#United States #AAON #BASX #Tulsa #HVAC solutions

AAON's Second Quarter Performance and Market Outlook

On August 11, 2025, AAON, Inc. (NASDAQ: AAON), a recognized leader in high-performance and energy-efficient HVAC systems, published its financial results for the second quarter of 2025. The recent quarter highlighted operational challenges resulting from the rollout of a new ERP system and ongoing supply chain limitations.

Q2 Financial Performance Highlights

AAON reported a net sales decrease of 0.6%, amounting to $311.6 million, compared to $313.6 million in Q2 2024. A significant contributor to this decline was the performance of the AAON Oklahoma segment, which saw an 18% drop in net sales. Despite entering the quarter with a robust backlog, supply chain constraints curbed production escalation. In contrast, the BASX and AAON Coil Products segments showcased remarkable sales growth of 20.4% and 86.4%, respectively, fueled by a rising demand for data center equipment.

However, the growth in the AAON Coil Products sector was somewhat hampered due to disruptions caused by the ERP system implementation, which initially hindered production capacity. The gross profit margin for this quarter decreased to 26.6%, down from 36.1% in Q2 of the previous year. This decline was largely attributed to lower production output from the AAON Oklahoma portion and the operational inefficiencies accentuated by the ERP transition at the AAON Coil Products segment.

The company's selling, general, and administrative (SGA) expenses for the quarter rose to $59.1 million, or 19% of total sales, compared to $45.9 million (14.6% of sales) in the same period last year. This increase reflects investments made in technology and personnel aimed at enhancing future organizational growth. Part of these costs also included a one-time incentive fee totaling $3.4 million linked to their Memphis facility. Despite these challenges, AAON’s CEO, Matt Tobolski, stated, "Our second-quarter results fell short of our expectations and those of our high operational standards, primarily due to poor execution linked with our ERP rollout in Longview, Texas."

Management's Response

CEO Tobolski further emphasized that while the ERP initiative has introduced short-term challenges, they believe it is essential for the company’s long-term success. Measures are being implemented to rectify these interim setbacks and enhance production efficiency across operations, particularly in Tulsa and Longview. Encouragingly, production levels in the Tulsa facility have been gradually improving and July marked their highest production month of the year.

Backlog and Future Expectations

AAON's adjusted backlog demonstrated a prominent surge, rising 71.9% year-over-year to $1.12 billion. This robust backlog is seen as an indicator of sustained demand and market share growth, even amid declines in the non-residential construction segment. Notably, bookings for both AAON and BASX brands continue to climb, underscoring strong market performance.

Reflecting on the next quarters, AAON anticipates a stronger second half of the year, fueled by improvements in production and backlog. However, the company has adjusted its full-year outlook downwards as they expect lingering inefficiencies resulting from the ERP adjustments, alongside moderated production levels in Tulsa following third-quarter initiation.

"While our recent performance didn't hit the mark we aspire to, we're confident in our fundamentals with a clear course towards operational excellence,” Tobolski concluded.

Conclusion

As AAON moves forward, they remain committed to transparency and providing ongoing updates regarding their operational progress and expected improvements. Investor sentiment will likely hinge upon the company’s ability to navigate these operational hiccups while meeting the robust demand from the market. With strong growth trends in the backlog, AAON is well-positioned to capitalize on future opportunities in the HVAC sector.