Company Performance - Advanced Drainage Systems reported quarterly earnings of $2.06 per share, exceeding the Zacks Consensus Estimate of $1.98 per share, and showing a slight increase from $2.04 per share a year ago [1] - The earnings surprise for this quarter was 4.04%, following a previous quarter where the company reported earnings of $1.23 per share against an expectation of $0.95, resulting in a surprise of 29.47% [2] - The company posted revenues of $815.34 million for the quarter, which was 1.53% below the Zacks Consensus Estimate, but an increase from $778.05 million in the same quarter last year [3] Market Performance - Advanced Drainage shares have increased approximately 5.9% since the beginning of the year, while the S&P 500 has gained 9% [4] - The current consensus EPS estimate for the upcoming quarter is $2.02, with expected revenues of $826 million, and for the current fiscal year, the estimate is $7.19 on $3.02 billion in revenues [8] Industry Outlook - The Building Products - Miscellaneous industry, to which Advanced Drainage belongs, is currently ranked in the top 40% of over 250 Zacks industries, indicating a favorable outlook [9] - Empirical research suggests a strong correlation between near-term stock movements and trends in earnings estimate revisions, which could impact the stock's performance [6]

The market expects Advanced Drainage Systems (WMS) to deliver a year-over-year decline in earnings on higher revenues when it reports results for the quarter ended June 2024. This widely-known consensus outlook is important in assessing the company's earnings picture, but a powerful factor that might influence its near-term stock price is how the actual results compare to these estimates. The earnings report, which is expected to be released on August 8, 2024, might help the stock move higher if these key n ...

Market Overview - The stormwater industry is estimated to be approximately $13 billion annually, while the onsite septic market is around $2 billion, leading to a combined addressable market opportunity of approximately $15 billion[17]. - The company has established a leading position in various end markets by leveraging its national sales and distribution platform, engineering support, and manufacturing excellence[15]. - The product portfolio is built around four lifecycle steps: Capture, Conveyance, Storage, and Treatment, ensuring comprehensive stormwater management[16]. Financial Performance - Net sales decreased by $196.6 million, or 6.4%, to $2,874.5 million compared to $3,071.1 million in the prior year[196]. - Gross profit increased by $27.5 million, or 2.5%, to $1,145.9 million, primarily due to favorable material costs[197]. - Adjusted EBITDA increased by $19.0 million, or 2.1%, to $922.9 million, representing 32.1% of net sales compared to 29.4% in the prior year[198]. - Net income increased by 0.4% to $513.3 million, with net income per diluted share rising by 6.1% to $6.45[204]. - Cash provided by operating activities increased by $10.1 million to $717.9 million, while free cash flow decreased by $6.8 million to $534.1 million[204]. Product and Technology Development - The Infiltrator product line includes advanced treatment systems capable of handling daily flows up to 100,000 gallons, enhancing wastewater purification[34]. - The company actively seeks and evaluates new products and technologies to enhance its Allied Products, which complement its core Pipe offerings[37]. - The company is investing in technology initiatives aimed at improving order management and manufacturing efficiency, but these may disrupt operations in the short term[135]. Sustainability Initiatives - Approximately 360 million pounds of post-consumer and post-industrial recycled HDPE and 130 million pounds of recycled polypropylene are converted each year, contributing to sustainability initiatives[49]. - The company has set 10 Year Sustainability Goals, including increasing the use of recycled plastic and implementing a supplier sustainability program[68]. - The company emphasizes a commitment to sustainability, recognized by its inclusion in Newsweek's list of America's Most Responsible Companies 2024[65]. - The company has committed to pursuing science-based targets to reduce