The Aaon Group Reports Record Third Quarter 2026 Results, Restates First and Second Quarter 2026 Financial Statements and Raises Full-Year Outlook
AAON, INC. (AAON) filed an SEC Form 8-K — Results of Operations and Financial Condition. Exhibit 99.1 The 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 do
How this was made
The 30-second read
Why it matters
The raised outlook and strong operating metrics suggest a near‑term price rally, but the disclosed material weakness could introduce risk.
Market read
AAON's earnings beat and raised guidance provide a clear catalyst for short‑term buying, while the internal‑control issue warrants monitoring.
What to watch
Backlog growth may not fully translate to revenue if demand softens later in the year.
Record Q3 2026 net sales of $707.4 million and operating income of $100.0 million, with a restatement of Q1 and Q2 2026 and a material weakness in internal control
Net sales, operating income, diluted EPS, backlog and nine-month operating cash flow all improved sharply year over year, and the outlook was raised. Against that, gross margin fell 110 basis points year over year, the company restated Q1 and Q2 2026 and disclosed a material weakness in internal control over financial reporting, and cash and cash equivalents were $3.7 million against a $386.7 million revolver balance.
Key metrics
shortened, hover for the filing’s print| Metric | Value | q/q | y/y |
|---|---|---|---|
| Net sales, Q3 2026 (three months ended Sep 30, 2026)GAAP | $707.4M | – | 84.1% |
| Net sales, nine months 2026GAAP | $1.84B | – | – |
| Gross profit, Q3 2026GAAP | $188.5M | – | 76.4% |
| Gross profit, nine months 2026GAAP | $476.7M | – | – |
| Gross profit margin, Q3 2026GAAP | 26.7% | +60 basis points sequentially | – |
| Cost of sales, Q3 2026GAAP | $518.9M | – | – |
| Cost of sales, nine months 2026GAAP | $1.37B | – | – |
| Selling, general and administrative expenses, Q3 2026GAAP | $88.56M | – | – |
| Selling, general and administrative expenses, nine months 2026GAAP | $242.8M | – | – |
| SG&A as a percent of sales, Q3 2026GAAP | 12.5% | – | declined 400 basis points |
| Income from operations, Q3 2026GAAP | $100M | – | 129.3% |
| Income from operations, nine months 2026GAAP | $233.9M | – | – |
| Interest expense, Q3 2026GAAP | −$5.82M | – | – |
| Interest expense, nine months 2026GAAP | −$17.07M | – | – |
| Income before taxes, Q3 2026GAAP | $94.23M | – | – |
| Income before taxes, nine months 2026GAAP | $217.2M | – | – |
| Income tax provision, Q3 2026GAAP | $25.27M | – | – |
| Income tax provision, nine months 2026GAAP | $44.62M | – | – |
| Net income, Q3 2026GAAP | $68.96M | – | – |
| Net income, nine months 2026GAAP | $172.5M | – | – |
| Basic EPS, Q3 2026GAAP | $0.84 | – | – |
| Diluted EPS, Q3 2026GAAP | $0.83 | – | 124.3% |
| Diluted EPS, nine months 2026GAAP | $2.06 | – | – |
| Non-GAAP adjusted EPS, Q3 2026non-GAAP | $0.83 | – | 124.3% |
| Non-GAAP adjusted earnings per diluted share, nine months 2026non-GAAP | $2.08 | – | – |
| EBITDA, Q3 2026non-GAAP | $127.2M | – | – |
| Adjusted EBITDA, Q3 2026non-GAAP | $127.2M | – | – |
| Adjusted EBITDA margin, Q3 2026non-GAAP | 18.0% | – | – |
| Adjusted EBITDA, nine months 2026non-GAAP | $309.4M | – | – |
| Adjusted EBITDA margin, nine months 2026non-GAAP | 16.8% | – | – |
| Total backlog, September 30, 2026other | $1.85B | decreased 5.9% | 40.5% |
| AAON-branded backlog, September 30, 2026other | $499.3M | declined 7.6% | 18.0% |
| BASX-branded backlog, September 30, 2026other | $1.36B | – | 51.1% |
| AAON-branded sales, Q3 2026other | $310.2M | – | 19.6% |
| BASX-branded sales, Q3 2026other | $397.2M | – | 218.3% |
| Net cash provided by (used in) operating activities, nine months 2026GAAP | $146.9M | – | – |
| Capital expenditures, nine months 2026GAAP | −$138.1M | – | – |
Segments
| Segment | Revenue | q/q | y/y |
|---|---|---|---|
| AAON Oklahoma (net sales, Q3 2026)Company attributes growth to execution of a robust backlog, operational improvements that enhanced throughput and backlog conversion, and higher pricing. Segment gross margin was 25.5% against 33.0% in Q3 2025; the company says segment profitability was impacted by $20.7 million of Memphis facility overhead, compared with $4.5 million in the prior-year period. | $283.5M | – | 18.7% |
| AAON Oklahoma (gross profit, Q3 2026)Gross profit of $72.3 million compared with $78.8 million in Q3 2025. Non-GAAP adjusted gross margin for the segment was 32.8% against 34.9% in the prior-year period. Company states that, excluding Memphis overhead, adjusted gross margin improved 160 basis points sequentially, benefiting from improving price/cost and higher capacity utilization. | $72.3M | – | – |
