AAON, INC. Q4 FY2025 earnings call

• 2025 was marked by achievements and transformational investments, strengthening the business. - Data center market is a key growth opportunity; Basics branded sales and backlog grew significantly. - Aon branded sales were resilient despite industry challenges. - Investments in manufacturing, supply chain, product development, and ERP upgrade were made. - Focus on margin improvement, with strong bookings and backlog in Q4. - Production drove record sales, with margin dynamics across facilities.

Basics branded sales increased 143% to $548 million in 2025 with backlog growing 141% to $1.3 billion. Aon branded sales declined 8% but outperformed the industry, bookings grew ~12% driven by national accounts. Aon Oklahoma net sales increased 11.1% to $215.5 million. Aon Coil product sales rose 93.6% with $75.3 million in basics-rated liquid cooling product sales. Basics segment sales grew 109.1% to $106.1 million.

2026 sales growth expected 18%-20% with gross margin 29%-31%. SG&A as a percent of sales expected to be about 16%, depreciation and amortization expenses in $95 to $100 million range. Focus on execution, production, throughput, backlog conversion for margin expansion.

Inherent difficulties, uncertainties in predictive statements. Risk factors in press release and Form 10-K. Near-term challenges like refrigerant transition and ERP upgrade impacting margins.

Q: Matt, can we just start on the gross margin in the quarter?

A: Ryan Merkel's question about Q4 gross margin and 1Q26 expectations, Matt's response about Tulsa volumes, supply chain issues, etc.; Q: Noah K. at Oppenheimer's question on cash generation and debt; A: Matt's response on cash flows, working capital, and debt; Q: Brent Seelman at DA Davidson's question on Basex backlog composition and Aon branded order intake; A: Matt's response on backlog composition, customer base diversity, and Aon branded execution; Q: Timothy Voice at Baird's question on Oklahoma business lead times and Basics business capacity; A: Matt's response on lead times, capacity ramp, and ramp rate as limiting factor; Q: Julio Romero at Sidoti & Company's question on 2026 sales growth vs Invest Today targets and IT systems upgrades; A: Matt's response on sales growth, margin targets, and IT system focus on execution; Q: Chris Moore at CJS Securities' question on 2026 revenue trajectory and liquid cooling percentage impact; A: Matt's response on revenue trajectory and liquid cooling percentage dynamics