greenhouse gas emissions, aligning with global temperature increase limits of 1.5°C[107]. Operational Capacity - The company operates 64 manufacturing plants and 41 distribution centers, with a new pipe manufacturing facility planned in Lake Wales, Florida[55]. - The company can produce over one billion pounds of pipe annually, with additional capacity to support seasonal production needs[58]. - The company maintains a large in-house fleet of approximately 650 tractors, aiming for less than three-day lead time on deliveries[62]. Customer Base and Sales Strategy - The customer base includes approximately 16,000 customers, with Ferguson Enterprises and Core and Main representing 13.3% and 12.5% of fiscal 2024 net sales, respectively[72]. - The company’s sales and marketing strategy focuses on comprehensive market coverage and diverse product offerings to effectively service customers[70]. - Seasonal sales are typically higher in the first and second quarters due to favorable weather conditions[192]. Regulatory and Compliance Challenges - The company is focused on regulatory approvals for its HDPE products, which are expected to drive growth opportunities in new and existing markets[93]. - Over the past 10 years, the regulatory team has successfully initiated over 100 regulatory initiatives, expanding market addressability across the U.S. and Canada[94]. - The company’s operations are affected by various environmental, health, and safety laws, which could impose significant compliance costs[95]. - In March 2024, the SEC adopted rules requiring significant climate-related disclosures, which may increase compliance burdens and regulatory costs for the company[108]. Risks and Challenges - The company is subject to fluctuations in resin prices, which are influenced by crude oil and natural gas prices, potentially impacting profitability if costs cannot be passed to customers[100]. - The company is exposed to risks from climate change, which may lead to more severe weather events affecting operations and supply chains, potentially impacting financial performance[112]. - Increased fuel and energy prices could adversely affect operating profits, especially if the company cannot pass these costs onto customers[123]. - The company faces challenges in managing working capital, with significant components including inventories, accounts receivable, and accounts payable[115]. Cybersecurity and IT Risks - Cybersecurity incidents pose a risk to the company's confidential information and operational integrity, potentially harming reputation and financial performance[136]. - The company has experienced cybersecurity incidents in the past, which did not materially impact financial results, but future incidents could have significant adverse effects on financial condition and operations[137]. - Failures in IT systems due to cybersecurity incidents could disrupt operations and financial processes, potentially leading to material adverse effects on business performance[138]. - The company relies on third-party vendors for secure systems, and any cybersecurity incidents affecting these vendors could disrupt normal business operations and impact financial performance[139]. Employee and Management Considerations - The ability to attract and retain highly qualified employees is critical for success, with external factors influencing labor costs and competition for talent[140]. - The company’s financial performance is dependent on the experience and relationships of its management team and plant managers, with potential impacts on growth and profitability if key personnel are lost[142]. Shareholder and Stock Considerations - As of May 9, 2024, the company has 77.4 million outstanding shares of common stock, with potential future sales by stockholders possibly causing stock price declines[148]. - The concentration of ownership among directors and principal stockholders may delay or prevent changes in control, potentially affecting stockholder interests and market price[151]. - The company repurchased 1.8 million shares of common stock at a cost of $207.3 million during fiscal 2024[178]. - The quarterly cash dividend declared for the first quarter of fiscal 2025 is $0.16 per share, up from $0.14 in fiscal 2024[174].

