17:40:34 EDT Tue 09 Jun 2026
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AAON Reports Fourth Quarter and Full Year 2025 Results

2026-03-02 07:00 ET - News Release

AAON Reports Fourth Quarter and Full Year 2025 Results

PR Newswire

Carries Record Backlog into 2026

Full Year 2025 Results

(All comparisons are year-over-year, unless otherwise noted)

  • Delivered strong sales growth in 2025, while margins and earnings reflected strategic investments in production expansion and ERP implementation to support future growth
    • Net sales increased 20.1% to $1.44 billion compared to $1.20 billion in 2024
    • Gross margin was 26.7% compared to 33.1% in 2024
    • GAAP diluted EPS was $1.29 compared to $2.02 in 2024
  • Robust bookings trends of both AAON- and BASX-branded equipment support continued market share gains
    • Record year-end backlog of $1.83 billion, up 110.9% year-over-year, providing strong visibility entering 2026

Fourth Quarter 2025 Results

(All comparisons are year-over-year, unless otherwise noted)

  • Delivered strong sales growth in the quarter, while margins reflected capacity expansions and upfront fixed costs absorption associated with production ramp-up
    • Net sales increased 42.5% to $424.2 million compared to $297.7 million in the fourth quarter of 2024
    • Gross margin was 25.9% compared to 26.1% in the fourth quarter of 2024
    • GAAP diluted EPS was $0.39 compared to $0.30 in the fourth quarter of 2024

Company Introduces 2026 Outlook

  • 2026 outlook reflects revenue growth of 18-20% and gross margins of approximately 29-31%, supported by record backlog, expanded capacity, and improving operational execution

TULSA, Okla., March 2, 2026 /PRNewswire/ -- AAON, INC. (NASDAQ-AAON), a leader in high-performing, energy-efficient HVAC solutions that bring long-term value to customers and owners, today announced its results for the fourth quarter and full year 2025.

Full Year 2025 Results

"2025 represented a year of record growth for AAON, driven by strong bookings and sales reflecting expanding market share and growing demand for our products and custom solutions," said AAON President and CEO Matt Tobolski. "During the year, we executed on targeted investments to support long-term growth and profitability. These actions included strengthening our leadership team, enhancing supply chain management capabilities, and expanding manufacturing capacity. These investments have increased production throughput and expanded our ability to serve customers at scale, although lead times have remained extended as a result of strong order activity and recovery from prior production challenges.

"Our manufacturing footprint increased approximately 25%, and our production capacity for BASX-branded data center equipment more than doubled following the renovation and commissioning of our new 787,000-square-foot Memphis, Tennessee facility. Together, these investments have significantly strengthened the Company's operating foundation and position us well for continued growth and margin improvement in 2026 and beyond.

"The BASX brand more than doubled revenue and ended the year with backlog up 141.3%, reflecting strong adoption of our customized air-side and liquid cooling solutions in the data center market. Demand for AAON-branded equipment also remained strong, and production increased steadily throughout the year, with additional ramping planned. We made substantial progress stabilizing and advancing the implementation of our new Enterprise Resource Planning ("ERP") system. While the ERP rollout initially impacted production at our Longview, TX facility, operating performance improved consistently over time, reinforcing our confidence in execution as we focus on continued operational improvement and meeting customer commitments."

Fourth Quarter 2025 Results

Net sales for the fourth quarter of 2025 increased 42.5% to $424.2 million, from $297.7 million in the fourth quarter of 2024. BASX-branded sales increased 138.8% to $181.4 million, reflecting strong demand for both air-side and liquid cooling equipment for data center applications. AAON-branded sales increased 9.5% to $242.8 million, supported by a strong backlog and favorable comparison to the prior-year period, which was adversely impacted by the industry's refrigerant transition. Booking activity remained solid across both brands, led by the BASX brand, which ended the quarter with backlog up 141.3%, while AAON-branded bookings increased approximately 20% compared to the prior-year period.

Gross profit margin in the quarter was 25.9%, compared to 26.1% in the prior-year period. The modest year?over?year decline primarily reflected unabsorbed fixed?cost investments at the Company's new Memphis facility as production capacity was brought online to support a significant ramp of BASX?branded data center equipment, positioning the business for improved operating leverage as volume scales.

