AAON reported fourth-quarter 2025 net sales up 42.5% year-over-year to $424.2 million, driven by 138.8% growth in BASX branded sales on data center cooling demand and higher Memphis facility utilization, plus a 9.5% increase in AAON branded sales. Gross margin was 25.9%, down slightly from 26.1% a year ago on unabsorbed fixed costs at the new Memphis facility, non-GAAP adjusted EBITDA margin was 15.2% (down from 15.8%), and diluted EPS was $0.39, up 30% from Q4 2024. By segment, AAON Oklahoma sales rose 11.1% to $215.5 million (gross margin 27.5%), AAON Coil Products sales grew 93.6% aided by $75.3 million of BASX liquid cooling (gross margin 21.3%), and the BASX segment grew 109.1% to $106.1 million (gross margin 27.1%). For the full year, BASX branded sales rose 143% to $548 million with backlog up 141% to $1.3 billion and a 2.4 book-to-bill, while AAON branded sales fell just 8% against a 16% industry volume decline. Backlog remained strong exiting Q4 with BASX at $1.3 billion (up 45% sequentially, 141% year-over-year) and AAON branded backlog up 61% year-over-year. Management guided 2026 to sales growth of 18%-20% at a 29%-31% gross margin, with SG&A about 16% of sales and planned capex of $190 million.
Thank you, operator. Good morning everyone. The press release announcing our fourth quarter and full year 2025 financial results was issued earlier this morning and can be found on our corporate website, aaon.com. The call today is accompanied by a presentation that you can also find on our website as well as on the listen-only webcast.
We begin with our customary forward-looking statement policy. During the call, any statement presented dealing with information that is not historical is considered forward-looking and made pursuant to the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995, the Securities Act of 1933, and the Securities Exchange Act of 1934, each as amended. As such, it is subject to the occurrence of many events outside of AAON's control that could cause AAON's results to differ materially from those anticipated.
You are all aware of the inherent difficulties, risks, and uncertainties in making predictive statements. Our press release in Form 10-K was, that we filed this morning details some of the important risk factors that may cause our actual results to differ from those in our predictions. Please note that we do not have a duty to update our forward-looking statements.
Our press release and portions of today's calls use non-GAAP financial measures as defined in Regulation G. You can find the related reconciliations to GAAP measures in our press release and presentation. Joining me on today's call is Matt Tobolski, President and CEO, and Rebecca Thompson, CFO and Treasurer. Matt will start off with some opening remarks. Rebecca will follow with a walkthrough of the quarterly results, and Matt will then finish up with our outlook for 2026 and some closing remarks.
With that, I will turn the call over to Matt.
Thanks, Joe. Good morning. 2025 was a year marked by several notable achievements delivered alongside transformational investments that are building a more resilient and scalable business. Importantly, we've made these investments with clear priorities in disciplined execution, strengthening our foundation and sustaining strong commercial momentum. Robust bookings and revenue momentum underscore demand for our products and custom solutions as customers seek greater operational efficiency, supporting continued market share gains.
As we enter 2026, we have clear visibility into growth drivers and a well-defined plan that positions us for improved operating performance and margin expansion as temporary headwinds fade. The data center market continues to represent our most robust and dynamic growth opportunity. In 2025, BASX branded sales increased 143% to $548 million, while backlog grew 141% to $1.3 billion.
Strong demand resulted in a book-to-bill of 2.4 for the BASX brand on the year. Our differentiated custom airside and liquid cooling solutions continue to gain momentum as customers increasingly require highly engineered systems tailored to their specific performance and scalability needs. This dynamic aligns directly with BASX's core strengths: custom engineering, thermal management, innovation, and speed.
It positions us well to grow with this increasingly demanding AI data center market. Our focus is now squarely on converting this demand into sustained profitable growth through disciplined program execution and capacity readiness. AAON branded sales and bookings remained resilient in 2025, particularly in light of a 16% decline in overall industry volumes. Despite the refrigerant transition and the ERP rollout at our Longview facility, AAON branded sales declined just 8%, significantly outperforming the broader industry.