Financial Performance - Adjusted EBITDA increased 2% to $923 million, with Adjusted EBITDA margin reaching a record 32.1% for fiscal year 2024[2] - Net sales decreased 6% to $2.9 billion for fiscal year 2024, driven by weaker demand in the first half of the year[2] - Fourth quarter net sales increased 5.9% to $653.8 million, with Adjusted EBITDA up 11.2% to $191.2 million[3] - Gross profit increased 13.3% to $252.0 million in Q4, driven by favorable volume growth and productivity improvements[4] - Net income for the fiscal year ended March 31, 2024, was $513,291 thousand, slightly up from $511,353 thousand in the previous year[24] - Net Income for Q1 2024 was $95.48 million, a 10.6% increase from $86.31 million in Q1 2023[34] - Diluted Earnings Per Share for Q1 2024 was $1.21, compared to $1.06 in Q1 2023[38] - Adjusted Earnings Per Share for Q1 2024 was $1.23, up from $1.12 in Q1 2023[38] Segment Performance - Domestic pipe sales increased 3.3% to $358.7 million, while Infiltrator sales surged 21.0% to $106.1 million in Q4[3] - Pipe segment net sales from external customers were $1,544,290 thousand in 2024, down from $1,717,189 thousand in 2023[26] - Infiltrator Water Technologies segment net sales from external customers increased to $449,027 thousand in 2024 from $442,280 thousand in 2023[26] - International segment net sales from external customers decreased to $207,769 thousand in 2024 from $219,853 thousand in 2023[26] - Infiltrator Water Technologies segment gross profit for Q1 2024 was $65.36 million, a 63.3% increase from $40.01 million in Q1 2023[33] - Total Segment Adjusted Gross Profit for Q1 2024 was $280.94 million, up 14.6% from $245.20 million in Q1 2023[33] Cash Flow and Capital Expenditures - Free cash flow (Non-GAAP) decreased $6.8 million to $534.1 million for fiscal year 2024[3] - Net cash provided by operating activities reached $717,928 thousand in 2024, compared to $707,810 thousand in 2023[24] - Capital expenditures for 2024 were $183,812 thousand, up from $166,913 thousand in 2023[24] - Capital Expenditures for FY 2024 were $183.81 million, up 10.1% from $166.91 million in FY 2023[36] - Capital expenditures for fiscal 2025 are anticipated to be between $250 million and $300 million[12] Debt and Shareholder Returns - Net debt decreased by $246.9 million to $860.9 million as of March 31, 2024[9] - The company repurchased 1.8 million shares for $207.3 million and returned $251.3 million to shareholders in fiscal year 2024[11] - Repurchase of common stock in 2024 amounted to $207,308 thousand, significantly lower than $575,027 thousand in 2023[24] Future Outlook - Fiscal 2025 net sales are expected to range between $2.925 billion and $3.025 billion, with Adjusted EBITDA projected between $940 million and $980 million[12] Balance Sheet and Assets - Total assets increased to $3,268,913 thousand in March 2024 from $2,901,125 thousand in March 2023, reflecting a growth of 12.7%[22] - Cash and restricted cash at the end of 2024 were $495,848 thousand, up from $217,128 thousand in 2023[24] Other Financial Metrics - Free Cash Flow for FY 2024 was $534.12 million, slightly down from $540.90 million in FY 2023[36] - Depreciation and Amortization for Q1 2024 was $42.89 million, up 13.4% from $37.80 million in Q1 2023[34] - Stock-based Compensation Expense for Q1 2024 was $8.35 million, a 378% increase from $1.75 million in Q1 2023[34] - Total consolidated net sales for the fiscal year ended March 31, 2024, were $2,874,473 thousand, a decrease from $3,071,121 thousand in 2023[26]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended December 31, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number: 001-36557 ADVANCED DRAINAGE SYSTEMS, INC. (Exact name of registrant as specified in its charter) (State or Other Jurisdiction of Incorporation or Organization) De ...