Earnings per diluted share were $0.39, an increase of 30.0% year-over-year.

Dr. Tobolski added, "During the quarter, we made meaningful progress expanding production capacity and further advanced our operational readiness for sustained long-term growth. Production at our new Memphis facility is ramping rapidly, while our Longview, Texas facility continues to scale, increasing our ability to support accelerating demand for our data center equipment. BASX-branded equipment sales increased 138.8% year-over-year in the fourth quarter, and backlog increased 141.3%, providing strong visibility as we enter 2026.

"AAON?branded equipment sales increased 9.5% year?over?year, representing our strongest quarterly growth since the second quarter of 2024. Despite typical seasonal headwinds, we ended the year with backlog up 60.8%, underscoring the strength and durability of underlying demand. We have a clear and disciplined operational plan in place to continue ramping production in 2026, positioning the Company to deliver solid growth and margin expansion.

"Fourth?quarter margins reflected mixed operating dynamics across our facilities. While production volumes in Tulsa were below plan, Memphis reached profitability earlier than expected, validating our investment strategy. Fixed?cost under?absorption continues to pressure consolidated margins in the near term; however, these impacts are largely transitory and directly tied to capacity ramp-up that is already underway, positioning the Company for improved operating leverage as volumes scale. With capacity in place and execution continuing to improve, we remain confident in our path toward meaningful margin expansion throughout 2026."

Backlog

                        December 31, 2025      September 30, 2025  December 31, 2024


                                          
 
 (in thousands)



 AAON-branded products          $526,350                 $423,316            $327,343



 BASX-branded products         1,302,145                  896,824             539,747


                               $1,828,495               $1,320,140            $867,090

Total backlog increased 110.9% year-over-year to $1.83 billion, and increased 38.5% sequentially. Growth was driven primarily by the BASX-brand, with backlog increasing 141.3% from the prior year and 45.2% from the prior quarter, while AAON-branded equipment backlog increased 60.8% year-over-year. The Company's growing backlog and robust order activity demonstrate meaningful market share capture as customers prioritize high-performance, energy-efficient, and reliable infrastructure solutions. A significant portion of the BASX-branded backlog is slated for production at the Memphis facility, which will support a steady ramp in production in 2026.

2026 Outlook

Dr. Tobolski concluded, "As we enter early 2026, we are positioned to build on the investments made throughout 2025 in our people, products, manufacturing capabilities, and working capital. While these initiatives carried upfront costs and impacted near-term results, they have meaningfully strengthened AAON's operating foundation and positioned the Company to meet the growing demand in the data center market.

"Our ERP upgrade presented short-term challenges, which are now largely behind us, and is expected to deliver lasting benefits through improved production throughput, operating efficiency, and margin expansion. We begin 2026 with record backlog, allowing us to remain sharply focused on execution and customer delivery. To support a disciplined ramp in production throughput and accelerate margin improvement, we have moderated the pace of near-term ERP rollouts, enhancing returns on our recent investments while ensuring the Company remains well positioned for future IT system upgrade.

"With these actions in place, and with operational execution continuing to improve, we expect 2026 sales to grow 18%-20%, with gross margin of 29%-31%. We also anticipate SG&A expenses as a percentage of sales will be approximately 16% and expect depreciation and amortization expenses of $95-$100 million."

                                               Current


      
        
            Metric               FY26




   
      
            YoY Sales Growth        18%-20%




 
      
            Gross Profit Margin       29%-31%




 
      
            SG&A as a % of sales         ~16%




    
      
            Depreciation &    
 $95M-$100M
             Amortization

Segment Results

AAON Oklahoma

                                                
 
 Three Months Ended


                      (in thousands) December 31,       September 30,  December 31,
                                             2025                 2025           2024



 Net sales                              $215,503             $238,748       $193,957





 Gross profit                            $59,168              $78,803        $59,516


  Gross profit margin                      27.5 %              33.0 %        30.7 %

Net sales for the AAON Oklahoma segment totaled $215.5 million, an increase of 11.1% year-over-year, driven by a strong starting backlog and ongoing production enhancements that improved backlog conversion despite a challenging industry environment. Results in the fourth quarter of 2025 also benefited from a favorable comparison to the prior-year period, which saw disruption due to the industry's refrigerant transition in the prior-year period.