| AAON Coil Products (net sales, Q3 2026)Company says growth was driven primarily by BASX-branded liquid cooling sales of $165.5 million, up 255.6%. Segment gross margin was 25.8% against 11.0% in Q3 2025, which the company attributes to repricing of existing backlog, improved labor efficiency, better overhead absorption and higher production volume. | $192.6M | – | 174.2% |
| AAON Coil Products (gross profit, Q3 2026)Gross profit of $49.8 million compared with $7.8 million in Q3 2025, per the company's segment discussion. | $49.8M | – | 541.8% |
| BASX (net sales, Q3 2026)Company attributes growth to strong backlog conversion, sustained data center investment activity, and increased production capacity from the continued ramp of the manufacturing footprint, including Memphis. Segment gross margin was 28.7% against 27.0% in Q3 2025; company states the year-over-year improvement reflected substantial volume growth, partially offset by incremental resources and investments to support future growth, customer delivery and share gains. | $231.3M | – | 207.4% |
| BASX (gross profit, Q3 2026)Gross profit of $66.4 million compared with $20.3 million in Q3 2025. Sequentially, segment gross margin moved from 32.9% in Q2 2026 to 28.7% in Q3 2026 as printed in the segment table. | $66.4M | – | 227.1% |
| AAON-branded products (brand sales, Q3 2026)Company describes a record level of AAON-branded sales supported by a healthy backlog and continued production throughput gains. Brand sales cut across segments and are not the same measure as AAON Oklahoma segment sales. | $310.2M | – | 19.6% |
| BASX-branded products (brand sales, Q3 2026)Company describes a record level of BASX-branded sales reflecting data center demand, production output gains and increased utilization of recently added capacity. Brand sales cut across segments and are not the same measure as BASX segment sales. | $397.2M | – | 218.3% |
FY2026 outlook
- RevenueNet sales growth of 72%-75% (YoY), per the current outlook
- Gross marginApproximately 26%
- Operating expensesSG&A as a percent of sales of about 13%
- NoteDepreciation & Amortization of about $100M (current outlook)
- NotePrior FY26 outlook as printed in the release: sales growth 55%-60%; gross profit margin 25%-26%; SG&A as a % of sales 13%-14%; Depreciation & Amortization $95M-$100M
- NoteCompany states it raised the full-year 2026 outlook based on Q3 performance, increased manufacturing throughput and current business conditions
Capital returns
- Cash dividends declared per common share: $0.10 in Q3 2026 and $0.10 in Q3 2025; $0.30 for nine months 2026 and $0.30 for nine months 2025.
- Cash dividends paid to stockholders: $(24,620) thousand for nine months 2026 against $(24,437) thousand for nine months 2025.
- Repurchase of stock, open market: no amount printed for nine months 2026; $(29,992) thousand for nine months 2025.
- Repurchases of stock, LTIP plans (Note 17): $(4,602) thousand for nine months 2026 against $(9,300) thousand for nine months 2025.
- Stock options exercised: $29,563 thousand for nine months 2026 against $13,275 thousand for nine months 2025.
What drove it
- Company attributes net sales growth to strong demand for both the AAON and BASX brands, increased manufacturing throughput and greater utilization of recently expanded production capacity.
- Company states that, year over year, gross 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.
- Company states that the sequential gross margin improvement of 60 basis points reflects progress in mitigating these headwinds through pricing, sourcing, productivity and other operational initiatives.
- Company states that SG&A as a percent of sales declined 400 basis points to 12.5%, reflecting operating leverage and cost management as revenue growth outpaced overhead investments.
- Company states that AAON Oklahoma segment profitability was impacted by $20.7 million of Memphis facility overhead expenses, compared with $4.5 million in the prior-year period.
- Company states that AAON Coil Products margin improvement reflected repricing of existing backlog to mitigate inflationary and other price/cost headwinds, improved labor efficiency, better overhead absorption and higher production volume.
- Company states that AAON-branded backlog declined 7.6% sequentially primarily reflecting higher production and improved throughput as the company continued to reduce elevated lead times.
- Company states that total backlog decreased 5.9% sequentially, primarily reflecting accelerated backlog conversion into record revenue and the inherent timing variability of large BASX project awards.