Financial Performance - Revenue increased by 1% to $662 million in Q3 FY24 compared to $655 million in Q3 FY23[13] - Adjusted EBITDA Margin improved significantly to 30.8% in Q3 FY24, a +490 basis points increase from 25.9% in Q3 FY23[11] - The company expects Net Sales for Fiscal Year 2024 to be between $2.8 billion and $2.85 billion, representing a (9%) to (7%) year-over-year change[63] - The company expects Adjusted EBITDA for Fiscal Year 2024 to be between $880 million and $910 million, representing a (3%) to +1% year-over-year change[63] - The company expects Adjusted EBITDA Margin for Fiscal Year 2024 to be between 31.4% and 31.9%, a +200 to +250 basis points change[63] Business Segment Performance - Infiltrator business revenue increased by 17% in Q3 FY24 compared to Q3 FY23[9] - ADS Legacy pipe business revenue decreased by 1% in Q3 FY24 compared to Q3 FY23[9] - Allied Products revenue increased by 5% in Q3 FY24[14] Market and Demand - Infrastructure sector experienced a significant increase of 22% in Q3 FY24[15] - Non-Residential construction decreased by 3% in Q3 FY24[15] - Residential construction increased by 5% in Q3 FY24[15] Cash Flow and Capital Structure - Consolidated Free Cash Flow was $564 million[62]

Financial Data and Key Metrics Changes - The company reported revenue of $780 million for Q2 2024, a decrease of 12% primarily due to lower volume [20] - Adjusted EBITDA was $246 million, a decrease of 6%, with a 180-basis point expansion in adjusted EBITDA margin to 31.6% [20][14] - Free cash flow generated in the first half of fiscal 2024 was $376 million, an increase of 4% compared to $361 million in the prior year [22] Business Line Data and Key Metrics Changes - The Infiltrator business performed better than expected, while the ADS pipe portfolio continued to meet expectations despite headwinds from higher interest rates and economic uncertainty [13] - The company experienced a consistent demand for infrastructure activity, particularly in locally funded projects [13] Market Data and Key Metrics Changes - The company noted that severe storms and flooding in the eastern U.S. highlighted the inadequacy of stormwater infrastructure, increasing the demand for their products [7] - The Florida market saw ADS pipe sales increase over 6x since the approval of corrugated thermoplastic pipe for stormwater in 2014 [10] Company Strategy and Development Direction - The company announced the construction of a new manufacturing facility in Lake Wales, Florida, to meet current and future customer demand [9] - Investments are being made in an engineering and technology center in Hilliard, Ohio, aimed at increasing innovation and incorporating more recycled materials into products [11][12] - The company is committed to sustainability, aiming to consume 1 billion pounds of recycled material annually by fiscal 2032 [12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to deliver on commitments despite a slow demand environment, emphasizing the ongoing demand for stormwater and septic wastewater products [18] - The company updated its fiscal 2024 guidance, raising the bottom of the revenue guidance to between $2.7 billion and $2.8 billion, driven by better-than-expected demand [24] Other Important Information - The company remains focused on managing costs and production while preparing for a recovery in residential and non-residential markets [19] - The share buyback program has resulted in 7% fewer shares outstanding compared to last year, partially offsetting the impact of lower net income on earnings per share [23] Q&A Session Summary Question: Can you provide insights on residential performance across legacy pipe and Infiltrator? - Management noted that Infiltrator is performing stronger in the latter half of the build cycle, benefiting from home completions catching up with starts [29] Question: What is the status of automation investments across facilities? - Management indicated there is significant room for improvement in automation across various facilities, with plans to implement best practices in the new Lake Wales facility [31][34] Question: What are the expectations for EBITDA margins in the second half? - Management acknowledged a larger-than-normal decline in margins from the first half to the second half, driven by prudent end market guidance and increased investments in SG&A [36][38] Question: How is the non-residential project bidding and backlog tracking? - Management reported steady backlog and order activity in the non-residential market, despite challenges from higher interest rates and tightening credit standards [45][46] Question: Can you elaborate on the new manufacturing facility in Florida? - Management confirmed that the new facility will provide incremental capacity and will not displace existing high-performing facilities [49][51] Question: What is the outlook for free cash flow conversion in the second half? - Management targets a free cash flow conversion of 50% or greater, with a focus on working capital management [67] Question: What are the dynamics in the residential and non-residential markets for the back half of the year? - Management expects easier comps in the back half for residential, but does not anticipate significant changes in performance between residential and non-residential markets [86]

