Advanced Drainage Systems(WMS) - 2025 Q1 - Quarterly Results

First Quarter Fiscal 2025 Results Performance Highlights The company reported modest sales growth but slight declines in net income and Adjusted EBITDA for Q1 FY2025 Q1 Fiscal 2025 Key Financial Metrics | Metric | Q1 FY2025 | Change vs. Q1 FY2024 | | :--- | :--- | :--- | | Net Sales | $815.3 million | +4.8% | | Net Income | $162.3 million | -6.7% | | Net Income per Diluted Share | $2.06 | -5.5% | | Adjusted EBITDA (Non-GAAP) | $275.5 million | -2.1% | | Adjusted EPS (Non-GAAP) | $2.06 | Flat | - Revenue growth was primarily led by an 8% increase in Allied product sales and a 6% increase in sales from the Infiltrator business[1] - The Adjusted EBITDA margin of 33.8% is noted as one of the highest quarterly margins in the company's history, attributed to volume growth, sales mix, and better fixed cost absorption[1] - The company recently began moving into its new world-class Engineering and Technology Center in Hilliard, OH, to support industry advancement through engineered solutions[1] Detailed Financial Results Net sales increased due to strong US demand, while gross profit was flat and SG&A expenses rose from strategic investments Q1 FY2025 Net Sales Breakdown (vs. Prior Year) | Category | Q1 FY2025 Sales | Change | | :--- | :--- | :--- | | Total Net Sales | $815.3 million | +4.8% | | Domestic Pipe Sales | $431.4 million | +2.5% | | Domestic Allied Products & Other | $196.0 million | +7.6% | | Infiltrator Sales | $130.2 million | +5.9% | | International Sales | $57.7 million | +10.4% | - Gross profit increased slightly by $1.0 million, as the benefit from higher demand and a better sales mix was largely offset by unfavorable pricing and costs for materials and transportation[2] - SG&A expenses increased by $7.5 million to $94.1 million, primarily due to higher commissions from increased sales volume and continued investments in talent for strategic areas[3] Balance Sheet and Liquidity The company maintained a strong liquidity position while reducing net debt and executing share repurchases Cash Flow and Debt Summary (Q1 FY2025) | Metric | Q1 FY2025 | Q1 FY2024 | | :--- | :--- | :--- | | Net Cash from Operating Activities | $183.4 million | $244.0 million | | Free Cash Flow (Non-GAAP) | $125.7 million | $201.9 million | - As of June 30, 2024, the company had total liquidity of $1,131.2 million, including $541.6 million in cash and $589.6 million available under credit facilities[5] - The company repurchased 0.3 million shares for $49.2 million in the quarter, with approximately $167.6 million remaining under the current share repurchase authorization[5] Fiscal 2025 Outlook The company reaffirmed its full-year fiscal 2025 guidance for net sales and Adjusted EBITDA Full-Year Fiscal 2025 Guidance | Metric | Expected Range | | :--- | :--- | | Net Sales | $2.925 billion to $3.025 billion | | Adjusted EBITDA | $940 million to $980 million | | Capital Expenditures | $250 million to $300 million | Financial Statements Consolidated Statements of Income The statement shows a year-over-year increase in net sales but a decrease in net income for the quarter Consolidated Statements of Income (Unaudited, in thousands) | (In thousands, except per share data) | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | | :--- | :--- | :--- | | Net sales | $815,336 | $778,046 | | Gross profit | $332,454 | $331,460 | | Income from operations | $226,215 | $245,451 | | Net income | $162,322 | $173,905 | | Net income attributable to ADS | $161,402 | $173,652 | | Diluted Net income per share | $2.06 | $2.18 | Consolidated Balance Sheets The balance sheet reflects an increase in total assets and liabilities compared to the previous quarter Consolidated Balance Sheets (Unaudited, in thousands) | (Amounts in thousands) | As of June 