Open the filing on EDGARThe Aaon Group Reports Record Third Quarter 2026 Results, Restates First and Second Quarter 2026 Financial Statements and Raises Full-Year Outlook
Record revenue, continued margin improvement and strong execution drive operating income and diluted EPS to more than double year over year
Company identifies material weakness and restates first and second quarter of 2026 financial statements, resulting in an increase to first-half 2026 financial results
Third Quarter 2026 Highlights
(All comparisons are year-over-year, unless otherwise noted)
- Net sales increased 84.1% to a record $707.4 million
- Gross profit increased 76.4% to $188.5 million, with gross margin of 26.7%, improving 60 basis points sequentially
- Operating income increased 129.3% to $100.0 million
- GAAP diluted EPS increased 124.3% to $0.83; Non-GAAP adjusted EPS increased 124.3% to $0.83
- Total backlog increased 40.5% year-over-year to $1.9 billion
- Year-to-date, operating cash flow improved to $146.9 million, compared with a use of $18.8 million a year ago
- During the third quarter reporting process, the Company identified errors through enhanced review and control procedures and restated first and second quarter 2026 financial statements. The Company also identified a material weakness in its internal control over financial reporting and is continuing remediation efforts. In aggregate, the restatements increased first-half net sales by $10.7 million and diluted EPS by $0.09.
Raises 2026 Outlook
- 2026 outlook now reflects net sales growth of 72%-75%, gross margins of approximately 26%, and SG&A as a percent of sales of about 13%, supported by strong backlog, expanded capacity, and improving operational execution
TULSA, Okla., November 9, 2026 - AAON, INC. (NASDAQ-AAON) ("The Aaon Group" or the "Company"), a leader in high-performance HVAC and thermal management solutions, today announced its results for the third quarter of 2026 and raised its full-year outlook.
"Our third quarter results reflect strong execution and continued progress turning the investments we have made into stronger operating performance," said Matt Tobolski, President and CEO of The Aaon Group. "We delivered record net sales, more than doubled operating income and diluted EPS, improved gross margin 60 basis points sequentially, generated strong cash flow and raised full-year outlook. The improvement was broad-based, with both AAON and BASX delivering strong growth.
"During our third quarter reporting process, we also identified errors in our previously reported first and second quarter financial statements. We corrected those errors and determined that a material weakness existed in our internal control over financial reporting. We take that seriously. These issues were identified through enhanced review and control procedures as we continue to strengthen our finance organization, and we are moving with urgency to remediate the material weakness and further strengthen our control environment.
"Across the business, higher throughput and utilization, better overhead absorption, pricing and sourcing actions, and continued operational improvement are increasingly showing up in our results. AAON continues to gain share despite softer conditions in the broader commercial HVAC market. At BASX, customer engagement remains strong, our opportunity pipeline is healthy, and we continue to strengthen our position with strategic data center customers.
"We have invested significantly in capacity and capabilities to support our growth. We are increasingly converting those investments into revenue, earnings and cash flow while continuing to improve how we operate. There is more work to do, but the progress is clear. We remain focused on execution, continuous improvement, and creating durable long-term value."
Third Quarter 2026 Results
Net sales for the third quarter of 2026 increased 84.1% to a record $707.4 million, compared with $384.2 million in the third quarter of 2025. Growth was driven by strong demand for both the AAON and BASX brands, increased manufacturing throughput, and greater utilization of recently expanded production capacity.
AAON-branded sales increased to a record level, growing 19.6% to $310.2 million, benefitting from a healthy backlog and continued production throughput gains. BASX-branded sales grew 218.3% to a record $397.2 million, reflecting strong momentum in data center demand, continued production output gains, and increased utilization of recently added manufacturing capacity. Booking activity remained solid across both brands, contributing to market share gains and elevated backlog levels. AAON‑branded backlog increased 18.0% from the prior-year period while BASX-branded products ended the quarter with backlog up 51.1%.
Gross profit increased 76.4% to $188.5 million, compared with $106.9 million in the third quarter of 2025. Gross profit margin was 26.7%, compared with 27.8% in the prior-year period, but increased 60 basis points sequentially, marking the second consecutive quarter of improvement. Year over year, margin was impacted primarily by a higher proportion of BASX revenue generated from less mature, lower-utilization facilities, partially offset by improved price/cost and volume leverage. The sequential improvement reflects progress in mitigating these headwinds, and through a combination of pricing, sourcing, productivity, and other operational initiatives, margins continue to trend positively.