Bookings saw even stronger performance, growing approximately 12%, driven primarily by national accounts, which increased 86%. This sales growth represents deliberate market share gains as customers increasingly recognize the total cost of ownership advantages our products deliver across their building portfolios. In other words, while we worked through near-term friction, we continued to take share in the places that matter most and where our differentiation is strongest.
Building on the operational foundation established in prior years, we advanced several initiatives designed to drive margins to optimal levels and support durable long-term growth. These included strategic investments in people and leadership, in manufacturing capacity, supply chain management, product development, and IT systems and infrastructure. Over the past 18 months, we have expanded our manufacturing footprint by more than 25% and meaningfully strengthened our leadership depth.
Our investments in supply chain management will improve supply reliability, help reduce material costs, and improve working capital discipline going forward. These actions are practical, execution-focused, and designed to improve throughput, reduce variability, and enhance margin performance over time. Our focus on innovation drove meaningful advances in product development, most notably in support of AI data centers, where we introduced unique concepts designed to enhance scale, operating efficiency, and strategic flexibility.
In 2025, we also became the first manufacturer in the commercial HVAC industry to commercialize rooftop units up to 40 tons with Cold Climate Heat Pumps that are capable of delivering reliable heating performance at ambient temperatures down to -20 degrees Fahrenheit. We also made significant progress in upgrading our legacy ERP system, which is critical to supporting long term scalability.
As expected in a transformation of this scale, when issues were encountered, we addressed them directly and implemented a revised rollout approach that prioritizes stability, customer deliveries, and execution certainty. We are sequencing remaining ERP implementations under a disciplined governance framework, with Redmond scheduled for the back half of 2026 and Tulsa expected in 2027. This approach reflects control and intentionality, allowing us to protect service levels while preserving the long term benefits of the system.
Alongside these accomplishments, 2025 included several temporary challenges, most notably the industry's refrigerant transition early in the year and incremental complexity from our ERP upgrade. While these factors pressured margins in the near term, they are well understood, largely contained, and do not change our confidence in meaningful margin improvement as execution continues to strengthen.
Before turning it over to Rebecca, I want to share my perspective on how we ended the year. Bookings and backlog remained strong in the fourth quarter. BASX branded bookings again reached record levels, driving backlog to $1.3 billion, up 45% sequentially and 141% year-over-year. AAON branded bookings were also strong and increased 20% year-over-year, with backlog up 24% sequentially and 61% from the prior year period. That demand strength, paired with actions to improve execution, set the stage for a strong 2026. Operationally, production drove record sales. BASX branded sales more than doubled year-over-year, supported by the continued ramp at Memphis and strong throughput of liquid cooling solutions in Longview.
AAON branded sales increased 9.5%, supported by a 42% increase in Alpha Class heat pump sales, represents the strongest quarterly growth since the second quarter of 2024. Fourth quarter margins reflected differing operational dynamics across our facilities. Margin momentum in Tulsa moderated sequentially due to normal seasonality and temporary supply chain constraints that reduced production volumes.
Thank you, Matt. Net sales in the fourth quarter increased 42.5% year-over-year to $424.2 million. The increase was driven primarily by 138.8% growth in BASX branded sales, reflecting continued strong demand for data center cooling solutions and higher utilization of our Memphis facility. AAON branded sales were also additive to the year-over-year growth in the fourth quarter, increasing 9.5%, driven by higher production levels at our Tulsa facility and a favorable comparison to the prior year period, which had been negatively impacted by the industry's refrigerant transition. Gross margin was 25.9% in the fourth quarter, down from 26.1% in the prior year period.
The modest year-over-year contraction was primarily driven by unabsorbed fixed costs with our new Memphis facility. Looking ahead, utilization and productivity at the Memphis facility continued to increase, and we are positioned for these capacity gains to provide meaningful operating leverage in 2026. As a result of these unabsorbed costs, fourth quarter non-GAAP adjusted EBITDA margin was 15.2%, down from 15.8% a year ago, and the fourth quarter diluted EPS was $0.39, up 30% from the fourth quarter of 2024.
Looking at the segment financials, beginning with AAON Oklahoma, net sales increased 11.1% year-over-year to $215.5 million. This double-digit growth was driven by a strong starting backlog and improved production throughput, which supported higher backlog conversion despite a challenging industry backdrop.
