Financial Data and Key Metrics Changes - Revenue increased by 9% to $850 million, with adjusted EBITDA growing by 17% and achieving a margin of 33.8% [11][12][9] - Free cash flow generated year-to-date was $399 million, compared to $238 million in the prior year, driven by increased profitability and better working capital performance [12][14] Business Line Data and Key Metrics Changes - Allied product sales increased by 13%, with strong growth in StormTech chambers, Nyloplast catch basins, and water quality products [4][5] - Infiltrator revenue rose by 25%, with 7% organic growth, driven by tanks and advanced treatment products [5] - Pipe revenue increased by 1%, with growth in HP pipe products offset by weakness in the agriculture market [5] Market Data and Key Metrics Changes - Non-residential sales grew by 15%, with organic growth of 12% driven by Allied products and strong HP pipe product growth [5] - The residential market showed mixed results, with strong growth in multi-family development but challenges in single-family housing starts due to interest rates [6][7] Company Strategy and Development Direction - The company remains committed to investing in both organic and inorganic growth, including the acquisition of NDS, a supplier of residential stormwater and irrigation products [7][8] - The strategy focuses on diversifying and increasing the mix of profitable Allied and Infiltrator products to enhance resiliency and support growth [8][9] Management's Comments on Operating Environment and Future Outlook - Management expressed caution regarding market demand in the second half of the year, reflecting potential risks from seasonality and economic factors [16][17] - The long-term outlook remains strong, supported by secular tailwinds driving demand for water management solutions [10][11] Other Important Information - The company achieved its safest first half of the year on record, with a total recordable incident rate half of the industry average [9] - The acquisition of NDS is expected to be accretive to adjusted earnings per share in the first year, with anticipated annual cost synergies of $25 million by year three [15] Q&A Session Summary Question: Outlook for end markets in the second half of the year - Management indicated a conservative outlook, expecting some degradation year-over-year, with demand being the riskiest part of the forecast [21][23] Question: Inventory levels in the channel - Management noted that inventory levels are sized correctly for the current uncertain demand environment, with no unusual inventory issues [25][26] Question: Sustainability of growth in the residential segment - Management highlighted strong growth driven by new products and programs with builders, particularly in multi-family developments [36][38] Question: Impact of government shutdown on demand - Management acknowledged that the government shutdown creates friction in the market, affecting shipment releases but not necessarily orders [34][35] Question: Integration and synergy capture from Orenco acquisition - Management reported that integration is progressing well, with earnings growing faster than sales and synergies exceeding expectations [82][85] Question: Pricing and material costs outlook - Management confirmed that pricing remains stable, with no expected degradation in price-cost dynamics for the second half of the year [62][63] Question: Long-term margin profile expectations - Management expressed confidence in the potential for margin expansion through product mix, innovation, and capital allocation strategies [102][104]

//ADS. Q2 Fiscal 2026 Financial Results November 6, 2025 2 3 CEO Highlights Q2 Fiscal 2026 Revenue Sales +5% $639 $671 +25% $144 $180 ADS Legacy Infiltrator ■Q2 FY25 ■Q2 FY26 Q2 Fiscal 2026 Profitability Adjusted EBITDA Margin +240 bps 33.8% 31.4% Q2 FY26 Q2 FY25 Outlook Acquisition of ( NDS® · Announced acquisition of NDS from Norma Group SE (DAX: NOEJ) for $1.0 billion, or $875 million net of tax benefits. Transaction is expected to close in the first quarter of calendar year 2026. Stormwater Management L ...

Core Insights - Advanced Drainage Systems reported quarterly earnings of $1.97 per share, exceeding the Zacks Consensus Estimate of $1.7 per share, and up from $1.7 per share a year ago [1] - The company achieved revenues of $850.38 million for the quarter ended September 2025, surpassing the Zacks Consensus Estimate by 5.65% and increasing from $782.61 million year-over-year [3] Earnings Performance - The earnings surprise for the quarter was +15.88%, following a previous surprise of +9.55% when actual earnings were $1.95 per share against an expectation of $1.78 per share [2] - Over the last four quarters, Advanced Drainage has surpassed consensus EPS estimates two times [2] Revenue Performance - The company has topped consensus revenue estimates three times over the last four quarters [3] - The current consensus EPS estimate for the upcoming quarter is $1.16 on revenues of $690.32 million, and for the current fiscal year, it is $5.87 on revenues of $2.96 billion [8] Stock Performance - Advanced Drainage shares have increased approximately 16.6% since the beginning of the year, compared to a 15.6% gain in the S&P 500 [4] - The stock currently holds a Zacks Rank 3 (Hold), indicating expected performance in line with the market in the near future [7] Industry Outlook - The Building Products - Miscellaneous industry, to which Advanced Drainage belongs, is currently ranked in the bottom 34% of over 250 Zacks industries [9] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can impact stock performance [6]