Selling, general and administrative expenses as a percent of sales declined 400 basis points to 12.5%, reflecting continued operating leverage and disciplined cost management as revenue growth outpaced overhead investments.
Operating income increased 129.3% to $100.0 million, compared with $43.6 million in the prior-year period. Diluted earnings per share were $0.83, an increase of 124.3% from $0.37 in the third quarter of 2025.
Backlog
| September 30, 2026 | June 30, 2026 | September 30, 2025 |
|---|
| (in thousands) |
|---|
| AAON-branded products | $499,341 | $540,465 | $423,316 |
| BASX-branded products | 1,355,152 | 1,419,822 | 896,824 |
| $1,854,493 | $1,960,287 | $1,320,140 |
Total backlog increased 40.5% year-over-year to $1.9 billion, compared to $1.3 billion the prior year. BASX-branded backlog increased 51.1% year-over-year, reflecting continued customer investment activity in data center infrastructure and the value customers place on BASX's custom-engineered solutions. AAON-branded backlog increased 18.0% year-over-year, supported by strong order activity despite soft end-market conditions.
Compared to the second quarter of 2026, total backlog decreased 5.9%, primarily reflecting accelerated backlog conversion into record revenue and the inherent timing variability of large BASX project awards. The Company continues to see strong customer engagement and a healthy pipeline of opportunities across the data center market, and expects order strength to continue in the fourth quarter and as we enter 2027. AAON-branded backlog declined 7.6% sequentially, primarily reflecting higher production and improved throughput as we continued to reduce elevated lead times. Strong order activity and continued market share gains partially offset the decline despite softness in the commercial HVAC market. Across the enterprise, our expanded capacity, shorter lead times, and differentiated, value-added solutions reinforce our confidence in the underlying fundamentals of the business.
2026 Outlook
Based on strong third quarter performance, increased manufacturing throughput, and current business conditions, the Company raised its full-year 2026 outlook:
| Current | Prior |
|---|
| Metric | FY26 | FY26 |
| YoY Sales Growth | 72%-75% | 55%-60% |
| Gross Profit Margin | ~26% | 25%-26% |
| SG&A as a % of sales | ~13% | 13%-14% |
| Depreciation & Amortization | ~$100M | $95M-$100M |
"Our raised outlook reflects the strength of our third quarter performance, continued customer activity across our end markets, and the meaningful progress we are making towards increasing throughput and converting backlog into revenue," said Matt Tobolski. "Expanded capacity, shorter lead times, and continued operational execution provide increased confidence in our ability to deliver strong growth through the remainder of the year.
"We are encouraged by the sequential improvement in gross margin during the third quarter. Higher production volumes, better utilization, pricing actions, sourcing initiatives, and continued operational discipline are beginning to show more clearly in our results. While additional work remains, we expect continued progress in the fourth quarter and remain confident in the long-term earnings power and cash generation potential of the business."
Restatement of Previously Issued Quarterly Financial Statements & Material Weakness
The Company has restated its previously issued financial statements for the first and second quarters of 2026. In aggregate, the restatements resulted in increases to first-half 2026 net sales, gross margin, and GAAP diluted EPS of $10.7 million, 71 basis points, and $0.09, respectively.
Management concluded that restatements to previously issued interim financial statements were appropriate and that a material weakness existed in internal control over financial reporting. The Company has implemented corrective actions and is executing additional measures designed to further strengthen our control environment and internal controls over financial reporting. The Company found no evidence of fraud or misconduct in connection with these matters and believes the identified errors do not alter the underlying strength of the business or its long-term growth outlook.
The impact of the restated first and second quarter of 2026 financial statements to correct for the identified errors can be seen at the end of this release or in Footnote 2 of the restated 10-Q filings for the first and second quarters of 2026, being filed today. Additional information regarding the material weakness can be found in Item 4 of the third quarter 10-Q filing, also being filed today.