Gross margin for the segment was 27.5%, compared to 30.7% in the fourth quarter of 2024. The year-over-year decrease was fully attributable to $6.4 million of incremental overhead associated with the Company's new Memphis facility, reflecting investments made to support future production growth and operating leverage.

AAON Coil Products

                                                
 
 Three Months Ended


                      (in thousands) December 31,       September 30,  December 31,
                                             2025                 2025           2024



 Net sales                              $102,619              $70,246        $53,019





 Gross profit                            $21,827               $7,758         $8,535


  Gross profit margin                      21.3 %              11.0 %        16.1 %

Net sales for the AAON Coil Products segment totaled $102.6 million, up 93.6% compared to the same period last year. Growth was driven primarily by $75.3 million in BASX-branded liquid cooling sales, which increased 198.7% during the period. AAON-branded sales declined 1.8% year-over-year, but increased 15.2% sequentially, highlighting strengthening production momentum.

AAON Coil Products gross margin was 21.3%, increasing year-over-year from 16.1% and sequentially from 11.0%. The year?over?year margin expansion reflected improved operating leverage on higher throughput at the Longview facility, along with a favorable mix of higher-margin BASX sales. This was partially offset by a full five?day plant shutdown at Longview at year?end to conduct a wall?to?wall inventory count.

BASX

                                                
 
 Three Months Ended


                      (in thousands) December 31,       September 30,  December 31,
                                             2025                 2025           2024



 Net sales                              $106,095              $75,244        $50,742





 Gross profit                            $28,775              $20,300         $9,564


  Gross profit margin                      27.1 %              27.0 %        18.8 %

Net sales for the BASX segment increased 109.1% to $106.1 million, compared to $50.7 million in the prior-year period. The year-over-year increase was driven by continued strong demand for data center equipment, supported by robust order intake and elevated backlog levels. Increased production from the Company's new Memphis facility played a key role in expanding capacity and driving higher sales.

BASX segment gross margin was 27.1%, compared to 18.8% in the prior-year period. The year?over?year improvement reflected a favorable comparison and accelerating production at the Memphis facility.

Balance Sheet & Cash Flow

As of December 31, 2025, the company had cash, cash equivalents and restricted cash of $1.2 million and a balance on its revolving credit facility of $398.3 million. Rebecca Thompson, AAON CFO and Treasurer, commented, "In 2025, we made substantial capacity and working?capital investments to support our expanding backlog and ongoing market share gains. As returns on these investments begin to materialize, we expect operating cash flow to improve significantly in 2026, supported by higher earnings and improved working?capital efficiency. This gives us flexibility to continue to focus on our investment in growth for the future with capital expenditure plans of $190.0 million in 2026."

Conference Call

The company will host a conference call and webcast this morning at 9:00 a.m. EST to discuss the fourth quarter of 2025 results and outlook. The conference call will be accessible via dial-in for those who wish to participate in Q&A as well as a listen-only webcast. The dial-in is accessible at 1-888-880-3330. To access the listen-only webcast, please register at https://app.webinar.net/X2DbRx9Pk8v. On the next business day following the call, a replay of the call will be available on the company's website at https://aaon.com/investors.

About AAON

Founded in 1988, AAON is a global leader in HVAC solutions for commercial, industrial and data center indoor environments. The company's industry-leading approach to designing and manufacturing highly configurable and custom-made equipment to meet exact needs creates a premier ownership experience with greater efficiency, performance and long-term value. Its highly engineered equipment is sold under the AAON and BASX brands. AAON is headquartered in Tulsa, Oklahoma, where its world-class innovation center and testing lab allows AAON engineers to continuously push boundaries and advance the industry. For more information, please visit www.aaon.com.