Financial Performance - Net sales for Q2 Fiscal 2024 decreased by $104.0 million, or 11.8%, to $780.2 million compared to $884.2 million in the prior year quarter[57] - Year-to-date net sales decreased by 13.4% to $1.6 billion, with net income down 9.0% to $310.9 million[61] - Consolidated net sales for the six months ended September 30, 2023, decreased by $240.1 million, or 13.4%, compared to the same period in fiscal 2022, primarily due to lower demand in the U.S. construction and agriculture markets[76] - International sales decreased by $4.0 million, or 5.5%, to $69.4 million, indicating a decline in global demand[57] Profitability - Gross profit decreased by $17.3 million, or 5.4%, to $302.7 million, primarily due to decreased volume and unfavorable fixed cost absorption[58] - Total gross profit for the six months ended September 30, 2023, decreased by $37.9 million, or 5.6%, with a consolidated cost of goods sold decreasing by $202.2 million, or 18.0%[78] - Adjusted EBITDA decreased by $17.0 million, or 6.4%, to $246.3 million, with an Adjusted EBITDA margin of 31.6% compared to 29.8% in the prior year[58] - Adjusted EBITDA for the six months ended September 30, 2023, was $527.6 million, with an adjusted EBITDA margin of 33.9%[87] Expenses - Selling, general and administrative expenses increased to $91.7 million, or 11.8% of net sales, reflecting investments in engineering and innovation initiatives[70] - Selling, general and administrative expenses increased by $3.1 million to $178.2 million, representing 11.4% of net sales, up from 9.7% in the prior year[79] - Interest expense increased by $3.7 million due to rising interest rates[71] - Interest expense rose by $14.3 million due to increased average debt levels and higher interest rates[80] Cash Flow and Capital Expenditures - Free cash flow increased by 4.1% to $376.2 million, reflecting improved cash generation despite lower sales[61] - Free cash flow for the six months ended September 30, 2023, was $376.2 million, compared to $361.5 million in the same period of 2022[91] - Cash provided by operating activities increased by $21.8 million to $458.9 million during the six months ended September 30, 2023, primarily driven by changes in net working capital[95] - Capital expenditures for the six months ended September 30, 2023, totaled $82.6 million, with anticipated capital expenditures of approximately $200 to $225 million for fiscal year 2024[97][98] Debt and Compliance - Total debt as of September 30, 2023, was $1.32 billion, with a leverage ratio of 1.0[92] - Working capital increased to $804.0 million as of September 30, 2023, from $638.7 million as of March 31, 2023[94] - As of September 30, 2023, the company is in compliance with its debt covenants and has no changes in debt disclosures from the Fiscal 2023 Form 10-K[102] - The South American Joint Venture has approximately $1.4 million of outstanding debt subject to the company's guarantees, which is not expected to impact financial condition or liquidity[103] Interest Rate Risks - A 1.0% increase in interest rates on variable-rate debt would increase annual forecasted interest expense by approximately $4.2 million based on borrowings as of September 30, 2023[110] - If the Revolving Credit Facility is fully drawn, each 1.0% change in the applicable interest rate would alter interest expense by approximately $10.2 million for the twelve months ended September 30, 2023[110] Forward-Looking Statements and Market Risks - Forward-looking statements include expectations regarding consolidated results of operations, financial condition, and growth strategies, but are subject to risks and uncertainties[105] - The company cautions that actual results may differ materially from forward-looking statements due to various factors, including competition and economic conditions[106] - Market risks include changes in interest rates, credit, raw material supply prices, and foreign currency exchange rates, with no material change in exposure reported[109] - The company does not engage in speculative, non-operating transactions, limiting exposure to market risks to normal business operations[109] - The company does not undertake any obligation to update forward-looking statements beyond legal requirements[108]

(Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (614) 658-0050 (Registrant's Telephone Number, Including Area Code) Securities registered pursuant to Section 12(b) of the Act: For the quarterly period ended June 30, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number: 001-36557 ADVANCED DRAINAGE SYSTEMS, I ...

Washington, D.C. 20549 Form 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended March 31, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to COMMISSION FILE NO.: 001-36557 ADVANCED DRAINAGE SYSTEMS, INC. UNITED STATES SECURITIES AND EXCHANGE COMMISSION Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securit ...