Segment Results
AAON Oklahoma
| Three Months Ended |
|---|
| (in thousands) | September 30, 2026 | June 30, 2026 | March 31, 2026 | December 31, 2025 | September 30, 2025 |
| Net sales | $283,492 | $262,277 | $243,967 | $215,503 | $238,748 |
| Gross profit | $72,346 | $63,617 | $64,272 | $59,168 | $78,803 |
| Gross profit margin | 25.5% | 24.3% | 26.3% | 27.5% | 33.0% |
| Non-GAAP Adjusted gross profit | $93,075 | $81,739 | $74,117 | $65,567 | $83,303 |
| Non-GAAP Adjusted gross profit margin | 32.8% | 31.2% | 30.4% | 30.4% | 34.9% |
AAON Oklahoma generated net sales of $283.5 million, an increase of 18.7% from the prior-year period. Growth was supported by effective execution of a robust backlog and continued operational improvements that enhanced production throughput and backlog conversion. Higher pricing also contributed to growth.
Gross profit was $72.3 million compared with $78.8 million in the prior-year period. Gross margin was 25.5%, compared to 33.0% in the third quarter of 2025. Segment profitability was impacted by $20.7 million of overhead expenses associated with the Memphis facility, compared with $4.5 million in the prior-year period. Sequentially, excluding these expenses, AAON Oklahoma adjusted gross margin improved 160 basis points, benefiting from improving price/cost and higher capacity utilization.
AAON Coil Products
| Three Months Ended |
|---|
| (in thousands) | September 30, 2026 | June 30, 2026 | March 31, 2026 | December 31, 2025 | September 30, 2025 |
| Net sales | $192,630 | $152,282 | $101,654 | $102,619 | $70,246 |
| Gross profit | $49,792 | $29,140 | $12,345 | $21,827 | $7,758 |
| Gross profit margin | 25.8% | 19.1% | 12.1% | 21.3% | 11.0% |
AAON Coil Products generated net sales of $192.6 million, an increase of 174.2% from the prior-year period. Growth was driven primarily by BASX-branded liquid cooling sales of $165.5 million, up 255.6% during the period.
Gross profit increased 541.8% to $49.8 million, compared with $7.8 million in the prior-year period. Gross margin was 25.8%, compared with 11.0% in the third quarter of 2025. The year-over-year margin performance reflected repricing of existing backlog to mitigate inflationary and other price/cost headwinds. Results were also positively impacted by improved labor efficiency, better overhead absorption, and higher production volume.
BASX
| Three Months Ended |
|---|
| (in thousands) | September 30, 2026 | June 30, 2026 | March 31, 2026 | December 31, 2025 | September 30, 2025 |
| Net sales | $231,308 | $227,569 | $146,904 | $106,095 | $75,244 |
| Gross profit | $66,401 | $74,885 | $43,937 | $28,775 | $20,300 |
| Gross profit margin | 28.7% | 32.9% | 29.9% | 27.1% | 27.0% |
BASX segment generated net sales of $231.3 million, an increase of 207.4% from the prior-year period. Growth was driven by strong backlog conversion, sustained data center investment activity, and increased production capacity resulting from the continued ramp of the Company's manufacturing footprint, including the Memphis facility.
Gross profit increased 227.1% to $66.4 million, compared with $20.3 million in the prior-year period. Gross margin was 28.7%, up from 27.0% in the third quarter of 2025. The year-over-year margin improvement reflected substantial volume growth, partially offset by incremental resources and investments required to support future growth, customer delivery, and continued share gains.
Balance Sheet & Cash Flow
As of September 30, 2026, the Company had cash, cash equivalents and restricted cash of $3.7 million and a balance on its revolving credit facility of $386.7 million.
Andy Cheung, CFO and Treasurer, commented, "Our balance sheet continued to strengthen during the third quarter as robust earnings growth and disciplined execution drove another period of exceptional cash flow generation. Operating cash flow totaled $146.9 million through the first nine months of 2026, a significant improvement from a $18.8 million use of cash in the prior year period. This improved cash flow provides The Aaon Group with a significant runway for continued execution of our strategic growth initiatives. Looking ahead, we remain confident that continued operational execution, working capital discipline, and margin improvement initiatives will support robust cash flow generation and continued balance sheet improvement."
Conference Call
The Company will host a conference call and webcast today at 5:00 p.m. EST to discuss the third quarter of 2026 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/E7MK2gxj9Oo. On the next business day following the call, a replay of the call will be available on the company’s website at https://investors.theaaongroup.com/.
About The Aaon Group
The Aaon Group provides high-performance HVAC and thermal management solutions for commercial, industrial, and data center environments. Through two strong brands, AAON and BASX, the company designs and manufactures highly configurable and custom-engineered equipment focused on efficiency, performance, reliability, and long-term customer value. For more information, please visit theaaongroup.com.