30, 2024 | As of March 31, 2024 | | :--- | :--- | :--- | | ASSETS | | | | Cash | $541,637 | $490,163 | | Total current assets | $1,424,300 | $1,299,967 | | Total assets | $3,447,538 | $3,268,913 | | LIABILITIES & EQUITY | | | | Total current liabilities | $492,927 | $439,622 | | Total liabilities | $2,062,725 | $1,988,214 | | Total stockholders' equity | $1,281,047 | $1,172,115 | | Total liabilities, mezzanine equity and stockholders' equity | $3,447,538 | $3,268,913 | Consolidated Statements of Cash Flows Operating cash flow decreased from the prior year, with cash used in investing and financing activities Consolidated Statements of Cash Flows (Unaudited, in thousands) | (Amounts in thousands) | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $183,426 | $243,967 | | Net cash used in investing activities | ($57,217) | ($21,944) | | Net cash used in financing activities | ($73,895) | ($73,512) | | Net change in cash | $51,522 | $148,976 | | Cash and restricted cash at end of period | $547,370 | $366,104 | Segment and Non-GAAP Information Net Sales by Segment All business segments reported year-over-year sales growth, led by the core Pipe segment Net Sales from External Customers by Segment (in thousands) | Segment | Q1 FY2025 | Q1 FY2024 | | :--- | :--- | :--- | | Pipe | $431,425 | $420,813 | | Infiltrator | $130,218 | $122,908 | | Total International | $57,705 | $52,249 | | Allied Products & Other | $195,988 | $182,076 | | Total Consolidated | $815,336 | $778,046 | Non-GAAP Financial Measures Reconciliation This section reconciles non-GAAP metrics like Adjusted EBITDA and Free Cash Flow to their comparable GAAP measures - The company uses non-GAAP measures to supplement GAAP results for analyzing performance and cash generation[18][20][21] Reconciliation of Adjusted Gross Profit to Gross Profit The reconciliation adjusts GAAP gross profit for non-cash items like depreciation and stock-based compensation Reconciliation of Adjusted Gross Profit (in thousands) | (Amounts in thousands) | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | | :--- | :--- | :--- | | Total Segment Adjusted Gross Profit | $361,007 | $355,072 | | Depreciation and amortization | (27,212) | (22,799) | | Stock-based compensation expense | (1,341) | (813) | | Total Gross Profit (GAAP) | $332,454 | $331,460 | Reconciliation of Adjusted EBITDA to Net Income Adjusted EBITDA is derived by adding back D&A, interest, taxes, and other items to GAAP net income Reconciliation of Adjusted EBITDA (in thousands) | (Amounts in thousands) | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | | :--- | :--- | :--- | | Net income | $162,322 | $173,905 | | Depreciation and amortization | 41,098 | 37,240 | | Interest expense | 22,824 | 21,712 | | Income tax expense | 49,886 | 55,058 | | EBITDA | 276,130 | 287,915 | | Other Adjustments | (629) | (6,602) | | Adjusted EBITDA | $275,498 | $281,313 | Reconciliation of Free Cash Flow to Cash flow from Operating Activities Free cash flow is calculated by subtracting capital expenditures from net cash provided by operating activities Reconciliation of Free Cash Flow (in thousands) | (Amounts in thousands) | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | | :--- | :--- | :--- | | Net cash flow from operating activities | $183,426 | $243,967 | | Capital expenditures | (57,715) | (42,078) | | Free cash flow | $125,711 | $201,889 | Reconciliation of Diluted Earnings per Share to Adjusted Earnings per Share Adjusted EPS was flat year-over-year at $2.06, with no adjustments in the current quarter Reconciliation of Adjusted Earnings per Share | | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | | :--- | :--- | :--- | | Diluted Earnings Per Share | $2.06 | $2.18 | | Adjustments (net of tax) | $0.00 | ($0.12) | | Adjusted Earnings per Share | $2.06 | $2.06 |