The fourth quarter benefited from a favorable comparison to the prior year period, which had been disrupted by the industry's refrigerant transition. AAON Oklahoma gross margin was 27.5%, down from 30.7% in the prior year period as a result of incremental overhead expenses of $6.4 million associated with the new Memphis facility. AAON Coil Products sales increased $49.6 million or 93.6% from the year ago period, driven by $75.3 million in BASX branded liquid cooling product sales, which grew 100% during the quarter. AAON branded sales at this segment declined year-over-year 1.8%, increased 15.2% sequentially as production momentum improved.
AAON Coil Products gross margin was 21.3% in the fourth quarter, up from 16.1% in the prior period and 11% from the prior quarter. The year-over-year margin expansion reflected improved operating leverage on higher throughput at the Longview facility, along with a favorable mix of high margin BASX branded 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. In the near term, BASX will continue to be a positive tailwind in dollars, but we do not expect product mix will be as favorable as we saw in Q4. Sales at the BASX segment grew 109.1% in the fourth quarter to $106.1 million.
The strong growth was driven by sustained demand for data center solutions as the market continues to demonstrate strong momentum and the business captures additional market share, as evidenced by our strong order intake and increasing backlog.
Increased utilization of our Memphis facility was also a significant contributing factor, providing additional production capacity that was additive to the segment results. BASX segment gross margin was 27.1%, up from 18.8% in the prior year period. The strong year-over-year increase was largely a result of a favorable comparison to the prior year period, along with accelerated production from our new Memphis facility. Turning now to the balance sheet. Cash, cash equivalents and restricted cash balances totaled $1.2 million on December 31, 2025, and debt at the end of the quarter was $398.3 million.
Our leverage ratio was 1.77. In 2025, cash flow from operations was a source of cash of $0.5 million, compared to $192.5 million in 2024. Capital expenditures in 2025, including expenditures related to software development, decreased 3.9% to $204.9 million. Overall, we made substantial capacity and working capital investments to support our expanding backlog and ongoing market share gains. As return on these investments begin to materialize, we are positioned for operating cash flow to improve significantly in 2026, driven by higher earnings and improved working capital efficiency. That flexibility supports our continued growth investments, including planned 2026 CapEx of $190 million. I will now turn the call back over to Matt.
Thank you, Rebecca. Looking ahead, we enter 2026 with strong visibility across both brands and confidence in our ability to execute. That visibility allows us to remain focused on production, prioritize throughput, improve delivery performance, and convert demand more efficiently as we move throughout the year. The BASX brand remains the company's key growth driver, fueled by exceptional demand from the data center market and our differentiated custom design solutions. During the quarter, BASX secured a strong volume of new orders at attractive margins, with the majority scheduled for production at our Memphis facility as it continues to scale. This demand profile and production mix position us to increase output efficiently, optimize the fixed cost investments made in 2025, and drive robust growth in 2026. As utilization improves, we are positioned for the economic benefits of that scale to increasingly flow through to margins.
The AAON brand also maintains strong momentum. Backlog at the end of the fourth quarter was up 61% year-over-year, reflecting strong demand across the business. While backlog levels and lead times remain extended, we are actively managing this through production ramp up and improved execution across the network. Despite a soft commercial HVAC market, bookings have remained strong, underscoring the resilience of our business. Importantly, we are seeing improving operational cadence as we work through backlog and position AAON for stronger performance in 2026. 2025 was a year of meaningful structural change and strategic investment, building on AAON's strong foundation and positioning the company for sustained long-term performance. As we move into 2026, our focus shifts squarely to execution, leveraging that foundation, improving throughput, accelerating backlog conversion, and continuing progress towards our margin objectives.
For the year, we anticipate sales growth of 18%-20% at gross margin of 29%-31%, with margin progression expected to be uneven by quarter as capacity ramps and product mix normalizes. SG&A as a percent of sales is expected to be about 16%. Depreciation and amortization expenses are expected to be in the $95 million-$100 million range. These expectations reflect our confidence in demand, improving execution, and the operating leverage embedded in our cost structure. In closing, I want to thank our employees, customers, sales channel partners, and shareholders for their continued support. We enter 2026 with clear priorities, improving momentum, and confidence in our ability to execute and deliver stronger results. With that, I'll open the call for questions.