Forward-Looking Statements
Forward-looking statements notice
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 material weakness in the effectiveness of our internal controls over financial reporting and the impact of our ability to adequately remediate the material weakness in a timely manner, (4) the timing and extent of changes in interest rates, as well as other competitive factors during the year, and (5) 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
Email: investorrelations@theaaongroup.com
AAON, Inc. and Subsidiaries
Consolidated Statements of Income
(Unaudited)
| Three Months Ended September 30, | Nine Months Ended September 30, |
|---|
| 2026 | 2025 | 2026 | 2025 |
|---|
| (in thousands, except per share data) |
|---|
| Net sales | $707,430 | | $384,238 | | $1,842,082 | | $1,017,859 | |
| Cost of sales | 518,891 | | 277,377 | | 1,365,347 | | 741,905 | |
| Gross profit | 188,539 | | 106,861 | | 476,735 | | 275,954 | |
| Selling, general and administrative expenses | 88,559 | | 63,230 | | 242,817 | | 173,670 | |
| (Gain) loss on disposal of assets | - | | 36 | | - | | (4) | |
| Income from operations | 99,980 | | 43,595 | | 233,918 | | 102,288 | |
| Interest expense | (5,817) | | (5,153) | | (17,067) | | (11,964) | |
| Other income, net | 67 | | - | | 302 | | 106 | |
| Income before taxes | 94,230 | | 38,442 | | 217,153 | | 90,430 | |
| Income tax provision | 25,272 | | 7,660 | | 44,620 | | 14,869 | |
| Net income | $68,958 | | $30,782 | | $172,533 | | $75,561 | |
| Earnings per share: | | | | |
| Basic EPS | $0.84 | | $0.38 | | $2.10 | | $0.93 | |
| Diluted EPS | $0.83 | | $0.37 | | $2.06 | | $0.91 | |
| Cash dividends declared per common share: | $0.10 | | $0.10 | | $0.30 | | $0.30 | |
| Weighted average shares outstanding: | | | | |
| Basic | 82,454,996 | | 81,543,105 | | 82,217,732 | | 81,485,914 | |
| Diluted | 83,557,784 | | 82,952,049 | | 83,570,266 | | 83,086,858 | |
AAON, Inc. and Subsidiaries
Segment Net Sales and Profit
(Unaudited)
| Three Months Ended September 30, | Nine Months Ended September 30, |
|---|
| 2026 | 2025 | 2026 | 2025 |
|---|
| (in thousands) |
|---|
| AAON Oklahoma | | | | |
| External sales | $283,492 | | $238,748 | | $789,735 | | $585,706 | |
| Inter-segment sales | 89,029 | | 9,737 | | 224,897 | | 18,894 | |
| Eliminations | (89,029) | | (9,737) | | (224,897) | | (18,894) | |
| Net sales | 283,492 | | 238,748 | | 789,735 | | 585,706 | |
| Cost of sales | 211,146 | | 159,945 | | 589,500 | | 412,786 | |
| Gross profit | 72,346 | | 78,803 | | 200,235 | | 172,920 | |
| AAON Coil Products | | | | |
| External sales | $192,630 | | $70,246 | | $446,566 | | $222,734 | |
| Inter-segment sales | 4,376 | | 4,689 | | 18,854 | | 11,707 | |
| Eliminations | (4,376) | | (4,689) | | (18,854) | | (11,707) | |
| Net sales | 192,630 | | 70,246 | | 446,566 | | 222,734 | |
| Cost of sales | 142,838 | | 62,488 | | 355,289 | | 174,889 | |
| Gross profit | 49,792 | | 7,758 | | 91,277 | | 47,845 | |
| BASX | | | | |
| External sales | $231,308 | | $75,244 | | $605,781 | | $209,419 | |
| Inter-segment sales | 108 | | 26 | | 664 | | 576 | |
| Eliminations | (108) | | (26) | | (664) | | (576) | |
| Net sales | 231,308 | | 75,244 | | 605,781 | | 209,419 | |
| Cost of sales | 164,907 | | 54,944 | | 420,558 | | 154,230 | |
| Gross profit | 66,401 | | 20,300 | | 185,223 | | 55,189 | |
| Consolidated gross profit | $188,539 | | $106,861 | | $476,735 | | $275,954 | |
Presented after intercompany eliminations.
