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Financial Performance - Net sales for the three months ended September 30, 2025, were $850,381,000, representing a 8.7% increase from $782,610,000 in the same period of 2024[13] - Gross profit for the six months ended September 30, 2025, was $670,570,000, up from $626,395,000 in 2024, indicating a growth of 7.1%[13] - Net income attributable to ADS for the three months ended September 30, 2025, was $156,017,000, compared to $130,382,000 in 2024, reflecting a 19.6% increase[13] - The company reported a comprehensive income of $155,381,000 for the three months ended September 30, 2025, compared to $131,128,000 in 2024, a rise of 18.4%[15] - Net income for the six months ended September 30, 2025, increased to $300,591 thousand, up from $293,496 thousand in 2024, representing a growth of 2.4%[18] - Net cash provided by operating activities rose to $509,843 thousand, compared to $350,326 thousand in the same period last year, reflecting a significant increase of 45.5%[18] - Net income for the three months ended September 30, 2025, was $156.017 million, compared to $299.939 million for the same period in 2024, reflecting a decrease of approximately 48%[20] Assets and Liabilities - Total assets as of September 30, 2025, were $4,079,289,000, an increase from $3,690,360,000 as of March 31, 2025[11] - Current assets increased to $1,672,912,000 as of September 30, 2025, from $1,324,783,000 as of March 31, 2025, marking a growth of 26.3%[11] - Total liabilities as of September 30, 2025, were $2,150,178,000, compared to $2,054,572,000 as of March 31, 2025, showing an increase of 4.7%[11] - The company’s 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[11] Stockholder Equity and Dividends - The total stockholders' equity at September 30, 2024, was $1,376,457 thousand, compared to $1,281,047 thousand at the beginning of the period, indicating a growth of 7.4%[19] - Common stock dividends paid were $28,085 thousand, up from $24,917 thousand in 2024, reflecting an increase of 12.0%[18] - The balance of total stockholders' equity as of September 30, 2025, was $1.846 billion, an increase from $1.543 billion as of April 1, 2025[20] - Common stock dividends declared were $0.18 per share, totaling $14.040 million for the three months ended September 30, 2025[20] Capital Expenditures and Cash Flow - Capital expenditures for the period were $111,018 thousand, slightly down from $112,182 thousand in 2024, indicating a decrease of 1.0%[18] - The company reported a net cash used in investing activities of $105,343 thousand, compared to $111,542 thousand in the previous year, showing a decrease of 5.6%[18] - Total capital expenditures for the three months ended September 30, 2025, were $58,420,000, compared to $54,467,000 in 2024, an increase of 7.0%[75] Segment Performance - The company operates in three reportable segments: Pipe, Infiltrator Water Technologies, and International, with additional reporting for Allied Products and Other[26] - The Pipe segment reported net sales of $426,811,000 for the three months ended September 30, 2025, compared to $420,989,000 in 2024, a slight increase of 0.4%[73] - The Infiltrator segment's net sales increased to $196,368,000 for the three months ended September 30, 2025, from $157,521,000 in 2024, marking a significant growth of 24.6%[73] - Segment Adjusted Gross Profit for the three months ended September 30, 2025, was $380,065,000, up from $325,932,000 in 2024, indicating a growth of 16.6%[74] Acquisitions and Investments - The acquisition of Orenco Systems, Inc. was completed on October 1, 2024, for a total consideration of approximately $236.3 million, net of cash acquired[38] - The preliminary fair value of consideration transferred for the acquisition of River Valley Pipe was approximately $18.8 million, funded from cash on hand[40] - The identifiable intangible assets from the acquisition of River Valley Pipe are valued at $2.970 million, including customer relationships and tradename[45] - The company entered into a definitive stock purchase agreement to acquire National Diversified Sales for approximately $1.0 billion, expected to close in Q1 2026[47] - The company incurred $0.5 million in transaction costs related to acquisitions during the six months ended September 30, 2025[43] Debt and Financing - The company issued $350 million in Senior Notes due 2027 with a 5.0% interest rate and $500 million in Senior Notes due 2030 with a 6.375% interest rate[59][60] - The company increased its Revolving Credit Facility from $350 million to $600 million, extending the maturity date to May 26, 2027[57] - The weighted average interest rate for equipment financing was 1.8% as of September 30, 2025, with a current portion of $1.7 million and a long-term portion of $2.4 million[61] Tax and Compensation - The effective tax rate for the three months ended September 30, 2025, was 25.2%, compared to 23.9% for the same period in 2024[65] - Total stock-based compensation expense for the three months ended September 30, 2025, was $8.6 million, an increase from $7.0 million in 2024[66] - The company granted 0.1 million shares of restricted stock with a grant date fair value of $13.8 million during the six months ended September 30, 2025[69] Market Presence and Outlook - The company’s products are utilized across various sectors, including non-residential, residential, infrastructure, and agriculture applications, indicating a broad market presence[25] - The company anticipates that sales will be higher in the first and second quarters of each fiscal year due to favorable weather conditions[27] - The company is currently evaluating the impact of new accounting standards on its financial statements, which may affect future reporting[31] Other Financial Metrics - Total inventories as of September 30, 2025, amounted to $423.778 million, down from $488.269 million as of March 31, 2025[51] - Payments on finance lease obligations increased to $17,171 thousand from $11,756 thousand, representing a rise of 46.2%[18] - A 1.0% increase in interest rates on variable-rate debt would increase annual forecasted interest expense by approximately $4.1 million based on borrowings as of September 30, 2025[133] - If the Revolving Credit Facility is fully drawn, each 1.0% increase or decrease in the applicable interest rate would change interest expense by approximately $10.1 million for the twelve months ended September 30, 2025[133]

