AAON, INC. 10-Q Summary: Period Ended June 30, 2026
Business Context and Reporting Period
This report covers the quarterly period ended June 30, 2026, for AAON, Inc., a manufacturer of premium HVAC equipment, data center cooling solutions, and cleanroom systems. The company operates through three reportable segments: AAON Oklahoma, AAON Coil Products, and BASX. The filing indicates a period of significant expansion, particularly in the BASX segment driven by data center demand.
Key Financial Metrics
| Metric (in thousands) | Three Months Ended June 30, 2026 | Six Months Ended June 30, 2026 |
|---|---|---|
| Net Sales | $626,976 | $1,123,912 |
| Gross Profit | $152,491 | $277,456 |
| Gross Margin | 24.3% | 24.7% |
| Operating Income | $68,884 | $125,943 |
| Net Income | $56,659 | $96,474 |
| Diluted EPS | $0.68 | $1.15 |
| Operating Cash Flow (6mo) | $54,968 | |
| Capital Expenditures (6mo) | $(97,282) | |
| Total Debt (Long-term) | $435,000 | |
| Available Liquidity (Revolver) | $163,692 |
Material Changes vs. Prior Period
- Revenue Growth: Net sales increased 101.2% year-over-year for the quarter and 77.4% for the six-month period. This was driven primarily by the BASX segment, which saw sales rise 220.7% (quarter) and 163.4% (six months) due to hyperscale data center demand.
- Profitability: Net income surged 266% for the quarter and 115% for the six months compared to the prior year. Operating leverage improved, with SG&A expenses as a percentage of sales declining from 19.0% to 13.3% in the quarter.
- Backlog: Total backlog reached $1.97 billion, a 98% increase from the prior year, with BASX-branded products accounting for the majority of the growth.
- Margin Pressure: Consolidated gross margin decreased slightly to 24.3% (from 26.6% prior year) due to overhead costs associated with ramping up the new Memphis facility and higher raw material costs (copper and aluminum).
Guidance, Outlook, and Risks
- Outlook: Management expects continued strength in the data center market driven by AI and high-performance computing. The company anticipates stabilizing activity in commercial construction markets but notes mixed economic indicators.
- Capital Allocation: The 2026 capital expenditure program is estimated at approximately $190 million, focused on expanding capacity in Memphis, Tennessee, and maintaining Tulsa facilities.
- Tax Rate: The estimated annual 2026 effective tax rate is approximately 25.0%, excluding discrete events. Recent tax law changes (OBBBA) impacted deferred tax assets and liabilities in the prior year.
- Risks: Key risks include volatility in raw material prices (copper, aluminum, steel), potential supply chain disruptions from tariffs, and the cyclical nature of the commercial construction market. The company also faces execution risks related to the rapid expansion of its Memphis facility.
Investor Verification Checklist
- Backlog Conversion: Verify the rate at which the record $1.97 billion backlog is converting to revenue, specifically for BASX data center projects.
- Memphis Ramp-Up: Monitor the impact of the new Memphis facility on AAON Oklahoma's gross margins, as overhead costs are currently being absorbed there while revenue is recognized in the BASX segment.
- Raw Material Hedging: Assess the company's ability to pass on increased costs for copper and aluminum (up 8.2% and 20.3% YTD) to customers.
- Debt Covenants: Confirm continued compliance with the leverage ratio covenant (currently 1.46x, well below the 3.0x limit) as debt levels fluctuate with working capital needs.
- NMTC Compliance: Review the status of New Markets Tax Credit (NMTC) obligations, particularly the 2019 project compliance period ending in 2026, which may trigger debt forgiveness.