v3.25.2
Contract Assets and Liabilities
 6 Months Ended
Jun. 30, 2025
Revenue from Contract with Customer [Abstract]  
Contract Assets and Liabilities Revenue Recognition
The following tables show disaggregated net sales by reportable segment (Note 21) by major source, net of intercompany sales eliminations.
SegmentBrands ProducedBrand Products
AAON OklahomaAAON Rooftop units and aftermarket parts
AAON Coil ProductsAAON / BASXCondensing units, air handling products, data center cooling solutions, and geothermal/water-source heat pumps
BASXBASX
Data center cooling solutions, cleanroom products, and air handling products
Three Months Ended June 30, 2025
AAON OklahomaAAON Coil ProductsBASXTotal
(in thousands)
AAON Products$185,120 $17,405 $— $202,525 
BASX Products— 41,060 67,982 109,042 
Total185,120 58,465 67,982 $311,567 
Three Months Ended June 30, 2024
AAON OklahomaAAON Coil ProductsBASXTotal
(in thousands)
AAON Products$225,727 $30,447 $— $256,174 
BASX Products— 926 56,466 57,392 
Total$225,727 $31,373 $56,466 $313,566 
Six Months Ended June 30, 2025
AAON OklahomaAAON Coil ProductsBASXTotal
(in thousands)
AAON Products$346,958 $45,060 $— $392,018 
BASX Products— 107,428 134,175 241,603 
Total$346,958 $152,488 $134,175 $633,621 
Six Months Ended June 30, 2024
AAON OklahomaAAON Coil ProductsBASXTotal
(in thousands)
AAON Products$435,867 $54,488 $— $490,355 
BASX Products— 1,132 84,178 85,310 
Total$435,867 $55,620 $84,178 $575,665 
Aftermarket part sales (included in the AAON Product sales above) were $20.7 million and $18.9 million for the three months ended June 30, 2025 and 2024, respectively, and $35.9 million and $34.5 million for the six months ended June 30, 2025 and 2024, respectively.
The Company recognizes revenue, presented net of sales tax, when it satisfies the performance obligation in its contracts. For certain manufactured equipment contracts and parts sales, the primary performance obligation in such a contract is delivery of the requested manufactured equipment. We satisfy the performance obligation when the control is passed to the customer, generally at time of shipment. Final sales prices are fixed based on purchase orders. Sales allowances and customer incentives are treated as reductions to sales and are provided for based on historical experiences and current estimates.

Due to the highly customized nature of many of the Company’s products and each product not having an alternative use to the Company without significant costs to the Company, the Company recognizes revenue over time as progress is made toward satisfying the performance obligations of each contract. The Company has formal cancellation policies and generally does not accept returns on these units. As a result, many of the Company’s products do not have an alternative use and have an enforceable right to payment, including a reasonable profit margin, and therefore, for these products, we recognize revenue over the time it takes to produce the unit.

Contract costs include direct materials, direct labor, installation, freight and delivery, commissions and royalties. Other costs not related to contract performance, such as indirect labor and materials, small tools and supplies, operating expenses, field rework and back charges are charged to expense as incurred. Provisions for estimated losses on contracts in progress are made in the period in which such losses are determined. Changes in job performance, job conditions, and estimated profitability, including those arising from contract penalty provisions and final contract settlements, may result in revisions to costs and income and are estimated and recognized by the Company throughout the life of the contract. The aggregate of costs incurred and income recognized on uncompleted contracts in excess of billings is shown as a contract asset within our consolidated balance sheets, and the aggregate of billings on uncompleted contracts in excess of related costs incurred and income recognized is shown as a contract liability within our consolidated balance sheets.

Historically, sales of our AAON products are moderately seasonal with the peak period being May-October of each year due to timing of construction projects being directly related to warmer weather.
Product Warranties
A provision is made for the estimated cost of maintaining product warranties to customers at the time the product is sold based upon historical claims experience by product line. The Company records a liability and an expense for estimated future warranty claims based upon historical experience and management’s estimate of the level of future claims. Changes in the estimated amounts recognized in prior years are recorded as an adjustment to the liability and expense in the current year.
The Company also sells extended warranties on parts for various lengths of time ranging from six months to 10 years. Revenue for these separately priced warranties is deferred and recognized on a straight-line basis over the separately priced warranty period.
Representatives and Third Party Products
We are responsible for billings and collections resulting from all sales transactions, including those initiated by our independent manufacturer representatives (“Representatives”). Representatives are national companies that are in the business of providing heating, ventilation, and air conditioning (“HVAC”) units and other related products and services to customers. The end user customer orders a bundled group of products and services from the Representative and expects the Representative to fulfill the order. These other related products and services may include controls purchased from another manufacturer to operate the unit, start-up services, and curbs for supporting the unit (“Third Party Products”). All are associated with the purchase of an HVAC unit but may be provided by the Representative or another third party. Only after the specifications are agreed to by the Representative and the customer, and the decision is made to use an AAON HVAC unit, will we receive notice of the order. We establish the amount we must receive for our HVAC unit (“minimum sales price”), but do not control the total order price that is negotiated by the Representative with the end user customer. The Representatives submit the total order price to us for invoicing and collection. The total order price includes our minimum sales price and an additional amount which may include both the Representatives’ fee and amounts due for additional products and services required by the customer. The Company is considered the principal for the equipment we design and manufacture and records that revenue gross. The Company has no control over the Third Party Products to the end customer and the Company is under no obligation related to the Third Party Products. Amounts related to Third Party Products are not recognized as revenue but are recorded as a liability and are included in accrued liabilities on the consolidated balance sheets.
The Representatives’ fee and Third Party Products amounts (“Due to Representatives”) are paid only after all amounts associated with the order are collected from the customer. The amount of payments to our Representatives were $12.0 million and $10.2 million for the three months ended June 30, 2025 and 2024, respectively, and $24.7 million and $21.0 million for the six months ended June 30, 2025 and 2024, respectively.
Contract Assets and Liabilities
Opening and closing balances of contract assets and contract liabilities are as follows:
 June 30,
2025		December 31,
2024		June 30,
2024		December 31,
2023
 (in thousands)(in thousands)
Contract assets$233,783 $135,820 $68,171 $45,194 
Less:  Allowance for credit losses599 399 — — 
Contract assets, net233,184 135,421 68,171 45,194 
Contract liabilities(33,752)(14,913)(26,862)(13,757)
     Total, net$199,432 $120,508 $41,309 $31,437 

Costs and estimated earnings on uncompleted contracts and related billings are as follows:
 June 30,
2025		June 30,
2024
 (in thousands)
Costs incurred on uncompleted contracts$162,227 $118,691 
Estimated earnings136,447 90,774 
Total298,674 209,465 
Less: Contract billings to date106,838 168,920 
Less: Allowance for credit losses599 — 
Plus: Completed contracts, unbilled8,195 764 
     Total, net$199,432 $41,309 
Revenue recognized in the reporting period that was included in the contract liability balance at the beginning of the period for the six months ended June 30, 2025 and 2024 was $5.9 million and $11.5 million, respectively. Typically, we expect to satisfy performance obligations relating to uncompleted in-process contracts within one year or less, however, timing of performance obligations can vary due to timing of payment, production scheduling and timing of customer installation requirements. Increases in contract assets are mainly due to the increased production and increased demand of our BASX branded products.