Financial Data and Key Metrics Changes - Revenue increased by 9% to $850 million, reflecting strong performance despite market challenges [5][13] - Adjusted EBITDA grew by 17%, resulting in a margin of 33.8%, demonstrating the resilience of the business model [11][13] - Free cash flow for the year-to-date reached $399 million, up from $238 million in the prior year, driven by increased profitability and better working capital performance [15][16] Business Line Data and Key Metrics Changes - Allied product sales rose by 13%, with significant growth in StormTech chambers, Nyloplast catch basins, and water quality products [5][6] - Infiltrator revenue surged by 25%, with 7% organic growth attributed to new tanks and advanced treatment products [6][7] - Pipe revenue saw a modest increase of 1%, with growth in HP pipe products offset by weakness in the agriculture market [7] Market Data and Key Metrics Changes - Non-residential sales grew by 15%, driven by broad-based geographic growth across the U.S., with organic growth of 12% [7][8] - The residential market showed mixed results, with strong growth in multi-family development but challenges in single-family housing starts due to interest rates [8][10] - Land development activity was stronger in the Atlantic Coast and south-central U.S., while the DIY channel faced challenges [8] Company Strategy and Development Direction - The company remains committed to investing in both organic and inorganic growth, including the recent agreement to acquire NDS, a supplier of stormwater and irrigation products [9][10] - The strategy focuses on diversifying and increasing the mix of profitable Allied and Infiltrator products to enhance resiliency and support growth [10][11] - The company aims to leverage its scale, product portfolio, and operational excellence to drive long-term growth in water management solutions [11][12] 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 [18][19] - The long-term outlook remains strong, supported by secular tailwinds driving demand for water management solutions [12][19] - Management highlighted the importance of safety and operational excellence, achieving the safest first half of the year on record [11][12] Other Important Information - The company ended the quarter with a net leverage of 0.7 turns and over $1.4 billion in available liquidity, including $813 million in cash [16][17] - 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 [17] Q&A Session Summary Question: Outlook for end markets in the second half of the year - Management indicated a conservative outlook for the second half, implying slight degradation year-over-year due to uncertain demand [24][26] Question: Inventory levels in the channel - Management noted that inventory levels are appropriately sized for the current demand environment, with no unusual issues observed [26][27] Question: Margin expectations for the second half - Management expects stable price-cost dynamics, with margins driven by demand and top-line performance [30][31] Question: Residential business growth drivers - Growth in the residential segment was attributed to new products and strong participation in multi-family developments [38][41] Question: Integration progress of Orenco acquisition - Integration is progressing well, with earnings growing faster than sales and positive customer feedback [87][90] Question: Potential revenue synergies from NDS acquisition - Management highlighted complementary product lines and opportunities for cross-selling between ADS and NDS products [99][100] Question: Long-term margin profile expectations - Management sees opportunities for margin expansion through product mix, innovation, and capital allocation strategies [106]

Financial Performance - Revenue increased by 9% to $850 million, driven by strong performance in both non-residential and residential end markets [13][5] - Adjusted EBITDA grew by 17%, resulting in a margin of 33.8%, reflecting the resilience of the company's business model [13][11] - Free cash flow for the year-to-date reached $399 million, up from $238 million in the prior year, attributed to increased profitability and better working capital performance [15][16] Business Line Performance - Allied product sales increased by 13%, with notable growth in StormTech chambers, Nyloplast catch basins, and water quality products [5][6] - Infiltrator revenue surged by 25%, with 7% organic growth, driven by strong demand for tanks and advanced treatment products [6][7] - Pipe revenue saw a modest increase of 1%, with growth in HP pipe products offset by weakness in the agriculture market [7] Market Performance - Non-residential sales grew by 15%, with organic growth of 12% driven by strong performance in Allied products and HP pipe products [7][8] - The residential market showed mixed results, with strong growth in multi-family development but challenges in single-family housing starts due to high interest rates [8][9] - Geographic performance varied, with better land development activity in the Atlantic Coast and south-central U.S. [8] Company Strategy and Industry Position - The company remains committed to investing in both organic and inorganic growth, including the recent agreement to acquire NDS, which will enhance its product portfolio [9][10] - The strategic focus is on diversifying and increasing the mix of profitable Allied and Infiltrator products to capture more opportunities in water management [10][11] - The company operates in attractive water segments supported by secular tailwinds from climate change and increased awareness of stormwater management [9] Management Commentary 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 [19][19] - The long-term outlook remains strong, supported by compelling demand for water management solutions across North America [12][19] - The company is focused on executing its long-term strategic plan to drive consistent growth and margin expansion [19] Other Important Information - The company plans to spend approximately $200 million-$225 million on capital expenditures for the full year, focusing on innovation and increasing recycling capacity [16][17] - 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 [17][18] Q&A Session Summary Question: Outlook for end markets in the second half of the year - Management indicated a conservative outlook for the second half, reflecting potential demand degradation and uncertainty in the market [24][26] Question: Inventory levels in the channel - Management stated that inventory levels are appropriately sized for the current demand environment, with no unusual issues noted [26][27] Question: Margin expectations for the second half - Management emphasized that margin expectations are primarily driven by demand, with stable price-cost dynamics anticipated [30][31] Question: Residential business growth drivers - Management highlighted strong performance in multi-family developments and new product introductions as key growth drivers in the residential segment [39][41] Question: Integration progress of Orenco acquisition - Management reported that the integration is progressing well, with earnings growing faster than sales and positive customer feedback [90][89] Question: Revenue synergies from NDS acquisition - Management discussed potential revenue synergies from cross-selling opportunities and complementary product lines between ADS and NDS [100][101]

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]