The reconciliation between consolidated gross profit to consolidated income from operations is as follows:
| Consolidated gross profit | $188,539 | $106,861 | $476,735 | $275,954 |
| Less: Selling, general and administrative expenses | 88,559 | 63,230 | 242,817 | 173,670 |
| Add: (gain) loss on disposal of assets | - | (36) | - | 4 |
| Consolidated income from operations | $99,980 | $43,595 | $233,918 | $102,288 |
AAON, Inc. and Subsidiaries
Consolidated Balance Sheets
(Unaudited)
| September 30, 2026 | December 31, 2025 |
|---|
| Assets | (in thousands, except share and per share data) |
| Current assets: | | |
| Cash and cash equivalents | $13 | $13 |
| Restricted cash | 3,658 | 1,226 |
| Accounts receivable, net | 396,849 | 314,387 |
| Income tax receivable | 334 | 27,445 |
| Inventories, net | 376,045 | 261,151 |
| Contract assets, net | 279,544 | 247,037 |
| Prepaid expenses and other | 18,274 | 17,921 |
| Total current assets | 1,074,717 | 869,180 |
| Property, plant and equipment, net | 689,617 | 631,262 |
| Intangible assets, net and goodwill | 168,435 | 165,799 |
| Right-of-use assets | 18,955 | 17,988 |
| Other long-term assets | 1,672 | 2,281 |
| Total assets | $1,953,396 | $1,686,510 |
| Liabilities and Stockholders' Equity | | |
| Current liabilities: | | |
| Short-term obligations of NMTC | 7,535 | 7,535 |
| Accounts payable | 182,598 | 110,437 |
| Accrued liabilities | 185,918 | 132,213 |
| Contract liabilities | 5,713 | 80,670 |
| Total current liabilities | 381,764 | 330,855 |
| Debt, long-term | 386,709 | 398,320 |
| Deferred tax liabilities | 44,323 | 30,313 |
| Other long-term liabilities | 34,484 | 23,299 |
| New markets tax credit obligations | 21,371 | 8,738 |
| Commitments and contingencies (Note 19) | | |
| Stockholders' equity: | | |
| Preferred stock, $.001 par value, 5,000,000 shares authorized, no shares issued | - | - |
| Common stock, $.004 par value, 200,000,000 shares authorized, 82,459,251 and 81,691,075 issued and outstanding at September 30, 2026 and December 31, 2025, respectively | 330 | 327 |
| Additional paid-in capital | 106,202 | 64,358 |
| Retained earnings | 978,213 | 830,300 |
| Total stockholders' equity | 1,084,745 | 894,985 |
| Total liabilities and stockholders' equity | $1,953,396 | $1,686,510 |
Held by variable interest entities
AAON, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
| Nine Months Ended September 30, |
|---|
| 2026 | 2025 |
|---|
| Operating Activities | (in thousands) |
| Net income | $172,533 | | $75,561 | |
| Adjustments to reconcile net income to net cash provided by (used in) operating activities | | |
| Depreciation and amortization | 73,859 | | 58,838 | |
| Amortization of debt issuance costs | 124 | | 250 | |
| Amortization of right-of-use assets | 240 | | 118 | |
| (Recoveries of) Provision for losses on accounts receivable, net of adjustments | (128) | | 92 | |
| Provision for losses on contract assets, net of adjustments | - | | 200 | |
| Provision for excess and obsolete inventories, net of write-offs | 1,745 | | 1,025 | |
| Share-based compensation | 16,886 | | 13,421 | |
| Other | - | | (32) | |
| Deferred income taxes | 14,010 | | 23,035 | |
| Changes in assets and liabilities: | | |
| Accounts receivable | (82,334) | | (118,896) | |
| Income tax receivable | 27,111 | | (21,393) | |
| Inventories | (116,639) | | (64,116) | |
| Contract assets | (32,507) | | (71,919) | |
| Prepaid expenses and other long-term assets | 256 | | (771) | |
| Accounts payable | 83,010 | | 59,891 | |
| Contract liabilities | (74,957) | | 5,061 | |
| Extended warranties | 10,737 | | 431 | |
| Accrued liabilities and other long-term liabilities | 52,946 | | 20,420 | |
| Net cash provided by (used in) operating activities | 146,892 | | (18,784) | |
| Investing Activities | | |
| Capital expenditures | (138,097) | | (128,067) | |
| Grant proceeds received | 1,650 | | - | |
| Proceeds from sale of property, plant and equipment | - | | 275 | |
| Acquisition of intangible assets | (9,252) | | (10,868) | |
| Principal payments from note receivable | - | | 37 | |
| Net cash used in investing activities | (145,699) | | (138,623) | |
| Financing Activities | | |
| Borrowings of debt | 925,430 | | 658,458 | |
| Payments of debt | (937,041) | | (453,449) | |
| Proceeds from financing obligation, net of issuance costs | 12,908 | | - | |
