $0.19 in Q2 2025; year-to-date diluted EPS was $1.15.
• Non-GAAP adjusted EPS increased 213.6% to $0.69 for the quarter; year-to-date adjusted EPS was $1.16.
• Selling, general and administrative (SG&A) expenses as a percent of sales declined 570 basis points to 13.3% for the quarter.
• Year-to-date operating cash flow improved to $55.0 million, a significant turnaround from a negative $31.0 million in the same period of 2025.
• As of June 30, 2026, the company held $12.7 million in cash, cash equivalents, and restricted cash, with $435.0 million outstanding on its revolving credit facility.

Guidance and Future Outlook

• Full-year 2026 outlook raised to reflect net sales growth of 55%-60% (previously 40%-45%).
• Revised gross margin guidance for 2026 is approximately 25%-26% (previously 27%-28%).
• SG&A as a percent of sales guidance updated to 13%-14% (previously 14%-15%).
• Depreciation and amortization guidance remains unchanged at $95 million-$100 million for 2026.
• Management expects sequential margin improvement in the second half of the year driven by higher production volumes, better capacity utilization, pricing actions, and sourcing initiatives.

Business Segments and Product Lines

• BASX-branded sales grew 216.2% to a record $345 million, driven by data center demand and increased manufacturing capacity utilization.
• AAON-branded sales increased 39.3% to $282.2 million, supported by a healthy backlog and improved production throughput.
• AAON Oklahoma segment net sales rose 41.7% to $262.3 million; gross margin was 24.3% (excluding $18.1 million in Memphis facility overhead, adjusted margin was 31.2%).
• AAON Coil Products segment net sales surged 150.9% to $146.7 million, primarily driven by BASX-branded liquid cooling sales of $126.6 million (up 208.4%).
• BASX segment net sales increased 220.7% to $218.0 million, with gross margin expanding to 30.0% from 27.9% in the prior year.
• Total backlog increased 98.0% year-over-year to $2.0 billion; BASX backlog rose 185.4% while AAON backlog increased 9.4%.

Market and Competitive Landscape

• The BASX brand benefits from significant data center investment activity, a healthy customer pipeline, and strong engagement with strategic customers.
• The AAON brand continues to gain market share despite a softer commercial HVAC market.
• Booking activity remained solid across both brands, contributing to market share gains and elevated backlog levels.
• The Memphis facility ramp-up and increased utilization of recently added production capacity are supporting substantially higher production levels and improved customer delivery performance.

Risks and Challenges

• Near-term margin pressure exists due to the pace of growth and capacity ramp, including the impact of the Memphis facility overhead ($18.1 million in Q2 2026).
• Gross margin performance was impacted by inflationary cost pressures, the use of outsourced components, and freight pressure.
• Large, highly engineered project timing variability can cause quarter-to-quarter fluctuations in backlog conversion and order awards.
• Forward-looking statements note risks related to raw material and component price fluctuations, commercial/industrial new construction market conditions, interest rate changes, and general economic conditions.

Management Commentary and Tone

• President and CEO Matt Tobolski stated that results demonstrate continued demand strength and progress in scaling the company, citing higher throughput and strong backlog conversion.
• Management emphasized that investments in capacity, leadership, supply chain, and manufacturing infrastructure are translating into measurable operating progress.
• CFO Andy Cheung highlighted meaningful improvement in financial leverage and operating cash flow generation, noting a focus on productivity and working capital efficiency for the remainder of the year.
• The tone is confident regarding long-term earnings power and the path to improved profitability, despite acknowledging current margin work ahead.

Other Key Points

• The company declared cash dividends of $0.10 per common share for the quarter.
• A $1.4 million infrequent expense related to an incentive fee for the Memphis, Tenn. facility was excluded from non-GAAP adjusted EPS.
• Capital expenditures for the six months ended June 30, 2026, were $97.3 million.
• Stock options exercised generated $29.1 million in proceeds during the first half of 2026.
• The company hosts a conference call and webcast to discuss results, with a replay available on its investor website.