AAON Q2 2025 Earnings: Sales Growth Revised to Low Teens Amid ERP Rollout Headwinds, BasX Expansion Accelerated

AAON has revised its 2025 sales growth outlook to the low teens amid challenges from ERP rollout and accelerated BasX data center expansion. The company's Q2 2025 earnings fell short of expectations, with President and CEO Matthew J. Tobolski stating that the results do not reflect AAON's high standards.

AAON, Inc. (AAON) has revised its 2025 sales growth outlook to the low teens due to challenges from ERP rollout and accelerated BasX data center expansion. The company's Q2 2025 earnings fell short of expectations, with President and CEO Matthew J. Tobolski stating that the results do not reflect AAON's high standards.

During the Q2 2025 earnings call, Tobolski acknowledged that the company's second quarter results fell short of expectations due to ERP implementation challenges at the Longview facility. This led to a prolonged production slowdown, particularly impacting AAON branded equipment and coils. However, he emphasized that the company is taking direct action to restore operational efficiency and capitalize on strong demand, particularly in the BasX data center business.

The BasX brand showed strong performance, with data center sales up 127% in Q2 and 269% year-to-date. A strategic partnership with Applied Digital, under which BasX will supply thermal management solutions for their AI factory, resulted in a significant order. National account orders for the AAON brand grew 163% in Q2 and 90% year-to-date.

CFO Rebecca A. Thompson reported that net sales in the quarter declined year-over-year $2 million or 0.6% to $311.6 million. The modest overall decline was driven by a 20.9% decline in AAON branded sales, which was nearly fully offset by a 90% increase in BasX branded sales. The gross margin was 26.6%, down 950 basis points due to lower production volume of AAON branded equipment sales.

Tobolski revised the company's full year 2025 outlook to low teens sales growth and a gross margin of 28% to 29%. He explained that the outlook incorporates additional ERP-related headwinds and expects favorable price/cost dynamics to accelerate in the second half. Through year-end, the company expects production rates to improve and the adverse impacts of the new ERP system implementation to lessen.

Non-GAAP adjusted EBITDA was 14.9%, down 1,120 basis points, and non-GAAP adjusted EPS was $0.22, down 64.5% from the previous year. Cash, cash equivalents, and restricted cash balances totaled $1.3 million on June 30, 2025, with debt at $317.3 million. Year-to-date, cash flow used in operations was $31 million.

Analysts pressed on the depth of ERP-related headwinds, the sustainability of data center demand, and backlog quality, reflecting a slightly negative to neutral tone. Management maintained an overall confident but defensive tone, repeatedly emphasizing contingency planning, ongoing improvements, and long-term benefits from current investments.

The revised guidance contrasts with last quarter's "mid- to high-teens" sales growth outlook, now lowered to "low teens." Margin targets were reduced from "similar to 2024" to "28% to 29%." The company is taking direct action to restore operational efficiency and capitalize on strong demand, particularly in the BasX data center business. Revised guidance, a robust backlog, and strategic partnerships position AAON for sequential improvement in the second half of the year, with margin recovery expected as ERP challenges are resolved and new capacity comes online.

References:
[1] https://seekingalpha.com/news/4483367-aaon-revises-2025-outlook-to-low-teens-sales-growth-amid-erp-rollout-headwinds-and