Forward-Looking Statements

This press release includes "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as "expects", "anticipates", "intends", "plans", "believes", "seeks", "estimates", "should", "will", and variations of such words and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions, which are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date on which they are made. We undertake no obligations to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise. Important factors that could cause results to differ materially from those in the forward-looking statements include (1) the timing and extent of changes in raw material and component prices, (2) the effects of fluctuations in the commercial/industrial new construction market, (3) the timing and extent of changes in interest rates, as well as other competitive factors during the year, and (4) general economic, market or business conditions. For a discussion of such risks and uncertainties, which could cause actual results to differ from those contained in any forward-looking statements, see "Risk Factors" and "Forward Looking Statements" in AAON's Annual Report on Form 10-K for the most recent fiscal year, as may be revised and updated by AAON's Quarterly Reports on Form 10-Q, and AAON's Current Reports on Form 8-K.

Contact Information

Joseph Mondillo
Director of Investor Relations & Corporate Strategy
Phone: (617) 877-6346
Email: joseph.mondillo@aaon.com

                                              
   
      AAON, Inc. and Subsidiaries


                                           
    
     Consolidated Statements of Income


                                                    
      (Unaudited)




                                                                                              Three Months Ended December 31,                     Years Ended December 31,


                                                                                       2025                  2024                    2025         2024


                                                                                  
         
         (in thousands, except per share data)



 Net sales                                                                        $424,217              $297,718              $1,442,076   $1,200,635



 Cost of sales                                                                     314,447               220,103               1,056,352      803,526



 Gross profit                                                                      109,770                77,615                 385,724      397,109



 Selling, general and administrative expenses                                       65,810                48,194                 239,480      188,014



 Gain on disposal of assets                                                              -                  (8)                    (4)        (23)



 Income from operations                                                             43,960                29,429                 146,248      209,118



 Interest expense                                                                  (5,762)              (1,208)               (17,726)     (2,905)



 Other income, net                                                                     124                    45                     230          378



 Income before taxes                                                                38,322                28,266                 128,752      206,591



 Income tax provision                                                                6,290                 3,576                  21,159       38,032



 Net income                                                                        $32,032               $24,690                $107,593     $168,559



 Earnings per share:



 Basic EPS                                                                           $0.39                 $0.30                   $1.32        $2.07



 Diluted EPS                                                                         $0.39                 $0.30                   $1.29        $2.02



 Cash dividends declared per common share:                                           $0.10                 $0.08                   $0.40        $0.32



 Weighted average shares outstanding:



 Basic                                                                          81,657,463            81,345,236              81,529,140   81,473,131



 Diluted                                                                        83,160,224            83,575,989              83,105,538   83,629,502

                           
        
   AAON, Inc. and Subsidiaries


                           
        
   Segment Net Sales and Profit


                                  
   
         (Unaudited)




                                                                 Three Months Ended December 31,                    Years Ended December 31,


                                                       2025                   2024                   2025        2024


                                                           
          
            (in thousands)



 
            AAON Oklahoma



 External sales                                   $215,503               $193,957               $801,209    $858,711



 Inter-segment sales                                29,304                  2,116                 48,198       6,336



 Eliminations                                     (29,304)               (2,116)              (48,198)    (6,336)



      Net sales                                    215,503                193,957                801,209     858,711



      Cost of sales(1)                             156,335                134,441                569,121     538,124



      Gross profit                                  59,168                 59,516                232,088     320,587



 
            AAON Coil Products



 External sales                                   $102,619                $53,019               $325,353    $143,871



 Inter-segment sales                                 4,298                  4,298                 16,005      20,192



 Eliminations                                      (4,298)               (4,298)              (16,005)   (20,192)



      Net sales                                    102,619                 53,019                325,353     143,871



      Cost of sales(1)                              80,792                 44,484                255,681     116,287



      Gross profit                                  21,827                  8,535                 69,672      27,584



 
            BASX



 External sales                                   $106,095                $50,742               $315,514    $198,053



 Inter-segment sales                                  (74)                   404                    502         666



 Eliminations                                           74                  (404)                 (502)      (666)



      Net sales                                    106,095                 50,742                315,514     198,053



      Cost of sales(1)                              77,320                 41,178                231,550     149,115



      Gross profit                                  28,775                  9,564                 83,964      48,938



 Consolidated gross profit                        $109,770                $77,615               $385,724    $397,109




