The Aaon Group — Third Quarter 2026 Earnings Summary

Financial Performance:

• Net sales increased 84.1% year-over-year to a record $707.4 million for the third quarter of 2026.
• Gross profit increased 76.4% year-over-year to $188.5 million, with a gross margin of 26.7% (an improvement of 60 basis points sequentially).
• Operating income increased 129.3% year-over-year to $100.0 million.
• GAAP diluted earnings per share (EPS) increased 124.3% year-over-year to $0.83; Non-GAAP adjusted EPS also increased 124.3% to $0.83.
• Year-to-date operating cash flow improved to $146.9 million, compared to a use of $18.8 million in the prior-year period.
• Total backlog increased 40.5% year-over-year to $1.9 billion.
• As of September 30, 2026, the company held $3.7 million in cash, cash equivalents, and restricted cash, with $386.7 million outstanding on its revolving credit facility.
• Restatements of the first and second quarters of 2026 increased first-half net sales by $10.7 million and diluted EPS by $0.09.

Guidance and Future Outlook:

• The company raised its full-year 2026 outlook to reflect net sales growth of 72%-75% (previously 55%-60%).
• Revised gross margin guidance is approximately 26% (previously 25%-26%).
• Revised SG&A as a percent of sales is approximately 13% (previously 13%-14%).
• Revised Depreciation & Amortization guidance is approximately $100 million (previously $95 million-$100 million).
• Management expects order strength to continue in the fourth quarter and into 2027, driven by strong customer engagement and a healthy pipeline in the data center market.

Business Segments and Product Lines:

• AAON-branded sales: Increased 19.6% year-over-year to $310.2 million, driven by a healthy backlog and production throughput gains. AAON-branded backlog increased 18.0% year-over-year.
• BASX-branded sales: Increased 218.3% year-over-year to $397.2 million, driven by strong data center demand and increased manufacturing capacity utilization. BASX-branded backlog increased 51.1% year-over-year.
• AAON Oklahoma Segment: Generated net sales of $283.5 million (up 18.7% year-over-year) and gross profit of $72.3 million. Segment profitability was impacted by $20.7 million in overhead expenses associated with the Memphis facility.
• AAON Coil Products Segment: Generated net sales of $192.6 million (up 174.2% year-over-year), driven primarily by BASX-branded liquid cooling sales of $165.5 million (up 255.6%).
• BASX Segment: Generated net sales of $231.3 million (up 207.4% year-over-year) and gross profit of $66.4 million.
• Total backlog decreased 5.9% sequentially to $1.9 billion, primarily reflecting accelerated conversion into record revenue and timing variability of large BASX project awards.

Market and Competitive Landscape:

• AAON continues to gain market share despite softer conditions in the broader commercial HVAC market.
• BASX maintains strong customer engagement and a healthy opportunity pipeline with strategic data center customers.
• The company is converting investments in capacity and capabilities into revenue, earnings, and cash flow while improving operational execution.

Risks and Challenges:

• The company identified a material weakness in its internal control over financial reporting during the third quarter reporting process.
• The company is continuing remediation efforts to strengthen its finance organization and control environment.
• Forward-looking statements note risks including fluctuations in raw material prices, commercial/industrial new construction market conditions, and the impact of the material weakness remediation.

Management Commentary and Tone:

• Matt Tobolski, President and CEO, stated that results reflect "strong execution" and progress in turning investments into stronger operating performance.
• Tobolski emphasized that the company is "moving with urgency to remediate the material weakness" and confirmed no evidence of fraud or misconduct.
• Andy Cheung, CFO and Treasurer, noted that robust earnings growth and disciplined execution drove "exceptional cash flow generation," providing a significant runway for strategic growth initiatives.
• Management expressed confidence in the underlying fundamentals, citing expanded capacity, shorter lead times, and differentiated solutions.

Other Key Points:

• The company restated its previously issued financial statements for the first and second quarters of 2026 due to errors in revenue recognition and accounting for software subscriptions.
• The restatements resulted in an increase to first-half 2026 gross margin of 71 basis points.
• Cash dividends declared per common share were $0.10 for the third quarter of 2026.
• The company will host a conference call and webcast to discuss the results.