Concerns
- Material weakness: the company identified a material weakness in internal control over financial reporting and states it is continuing remediation efforts. The company also states that the forward-looking statements include the risk of its ability to remediate the material weakness in a timely manner.
- Restatement of Q1 and Q2 2026: the company states that errors related to revenue recognition and accounting for software subscriptions were identified. Net sales, gross profit and net income were restated. Q1 2026 net sales moved from $496,936 thousand as previously reported to $492,525 thousand as restated, and Q2 2026 net sales moved from $626,976 thousand to $642,127 thousand.
- Restated diluted EPS: Q1 2026 moved from $0.48 as previously reported to $0.44 as restated. Q2 2026 moved from $0.68 to $0.80. The company states the restatements increased first-half 2026 net sales by $10.7 million, gross margin by 71 basis points and diluted EPS by $0.09.
- Gross margin fell year over year: 26.7% in Q3 2026 against 27.8% in Q3 2025. The company attributes the decline primarily to a higher proportion of BASX revenue from less mature, lower-utilization facilities.
- Memphis facility overhead: $20.7 million in Q3 2026 against $4.5 million in Q3 2025 at AAON Oklahoma, per the company's segment discussion.
- Cash position: cash, cash equivalents and restricted cash were $3.7 million at September 30, 2026, against a revolving credit facility balance of $386.7 million.
- Company states that AAON-branded backlog declined 7.6% sequentially and that total backlog decreased 5.9% sequentially. Company also states that soft conditions in the broader commercial HVAC market persisted.
- Company states that the restated statements contain errors that it corrected. Consolidated figures in this report use the Q3 2026 release as printed and are not reconciled to the restated 10-Q filings, which were not supplied.
What to watch
- Progress on remediation of the material weakness and whether the company reports any further restatements.
- Gross margin trajectory after the 60 basis point sequential improvement, including the effect of mix between BASX and AAON Oklahoma and the Memphis facility overhead.
- Conversion of backlog into revenue, given total backlog of $1,854,493 thousand at September 30, 2026 and the sequential decline of 5.9%.
- Fourth-quarter order activity in the data center market, which the company says it expects to remain strong.
- Delivery against the raised FY2026 outlook: sales growth of 72%-75%, gross margin of approximately 26%, SG&A of about 13% of sales, and D&A of about $100M.
- Cash generation and the level of revolver borrowings relative to the $3.7 million cash balance.
Balance sheet and cash flow
- Cash, cash equivalents and restricted cash at September 30, 2026: $3.7 million per the company's text; the balance sheet prints cash and cash equivalents of $13 thousand and restricted cash of $3,658 thousand.
- Revolving credit facility balance at September 30, 2026: $386.7 million per the company's text; the balance sheet prints Debt, long-term of 386,709 (in thousands) at September 30, 2026 and 398,320 at December 31, 2025.
- Total assets: $1,953,396 thousand at September 30, 2026 against $1,686,510 thousand at December 31, 2025.
- Total stockholders' equity: $1,084,745 thousand at September 30, 2026 against $894,985 thousand at December 31, 2025.
- Nine-month cash flow: operating activities $146,892 thousand (2025: $(18,784) thousand); investing activities $(145,699) thousand (2025: $(138,623) thousand); financing activities $1,239 thousand (2025: $153,160 thousand).
- Net increase (decrease) in cash, cash equivalents and restricted cash: $2,432 thousand for nine months 2026 against $(4,247) thousand for nine months 2025. Ending balance: $3,671 thousand at September 30, 2026.
- Company states that operating cash flow of $146.9 million through the first nine months of 2026 compares with a $18.8 million use of cash in the prior-year period.
Analysis
AAON reported record third-quarter net sales of $707.4 million, up 84.1% from $384.2 million, with growth split between AAON-branded sales of $310.2 million (up 19.6%) and BASX-branded sales of $397.2 million (up 218.3%). Operating income rose 129.3% to $100.0 million and GAAP diluted EPS rose 124.3% to $0.83 from $0.37. Nine-month operating cash flow was $146,892 thousand against $(18,784) thousand a year earlier. Total backlog was $1,854,493 thousand, up 40.5% year over year but down 5.9% from June 30, 2026, which the company attributes to accelerated backlog conversion and the timing of large BASX project awards.
Margins are the mixed part of the quarter. Gross margin was 26.7%, against 27.8% in Q3 2025, and rose 60 basis points sequentially. The company attributes the year-over-year decline mainly to a higher share of BASX revenue from less mature, lower-utilization facilities. The three segments show different margin paths. AAON Coil Products gross margin rose to 25.8% from 11.0%, which the company links to repricing of backlog and better absorption. AAON Oklahoma gross margin fell to 25.5% from 33.0%, which the company links to $20.7 million of Memphis facility overhead against $4.5 million a year earlier. BASX gross margin was 28.7%, against 27.0% in the prior-year quarter and 32.9% in Q2 2026 as printed in the segment table. SG&A fell to 12.5% of sales from 16.5%, which the company says reflects operating leverage.