Financial Performance - Net sales increased by $67.8 million, or 8.7%, to $850.4 million compared to $782.6 million in the prior year quarter[3] - Adjusted EBITDA increased by $42.0 million, or 17.1%, to $287.5 million, representing 33.8% of net sales compared to 31.4% in the prior year[8] - Net income increased by $25.3 million, or 19.3%, to $156.5 million, with net income per diluted share rising by $0.32, or 19.2%, to $1.99[6] - Total consolidated net sales for the three months ended September 30, 2025, were $850,381,000, an increase from $782,610,000 in the same period of 2024, representing a growth of 8.7%[31] - Adjusted EBITDA for the three months ended September 30, 2025, was $287,532,000, compared to $245,550,000 for the same period in 2024, reflecting an increase of 17.1%[41] - The company reported a net income of $156,500,000 for the three months ended September 30, 2025, compared to $131,174,000 for the same period in 2024, which is an increase of 19.2%[41] - Diluted earnings per share for the three months ended September 30, 2025, were $1.99, up from $1.67 in the same period of 2024, marking an increase of 19.2%[44] Sales and Revenue Growth - Infiltrator sales increased by $36.1 million, or 25.2%, to $179.7 million, driven by the acquisition of Orenco and growth in tanks and advanced treatment products[3] - Domestic allied products & other sales increased by $22.9 million, or 13.0%, to $199.0 million[3] - International net sales totaled $58,657,000 for the three months ended September 30, 2025, slightly down from $60,058,000 in the same period of 2024, a decrease of 2.3%[31] Guidance and Future Outlook - The company updated its fiscal 2026 guidance, expecting net sales in the range of $2.900 billion to $2.990 billion and Adjusted EBITDA between $900 million and $940 million[18] Cash Flow and Liquidity - Free cash flow increased to $398.8 million compared to $238.1 million in the prior year[13] - Net cash provided by operating activities for the six months ended September 30, 2025, was $509,843,000, compared to $350,326,000 in 2024, reflecting a 45.5% increase[29] - Free cash flow for the six months ended September 30, 2025, was $398,825,000, significantly higher than $238,144,000 for the same period in 2024, indicating a growth of 67.5%[42] - Total liquidity stood at $1,402.7 million, including cash of $812.9 million and $589.9 million available under credit facilities[14] Expenses and Costs - Selling, general and administrative expenses rose by $25.1 million, or 26.7%, to $119.2 million, primarily due to the acquisition of Orenco and transaction costs related to NDS[5] - Operating expenses for the three months ended September 30, 2025, were $119,224,000, an increase of 26.7% from $94,132,000 in 2024[25] - The company incurred restructuring and realignment expenses of $7,171,000 for the three months ended September 30, 2025, which were not present in the same period of 2024[41] Assets and Capital Expenditures - Total assets as of September 30, 2025, reached $4,079,289,000, up from $3,690,360,000 as of March 31, 2025[27] - Capital expenditures for the six months ended September 30, 2025, were $111,018,000, compared to $112,182,000 in the same period of 2024, showing a slight decrease of 1.0%[42] Debt and Shareholder Returns - Long-term debt obligations as of September 30, 2025, were $1,248,506,000, slightly down from $1,251,589,000 as of March 31, 2025[27] - The company declared cash dividends of $0.18 per share for the three months ended September 30, 2025, up from $0.16 per share in 2024[25] Share Information - The company reported a weighted average diluted shares outstanding of 78,310,000 for the three months ended September 30, 2025, compared to 78,110,000 in 2024[25] - Segment adjusted gross profit for the Pipe segment was $135,305,000 for the three months ended September 30, 2025, compared to $113,605,000 in 2024, reflecting a growth of 19.1%[40] - The company’s total segment adjusted gross profit for the three months ended September 30, 2025, was $380,065,000, an increase from $325,932,000 in the same period of 2024, representing a growth of 16.6%[40]