          
            1 Presented after intercompany eliminations.

The reconciliation between consolidated gross profit to consolidated income from operations is as follows:


 Consolidated gross profit                          $109,770 $77,615 $385,724 $397,109



 Less: Selling, general and administrative expenses   65,810  48,194  239,480  188,014



 Add: gain on disposal of assets                                  8        4       23



 Consolidated income from operations                 $43,960 $29,429 $146,248 $209,118

                                                                                                                                               
          
    AAON, Inc. and Subsidiaries


                                                                                                                                               
          
    Consolidated Balance Sheets


                                                                                                                                                             
   (Unaudited)




                                                                                                                                                                                               December 31,                                December 31,
                                                                                                                                                                                                       2025                                         2024



 
            Assets                                                                                                                                                                                   (in thousands, except share and per
                                                                                                                                                                                                                    share data)



 Current assets:



 Cash and cash equivalents                                                                                                                                                                             $13                                          $14



 Restricted cash                                                                                                                                                                                     1,226                                        6,500



 Accounts receivable, net                                                                                                                                                                          314,387                                      147,434



 Income tax receivable                                                                                                                                                                              27,445                                        4,115



 Inventories, net                                                                                                                                                                                  261,151                                      187,420



 Contract assets, net                                                                                                                                                                              247,037                                      135,421



 Prepaid expenses and other                                                                                                                                                                         17,921                                        7,308



 Total current assets                                                                                                                                                                              869,180                                      488,212



 Property, plant and equipment, net                                                                                                                                                                631,262                                      510,356



 Intangible assets, net and goodwill                                                                                                                                                               165,799                                      160,152



 Right of use assets                                                                                                                                                                                17,988                                       15,436



 Other long-term assets                                                                                                                                                                              2,281                                          242



 Deferred tax assets                                                                                                                                                                                     -                                         836



 Total assets                                                                                                                                                                                   $1,686,510                                   $1,175,234





 
            Liabilities and Stockholders' Equity



 Current liabilities:



 Debt, short-term                                                                                                                                                                         
 $            -                                     $16,000



 Short-term obligations of NMTC                                                                                                                                                                      7,535



 Accounts payable                                                                                                                                                                                  110,437                                       44,645



 Accrued liabilities                                                                                                                                                                               132,213                                       99,347



 Contract liabilities                                                                                                                                                                               80,670                                       14,913



 Total current liabilities                                                                                                                                                                         330,855                                      174,905



 Debt, long-term                                                                                                                                                                                   398,320                                      138,891



 Deferred tax liabilities                                                                                                                                                                           30,313



 Other long term liabilities                                                                                                                                                                        23,299                                       20,743



 New market tax credit obligations(1)                                                                                                                                                                8,738                                       16,113



 Commitments and contingencies (Note 20)



 Stockholders' equity:



 Common stock, $.004 par value, 200,000,000 shares authorized, 81,691,075 and 81,436,594 issued and outstanding at December 31, 2025 and 2024, respectively                                            327                                          326



 Additional paid-in capital                                                                                                                                                                         64,358                                       68,946



 Retained earnings                                                                                                                                                                                 830,300                                      755,310



 Total stockholders' equity                                                                                                                                                                        894,985                                      824,582



 Total liabilities and stockholders' equity                                                                                                                                                     $1,686,510                                   $1,175,234

                                                             
          
            AAON, Inc. and Subsidiaries


                                                        
          
            Consolidated Statements of Cash Flows


                                                                     
          
            (Unaudited)






                                                                                                                                Years Ended December 31,


                                                                                                                           2025        2024



 
            Operating Activities



 Net income                                                                                                           $107,593    $168,559



 Adjustments to reconcile net income to net cash provided by operating activities



 Depreciation and amortization                                                                                          79,191      62,735



 Amortization of debt issuance costs                                                                                       394         154



 Amortization of right of use assets                                                                                       166         189



 Provision for (recoveries of) losses on accounts receivable, net of adjustments                                            70         715



 Provision for losses on contract assets, net of adjustments                                                               200         399



 Provision for (recoveries of) excess and obsolete inventories, net of write-offs                                          152       (968)



 Share-based compensation                                                                                               17,994      16,729



 Other                                                                                                                    (15)        (4)