The restatement changes how the first half should be read. Q1 and Q2 2026 were restated for errors in revenue recognition and software subscription accounting. The company states the restatements increased first-half net sales by $10.7 million, gross margin by 71 basis points and diluted EPS by $0.09. Restated Q1 diluted EPS is $0.44 against $0.48 as previously reported, and restated Q2 is $0.80 against $0.68. The company also disclosed a material weakness in internal control over financial reporting and says it is continuing remediation. It states that it found no evidence of fraud or misconduct.
Capital allocation is focused on capacity and working capital. Nine-month capital expenditures were $(138,097) thousand and operating cash flow was $146,892 thousand. Dividends of $0.10 per quarter were unchanged, and cash dividends paid were $(24,620) thousand for nine months. Cash, cash equivalents and restricted cash were $3.7 million at September 30, 2026, while the revolver balance was $386.7 million, so the company relies on its credit facility to fund operations and growth. Total assets were $1,953,396 thousand and stockholders' equity was $1,084,745 thousand, both up from December 31, 2025.
The company raised its FY2026 outlook to sales growth of 72%-75% from a prior range of 55%-60%. It also guides to gross margin of approximately 26% (prior 25%-26%), SG&A of about 13% of sales (prior 13%-14%), and D&A of about $100M (prior $95M-$100M). The outlook is the company's own and does not include any analyst consensus. The figures that deserve attention are the gross margin trend against the raised sales guide, the Q4 backlog conversion, the remediation timeline for the material weakness, and whether the cash balance and revolver usage hold as volumes rise.
Management, verbatim
Our third quarter results reflect strong execution and continued progress turning the investments we have made into stronger operating performance,
Matt Tobolski, President and CEO
We take that seriously.
Matt Tobolski, President and CEO
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.
Andy Cheung, CFO and Treasurer
Not in the filing
stated, not guessed- The previous release's Outlook section was not provided, so the vs_prior_guidance comparison is empty. The current release does print a prior outlook column, which is listed in guidance.other.
- Full-year 2026 actual results are not reported in this filing, so no guidance verdict can be given.
- Year-over-year percentage changes are not printed for nine-month figures (net sales, gross profit, operating income, net income, EPS) and are left null.
- Sequential (quarter-over-quarter) percentage changes and prior-quarter values are not printed for most P&L lines and are left null.
- Year-over-year change in gross margin in basis points is not printed; only the prior-year margin of 27.8% is shown.
- Year-over-year percentage change for AAON Oklahoma gross profit is not printed.
- Year-over-year change for net income, basic EPS and cost of sales is not printed as a percentage.
- AAON-branded and BASX-branded sales prior-year and prior-quarter dollar figures are not printed; only the percentage changes are printed.
- Sequential change for BASX-branded backlog and segment sales is not printed as a percentage.
- Prior-year Q3 interest and other income line for 'Other income, net' is shown as a dash in the statement and is left null.
- Free cash flow is not printed; only operating cash flow and capital expenditures are reported.
- Share price reaction, analyst consensus and price targets are not included in the documents and are not reported.
- Restated Q1 and Q2 2026 figures are shown only as printed in the restatement tables. The restated 10-Q filings referenced in the release are not included.
- The release refers to the 10-Q filings and Item 4 of the Q3 10-Q for further detail on the material weakness, which were not provided.
Written by an AI language model from the company’s SEC earnings filing (Form 8-K Item 2.02, or Form 6-K for a foreign private issuer). Every figure is checked against the filing text, and a metric the filing does not print, or whose value, prior period and change do not add up, is dropped from the metrics. The model can still misread a table, in the metrics or in the text, so check a number in the filing before you rely on it. Consensus estimates, price targets and share-price reactions are not shown because they are not in the filing. AI-generated research, not investment advice.
Background
AAON, a Nasdaq‑listed HVAC and thermal‑management solutions provider, filed an 8‑K with record Q3 results and updated guidance.
Ticker impact
AAON reported record Q3 2026 results and raised its full-year outlook, increasing guidance for sales growth and margins.
likely upward pressure as investors price in stronger sales growth and higher margins
The company posted 84% revenue growth, doubled EPS, and lifted its FY2026 sales growth target to 72‑75%, which should attract buying interest.
Market effects
Strong HVAC demand and data‑center growth may boost peers in commercial climate control and industrial equipment.
Positive for U.S. industrial and technology manufacturing exposure.
Highlights resilience in the commercial HVAC market despite softer macro conditions.
Counterpoint
If the material weakness in internal controls leads to future restatements, investors may be cautious.
Key entities
- executiveMatt Tobolski
President and CEO of AAON who commented on the results and outlook.