| Payment related to financing costs | (399) | | (1,395) | |
| Stock options exercised | 29,563 | | 13,275 | |
| Repurchase of stock - open market | - | | (29,992) | |
| Repurchases of stock - LTIP plans (Note 17) | (4,602) | | (9,300) | |
| Cash dividends paid to stockholders | (24,620) | | (24,437) | |
| Net cash provided by financing activities | 1,239 | | 153,160 | |
| Net increase (decrease) in cash, cash equivalents, and restricted cash | 2,432 | | (4,247) | |
| Cash, cash equivalents, and restricted cash, beginning of period | 1,239 | | 6,514 | |
| Cash, cash equivalents, and restricted cash, end of period | $3,671 | | $2,267 | |
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 September 30, | Nine Months Ended September 30, |
|---|
| 2026 | 2025 | 2026 | 2025 |
|---|
| (in thousands) | | |
|---|
| Net income, a GAAP measure | $68,958 | | $30,782 | | $172,533 | | $75,561 | |
| Add: Memphis incentive fee | - | | - | | 1,448 | | 6,105 | |
| Profit sharing effect | - | | - | | (123) | | (519) | |
| Tax effect | - | | - | | (332) | | (1,369) | |
| Non-GAAP adjusted net income | $68,958 | | $30,782 | | $173,526 | | $79,778 | |
| Non-GAAP adjusted earnings per diluted share | $0.83 | | $0.37 | | $2.08 | | $0.96 | |
| 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. |
| 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 September 30, | Nine Months Ended September 30, |
|---|
| 2026 | 2025 | 2026 | 2025 |
|---|
| (in thousands) |
|---|
| Net income, a GAAP measure | $68,958 | | $30,782 | | $172,533 | | $75,561 | |
| Depreciation and amortization | 27,141 | | 19,959 | | 73,859 | | 58,838 | |
| Interest expense, net | 5,817 | | 5,153 | | 17,067 | | 11,964 | |
| Income tax expense | 25,272 | | 7,660 | | 44,620 | | 14,869 | |
| EBITDA, a non-GAAP measure | $127,188 | | $63,554 | | $308,079 | | $161,232 | |
| Add: Memphis incentive fee | - | | - | | 1,448 | | 6,105 | |
| Profit sharing effect | - | | - | | (123) | | (519) | |
| Adjusted EBITDA, a non-GAAP measure | $127,188 | | $63,554 | | $309,404 | | $166,818 | |
| Adjusted EBITDA margin, a non-GAAP measure | 18.0% | | 16.5% | | 16.8% | | 16.4% | |
| 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. |
| 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:
| Three Months Ended September 30, | Nine Months Ended September 30, |
|---|
| 2026 | 2025 | 2026 | 2025 |
|---|
| Non-GAAP Adjusted Selling, General and Administrative Expenses | | | | |
| SG&A, a GAAP measure | $88,559 | | $63,230 | | $242,817 | | $173,670 | |
| Memphis incentive fee | - | | - | | (1,448) | | (6,105) | |
| Profit sharing effect | - | | - | | 123 | | 519 | |
| Non-GAAP adjusted SG&A expenses | 88,559 | | 63,230 | | 241,492 | | 168,084 | |
| As a percent of sales | 12.5% | | 16.5% | | 13.1% | | 16.5% | |
Non-GAAP Adjusted AAON Oklahoma Gross Profit
The following tables provides a reconciliation of AAON Oklahoma gross profit (GAAP) to adjusted gross profit (non-GAAP) for the periods indicated:
| Three Months Ended September 30, | Nine Months Ended September 30, |
|---|
| (in thousands) | | 2026 | | 2025 | | 2026 | | 2025 |
| Non-GAAP Adjusted AAON Oklahoma Gross profit | | | | |
| AAON Oklahoma Net sales | $283,492 | | $238,748 | | $789,735 | | $585,706 | |
| AAON Oklahoma Gross profit | $72,346 | | $78,803 | | $200,235 | | $172,920 | |
| Memphis facility overhead costs | 20,729 | | 4,500 | | 48,696 | | 9,300 | |
| Non-GAAP Adjusted AAON Oklahoma Gross profit | $93,075 | | $83,303 | | $248,931 | | $182,220 | |
| Non-GAAP Adjusted AAON Oklahoma Gross profit margin | | 32.8% | | 34.9% | | 31.5% | | 31.1% |
| Three Months Ended |
|---|
| (in thousands) | June 30, 2026 | March 31, 2026 | December 31, 2025 |
| Non-GAAP Adjusted AAON Oklahoma Gross profit | | | |
| AAON Oklahoma Net sales | $262,276 | $243,967 | $215,503 |
| AAON Oklahoma Gross profit | $63,617 | $64,272 | $59,168 |
| Memphis facility overhead costs | $18,122 | $9,845 | $6,399 |
| Non-GAAP Adjusted AAON Oklahoma Gross profit | $81,739 | $74,117 | $65,567 |
| Non-GAAP Adjusted AAON Oklahoma Gross profit margin | 31.2% | 30.4% | 30.4% |
Restatement of Previously Issued Financial Statements
During the third quarter of 2026, management identified certain errors related to revenue recognition and accounting for software subscriptions. The Company has restated its previously issued financial statements.