 Deferred income taxes                                                                                                  31,149     (6,606)



 Changes in assets and liabilities:



 Accounts receivable                                                                                                 (167,023)   (10,041)



 Income tax receivable                                                                                                (23,330)    (5,285)



 Inventories                                                                                                          (73,883)     27,080



 Contract assets                                                                                                     (111,816)   (90,626)



 Prepaid expenses and other long-term assets                                                                          (11,673)    (3,707)



 Accounts payable                                                                                                       52,904      16,959



 Contract liabilities                                                                                                   65,757       1,156



 Extended warranties                                                                                                       831       1,835



 Accrued liabilities and other long-term liabilities                                                                    31,873      13,259



 Net cash provided by operating activities                                                                                 534     192,532



 
            Investing Activities



 Capital expenditures                                                                                                (190,563)  (195,660)



 Proceeds from government incentive grant                                                                               12,000



 Proceeds from sale of property, plant and equipment                                                                        40          25



 Acquisition of intangible assets                                                                                     (14,329)   (17,491)



 Principal payments from note receivable                                                                                   435          51



 Net cash used in investing activities                                                                               (192,417)  (213,075)



 
            Financing Activities



 Borrowings of debt                                                                                                    915,391     717,897



 Payments of debt                                                                                                    (672,204)  (601,091)



 Proceeds from financing obligation, net of issuance costs                                                                   -      4,186



 Payment related to financing costs                                                                                    (1,395)      (664)



 Stock options exercised                                                                                                17,144      31,861



 Repurchase of stock - open market                                                                                    (29,995)  (100,034)



 Repurchases of stock - LTIP plans (Note 18)                                                                           (9,730)    (8,037)



 Cash dividends paid to stockholders                                                                                  (32,603)   (26,084)



 Net cash provided by (used in) financing activities                                                                   186,608      18,034



 Net (decrease) increase in cash, cash equivalents, and restricted cash                                                (5,275)    (2,509)



 Cash, cash equivalents, and restricted cash, beginning of year                                                          6,514       9,023



 Cash, cash equivalents, and restricted cash, end of year                                                               $1,239      $6,514

Use of Non-GAAP Financial Measures

To supplement the company's consolidated financial statements presented in accordance with generally accepted accounting principles ("GAAP"), additional non-GAAP financial measures are provided and reconciled in the following tables. The company believes that these non-GAAP financial measures, when considered together with the GAAP financial measures, provide information that is useful to investors in understanding period-over-period operating results. The company believes that this non-GAAP financial measure enhances the ability of investors to analyze the company's business trends and operating performance as they are used by management to better understand operating performance. Since adjusted net income, adjusted net income per diluted share, EBITDA, adjusted EBITDA, and adjusted EBITDA margin are non-GAAP measures and are susceptible to varying calculations, adjusted net income, adjusted net income per diluted share, EBITDA, adjusted EBITDA, and adjusted EBITDA margin, as presented, may not be directly comparable with other similarly titled measures used by other companies.

Non-GAAP Adjusted Net Income

The company defines non-GAAP adjusted net income as net income adjusted for any infrequent events, such as litigation settlements, net of profit sharing and tax effect, in the periods presented.

The following table provides a reconciliation of net income (GAAP) to non-GAAP adjusted net income for the periods indicated:

                                                         Three Months Ended December 31,                  Years Ended December 31,


                                                  2025                  2024                   2025     2024


                                                       
          
            (in thousands)



 Net income, a GAAP measure                   $32,032               $24,690               $107,593 $168,559



 Add: Memphis incentive fee(1)                                                             6,105



 Profit sharing effect(2)                                                                  (519)



 Tax effect                                                                              (1,369)



 Non-GAAP adjusted net income                 $32,032               $24,690               $111,810 $168,559



 Non-GAAP adjusted earnings per diluted share   $0.39                 $0.30                  $1.35    $2.02




 
 (1)The incentive fee relates to fees payable to our real estate broker associated with the acquisition of our Memphis, Tenn. plant for a percentage of the incentives awarded to us by various entities.



 
 (2)Profit sharing effect of the Memphis incentive fee in the respective period.