Core Insights - Advanced Drainage Systems, Inc. (ADS) reported strong financial results for the second quarter of fiscal 2026, with a revenue increase of 8.7% year-over-year, reaching $850.4 million, driven by growth in core markets and acquisitions [2][3][9]. Financial Performance - Net sales increased by $67.8 million, or 8.7%, compared to the prior year quarter, with domestic pipe sales rising 1.6% to $413.0 million and allied products sales increasing 13.0% to $199.0 million [3][10]. - Infiltrator sales surged by 25.2% to $179.7 million, attributed to the acquisition of Orenco Systems and strong growth in tanks and advanced treatment products [3][10]. - Gross profit rose by $46.2 million, or 15.7%, to $340.1 million, primarily due to volume growth and favorable pricing [4][11]. - Selling, general and administrative expenses increased by 26.7% to $119.2 million, largely due to the acquisition of Orenco and related transaction costs [5][12]. - Net income per diluted share increased by 19.2% to $1.99, supported by the factors mentioned above and a $17.6 million gain on the sale of assets [6][13]. Adjusted Metrics - Adjusted EBITDA increased by 17.1% to $287.5 million, with a margin of 33.8%, compared to 31.4% in the prior year [7][13]. - Year-to-date fiscal 2026 results showed net sales of $1.68 billion, a 5.2% increase, with net income rising 2.4% to $300.6 million [9][10]. Acquisition Strategy - ADS announced plans to acquire NDS, a leading U.S. supplier of residential stormwater and irrigation products, in a transaction valued at approximately $1.0 billion, aimed at enhancing its product portfolio and market capabilities [2][17]. - The acquisition is expected to unlock over $25 million in annual cost synergies and is anticipated to close in the first quarter of calendar year 2026 [17][18]. Outlook - The company updated its fiscal 2026 guidance, projecting net sales between $2.9 billion and $2.99 billion and Adjusted EBITDA between $900 million and $940 million [19].

Company Overview - Advanced Drainage Systems is a leading manufacturer of stormwater and onsite wastewater solutions, with a focus on plastic drainage products made from high-density polyethylene (HDPE) and polypropylene [1][4] - The company operates through three primary segments: Pipe (56% of FY25 revenue), Allied Products (26%), and Infiltrator (18%), with a total addressable market of $15 billion and a market share of 75% to 95% across its segments [4][5] Financial Performance - The company has demonstrated strong growth, with earnings per share increasing almost 10 times since its IPO and a compound annual growth rate of 28% [5] - Advanced Drainage Systems has consistently achieved returns on invested capital above 20% and has a history of increasing dividends and share buybacks [5] Market Dynamics - Despite a 3% decline in construction spending year-to-date, the company's revenue is expected to remain stable due to several factors, including the increasing market share of plastic pipes, which have grown from 20% in 2010 to over 40% [7][8] - The company has enhanced its exposure to the residential repair and remodel market through acquisitions, positioning itself to benefit from the current low levels of existing home sales [9] Margin Management - Concerns about margin compression due to construction spending weakness are being addressed by the company's strategic diversification into higher-margin Allied Products and Infiltrator offerings [11] - Advanced Drainage Systems has a unique approach to managing input costs, toggling between recycled and virgin resins based on oil prices, which allows for better margin management [12] Future Outlook - Impactive Capital projects that Advanced Drainage Systems will return to mid-teens EPS growth, with a base case three-year total return of 69% and an internal rate of return of 19% [13]

Core Viewpoint - The company is discussing the proposed acquisition of National Diversified Sales (NDS) from NORMA Group SE, indicating a strategic move to enhance its market position and capabilities [2]. Group 1: Proposed Acquisition - The acquisition of NDS is presented as a significant opportunity for the company, with key executives involved in the discussion [2]. - The transaction is expected to strengthen the company's portfolio and expand its operational capabilities [2]. Group 2: Forward-Looking Statements - The company has issued a reminder regarding forward-looking statements, emphasizing that actual results may differ due to various factors [3]. - There is a disclaimer about the obligation to update forward-looking statements in the future, highlighting the uncertainty inherent in such projections [3][4].