Following is a summary of the significant effects of the restatement on the Company’s condensed statements of income and segment reporting for the three and six months ended June 30, 2026.
| For the Three Months Ended March 31, 2026 |
|---|
| As Previously Reported | Adjustments | As Restated |
|---|
| (in thousands) |
|---|
| Net sales | $496,936 | $(4,411) | | $492,525 |
| Gross profit | 124,965 | (4,411) | | 120,554 |
| Selling, general and administrative expenses | 67,906 | 385 | | 68,291 |
| Income from operations | 57,059 | (4,796) | | 52,263 |
| Income before taxes | 52,081 | (4,796) | | 47,285 |
| Income tax provision | 12,266 | (1,444) | | 10,822 |
| Net income | $39,815 | $(3,352) | | $36,463 |
| Earnings per share: | | | 0 | |
| Basic EPS | $0.49 | $(0.04) | | $0.45 |
| Diluted EPS | $0.48 | $(0.04) | | $0.44 |
| For the Three Months Ended June 30, 2026 |
|---|
| As Previously Reported | Adjustments | As Restated |
|---|
| (in thousands) |
|---|
| Net sales | $626,976 | $15,151 | | $642,127 |
| Gross profit | 152,491 | 15,151 | | 167,642 |
| Selling, general and administrative expenses | 83,607 | 2,360 | | 85,967 |
| Income from operations | 68,884 | 12,791 | | 81,675 |
| Income before taxes | 62,847 | 12,791 | | 75,638 |
| Income tax provision | 6,188 | 2,338 | | 8,526 |
| Net income | $56,659 | $10,453 | | $67,112 |
| Earnings per share: | | | 0 | |
| Basic EPS | $0.69 | $0.13 | | $0.82 |
| Diluted EPS | $0.68 | $0.12 | | $0.80 |
| For the Three Months Ended March 31, 2026 |
|---|
| As Previously Reported | Adjustments | As Restated |
|---|
| (in thousands) |
|---|
| AAON Coil Products | | | |
| External sales | 117,611 | (15,957) | 101,654 |
| Net sales | 117,611 | (15,957) | 101,654 |
| Gross profit | 28,302 | (15,957) | 12,345 |
| BASX | | | |
| External sales | 135,358 | 11,546 | 146,904 |
| Net sales | 135,358 | 11,546 | 146,904 |
| Gross profit | 32,391 | 11,546 | 43,937 |
| Consolidated gross profit | 124,965 | (4,411) | 120,554 |
| For the Three Months Ended June 30, 2026 |
|---|
| As Previously Reported | Adjustments | As Restated |
|---|
| (in thousands) |
|---|
| AAON Coil Products | | | |
| External sales | 146,680 | 5,602 | 152,282 |
| Net sales | 146,680 | 5,602 | 152,282 |
| Gross profit | 23,538 | 5,602 | 29,140 |
| BASX | | | |
| External sales | 218,020 | 9,549 | 227,569 |
| Net sales | 218,020 | 9,549 | 227,569 |
| Gross profit | 65,336 | 9,549 | 74,885 |
| Consolidated gross profit | 152,491 | 15,151 | 167,642 |