EBITDA

EBITDA (as defined below) is presented herein and reconciled from the GAAP measure of net income because of its wide acceptance by the investment community as a financial indicator of a company's ability to internally fund operations. The company defines EBITDA as net income, plus (1) depreciation and amortization, (2) interest expense (income), net and (3) income tax expense. EBITDA is not a measure of net income or cash flows as determined by GAAP. EBITDA margin is defined as EBITDA as a percentage of net sales.

The company's EBITDA measure provides additional information which may be used to better understand the company's operations. EBITDA is one of several metrics that the company uses as a supplemental financial measurement in the evaluation of its business and should not be considered as an alternative to, or more meaningful than, net income, as an indicator of operating performance. Certain items excluded from EBITDA are significant components in understanding and assessing a company's financial performance. EBITDA, as used by the company, may not be comparable to similarly titled measures reported by other companies. The company believes that EBITDA is a widely followed measure of operating performance and is one of many metrics used by the company's management team and by other users of the company's consolidated financial statements.

Adjusted EBITDA is calculated as EBITDA adjusted by items in non-GAAP adjusted net income, above, except for taxes, as taxes are already excluded from EBITDA.

The following table provides a reconciliation of net income (GAAP) to EBITDA (non-GAAP) and Adjusted EBITDA (non-GAAP) for the periods indicated:

                                                Three Months Ended December 31,                   Years Ended December 31,


                                         2025               2024                    2025      2024


                                              
          
            (in thousands)



 Net income, a GAAP measure          $32,032            $24,690                $107,593  $168,559



 Depreciation and amortization        20,353             17,550                  79,191    62,735



 Interest expense, net                 5,762              1,208                  17,726     2,905



 Income tax expense                    6,290              3,576                  21,159    38,032



 EBITDA, a non-GAAP measure          $64,437            $47,024                $225,669  $272,231



 Add: Memphis incentive fee(1)                                                  6,105



 Profit sharing effect(2)                                                       (519)



 Adjusted EBITDA, a non-GAAP measure $64,437            $47,024                $231,255  $272,231



 Adjusted EBITDA margin               15.2 %            15.8 %                 16.0 %   22.7 %




 
 (1)The incentive fee relates to fees payable to our real estate broker associated with the acquisition of our Memphis, Tenn. plant for a percentage of the incentives awarded to us by various entities.



 
 (2)Profit sharing effect of the Memphis incentive fee in the respective period.

Non-GAAP Adjusted Selling, General and Administrative Expenses

The following table provides a reconciliation of selling, general and administrative expenses (GAAP) to adjusted selling, general and administrative expenses (non-GAAP) for the periods indicated:

                                                                              Q1 2024   Q2 2024                 Q3 2024   Q4 2024      2024


                                                                                      
        
 (in thousands)



 
            Non-GAAP Adjusted Selling, General and Administrative Expenses



 SG&A, a GAAP measure                                                        $45,288    $45,895                  $48,637    $48,194   $188,014



 Less: Memphis Incentive Fee(1)                                                    -



 Profit Sharing effect(2)                                                          -



 Non-GAAP adjusted SG&A expenses                                             $45,288    $45,895                  $48,637    $48,194   $188,014



 As a percent of sales                                                        17.3 %    14.6 %                  14.9 %    16.2 %    15.7 %




                                                                              Q1 2025   Q2 2025                 Q3 2025   Q4 2025      2025


                                                                                      
        
 (in thousands)



 SG&A, a GAAP measure                                                        $51,293    $59,147                  $63,230     65,810    239,480



 Less: Memphis Incentive Fee(1)                                                2,700      3,405                                        6,105



 Profit Sharing effect(2)                                                      (230)     (289)                                       (519)



 Non-GAAP adjusted SG&A expenses                                             $48,823    $56,031                  $63,230    $65,810   $233,894



 As a percent of sales                                                        15.2 %    18.0 %                  16.5 %    15.5 %    16.2 %




 
 (1)The incentive fee relates to fees payable to our real estate broker associated with the acquisition of our Memphis, Tenn. plant for a percentage of the incentives awarded to us by various entities.



 
 (2)Profit sharing effect of the Memphis incentive fee in the respective period.

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SOURCE AAON

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