Core Viewpoint - The company is proposing to acquire National Diversified Sales (NDS) from NORMA Group SE, indicating a strategic move to enhance its market position and product offerings [2]. Group 1: Proposed Acquisition - The acquisition of NDS is aimed at expanding the company's capabilities and market reach [2]. - The transaction involves key executives, including the President and CEO, and the Chief Financial Officer, highlighting the importance of this deal to the company's leadership [2]. Group 2: Communication and Transparency - The company emphasizes the potential for forward-looking statements during the call, acknowledging that actual results may differ due to various factors [3]. - A press release regarding the acquisition has been issued and is available on the company's Investor Relations website, ensuring transparency and accessibility of information [4].

Summary of Advanced Drainage Systems Conference Call Company Overview - **Company**: Advanced Drainage Systems (NYSE: WMS) - **Acquisition Target**: National Diversified Sales (NDS), a leader in residential stormwater and irrigation access boxes - **Transaction Value**: $1 billion in an all-cash transaction [3][12] Key Points of the Acquisition - **Strategic Fit**: The acquisition is seen as highly complementary to Advanced Drainage Systems' water management strategy, enhancing exposure to the residential segment and resilient applications such as residential repair and landscape irrigation [4][10] - **Financial Metrics**: The acquisition represents a valuation multiple of approximately 10 times NDS' adjusted EBITDA from the trailing 12 months ended June 30, 2025, inclusive of expected run-rate cost synergies [3][13] - **Expected Synergies**: Advanced Drainage Systems anticipates $25 million in annual cost synergies by year three post-acquisition [4][11] Growth and Diversification Strategy - **Historical Context**: In 2016, nearly 75% of Advanced Drainage Systems' revenue came from the pipe segment. The company has since diversified its product portfolio and geographic mix, aiming for higher-margin, more profitable business segments [6][10] - **Impact of Previous Acquisitions**: The acquisition of Infiltrator in 2019 significantly contributed to this diversification, doubling annual sales with a 17% sales growth CAGR [8] - **Future Projections**: Post-acquisition, approximately 50% of company revenues will come from higher growth and more profitable allied products and Infiltrator segments [6] Market Position and Opportunities - **Market Reach**: NDS generates nearly 90% of its sales in the United States, primarily operating in North America, and is recognized for its expertise in small-scale drain basins and irrigation solutions [5][10] - **Addressable Market**: The acquisition allows Advanced Drainage Systems to tap into the $1.5 billion landscape irrigation market, enhancing cross-selling opportunities and expanding its product offerings [10] Financial Outlook - **Pro Forma Revenue**: The combined entity is expected to have pro forma revenue exceeding $3 billion with an adjusted EBITDA margin of approximately 31% [11] - **Debt Management**: The acquisition will be funded through cash on hand and existing revolving credit facilities, with pro forma net debt expected to be 1.6 times at closing, within the targeted leverage range [12] Conclusion - **Integration Confidence**: Advanced Drainage Systems expresses confidence in its ability to integrate NDS effectively, leveraging proven integration capabilities to drive growth and profitability [14] - **Future Updates**: The transaction is expected to close in the first calendar quarter of 2026, pending regulatory approvals [14]

Core Viewpoint - Advanced Drainage Systems, Inc. has signed a definitive agreement to acquire the water management unit of Norma Group SE, known as National Diversified Sales (NDS), for approximately $1 billion in cash, with a net purchase price of about $875 million after tax benefits [1][5]. Group 1: Acquisition Details - The acquisition is unanimously approved by both boards and aims to expand Advanced Drainage Systems' presence in stormwater, onsite wastewater, and irrigation markets [2][3]. - NDS generated $313 million in revenue over the 12 months ending June 2025, with nearly 90% of sales occurring in the U.S. [4]. - The purchase price reflects about 10 times NDS's adjusted EBITDA for the same period, including expected cost synergies [5]. Group 2: Financial Impact - Advanced Drainage Systems projects that the deal will contribute to adjusted EPS within the first year, supported by anticipated savings of more than $25 million annually, fully realized within three years [5]. - As of June 30, 2025, Advanced Drainage Systems had cash worth $638.27 million, with net long-term debt obligations of $1.25 billion at the end of the first quarter of fiscal 2026 [2]. Group 3: Strategic Implications - The acquisition diversifies Advanced Drainage Systems' offerings and supports growth across multiple end markets, including entry into the $1.5 billion landscape irrigation sector [6]. - The combination of Advanced Drainage Systems' operational expertise with NDS's established brand is expected to strengthen the firm's ability to capture long-term opportunities [7].