Advanced Drainage Systems(WMS) - 2026 Q1 - Quarterly Results

First Quarter Fiscal 2026 Financial Results This section provides an overview of the company's strong Q1 FY2026 performance, detailed financial results, balance sheet, and fiscal year 2026 outlook Performance Overview ADS reported strong Q1 FY2026 results with a 33.5% Adjusted EBITDA margin, driven by strategic investments and acquisitions despite macroeconomic headwinds - The company achieved a strong Adjusted EBITDA margin of 33.5% despite macroeconomic headwinds including wet weather delaying projects and elevated interest rates[2] - Strategic initiatives in the quarter included the formal launch of the Arcadia stormwater separator, scaling advanced treatment solutions at the newly acquired Orenco, and acquiring River Valley Pipe to strengthen geographic presence[2] - Management believes the company is well-positioned for long-term growth due to strong fundamentals and growing awareness of the value of stormwater and onsite wastewater management, which drives market conversion and demand[2] Detailed Financial Performance Q1 FY2026 net sales grew 1.8% to $829.9 million, driven by Infiltrator segment growth, while net income and diluted EPS declined Q1 Fiscal 2026 Key Financial Metrics | Metric | Q1 FY2026 | YoY Change | | :--- | :--- | :--- | | Net Sales | $829.9 million | +1.8% | | Net Income | $144.1 million | -11.2% | | Net Income per Diluted Share | $1.84 | -10.7% | | Adjusted EBITDA (Non-GAAP) | $278.2 million | +1.0% | | Adjusted EPS (Non-GAAP) | $1.95 | -5.3% | Q1 Fiscal 2026 Net Sales Breakdown by Segment (YoY) | Segment | Q1 FY2026 Sales (million USD) | YoY Change | | :--- | :--- | :--- | | Domestic Pipe | $415.5 | -2.5% | | Domestic Allied Products & Other | $187.5 | +1.9% | | Infiltrator | $178.4 | +21.1% | | International | $48.5 | -16.0% | - Gross profit decreased by 0.6% to $330.4 million, primarily due to unfavorable fixed cost absorption and the mix impact from the Orenco acquisition[4] - Selling, general and administrative (SG&A) expenses rose 10.5% to $104.0 million, largely driven by the acquisition of Orenco[5] Balance Sheet and Liquidity The company significantly improved liquidity, reducing net debt to $792.0 million and increasing operating cash flow to $275.0 million Key Balance Sheet and Cash Flow Metrics (as of June 30, 2025) | Metric | Value (million USD) | Change from Prior Period | | :--- | :--- | :--- | | Net Cash from Operating Activities | $275.0 | +$91.6 million (YoY) | | Free Cash Flow (Non-GAAP) | $222.4 | +$96.7 million (YoY) | | Net Debt | $792.0 | -$170.4 million (from Mar 31, 2025) | | Total Liquidity | $1,228.1 | N/A | | Leverage Ratio | 0.9x Adj. EBITDA | N/A | - The company did not repurchase any shares of its common stock in the three months ended June 30, 2025. Approximately $147.7 million remains available under the existing share repurchase authorization[10] Fiscal 2026 Outlook The company reaffirmed its FY2026 guidance, projecting net sales between $2.825 billion and $2.975 billion and Adjusted EBITDA of $850 million to $910 million Fiscal Year 2026 Guidance | Metric | Expected Range | | :--- | :--- | | Net Sales | $2.825 billion - $2.975 billion | | Adjusted EBITDA | $850 million - $910 million | | Capital Expenditures | $200 million - $225 million | Financial Statements and Reconciliations This section presents the consolidated financial statements and detailed reconciliations for key non-GAAP financial measures Consolidated Financial Statements This section presents unaudited consolidated statements of income, balance sheets, and cash flows for Q1 FY2026, showing revenue growth but lower net income Consolidated Statements of Income Q1 FY2026 net sales increased to $829.9 million, but income from operations and net income declined due to higher costs Consolidated Income Statement Highlights (Three Months Ended June 30, in thousands USD) | (In thousands, except per share data) | 2025 | 2024 | | :--- | :--- | :--- | | Net sales | $829,880 | $815,336 | | Gross profit | $330,438 | $332,454 | | Income from operations | $205,746 | $226,215 | | Net income attributable to ADS | $143,922 | $161,402 | | Diluted net income per share | $1.84 | $2.06 | Consolidated Balance Sheets Total assets increased to $3.91 billion as of June 30, 2025, driven by a significant rise in cash and stockholders' equity Consolidated Balance Sheet Highlights (in thousands USD) | Account | June 30, 2025 | March 31, 2025 | | :--- | :--- | :--- | | Cash | $638,268 | $463,319 | | Total Current Assets | $1,517,026 | $1,324,783 | | Total Assets | $3,909,945 | $3,690,360 | | Total Liabilities | $2,131,669 | $2,054,572 | | Total Stockholders' Equity | $1,690,291 | $1,543,136 | Consolidated Statements of Cash Flows Net cash from operating activities significantly increased to $275.0 million in Q1 FY2026, resulting in a $175.0 million net cash increase Consolidated Cash Flow Highlights (Three Months Ended June 30, in thousands USD) | Cash Flow Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $274,977 | $183,426 | | Net cash used in investing activities | $(69,934) | $(57,217) | | Net cash used in financing activities | $(31,132) | $(73,895) | | Net change in cash | $175,009 | $51,522 | Segment Results In Q1 FY2026, Infiltrator segment sales grew significantly to $178.4 million, while Pipe and International sales declined Net Sales from External Customers by Segment (Three Months Ended June 30, in thousands USD) | Segment | 2025 | 2024 | | :--- | :--- | :--- | | Pipe | $415,538 | $426,388 | | Infiltrator | $178,353 | $147,302 | | Total International | $48,491 | $57,705 | | Allied Products & Other | $187,498 | $183,941 | | Total Consolidated | $829,880 | $815,336 | - In Q1 FY2026, the company realigned certain wastewater products from the Pipe and Allied Products & Other segments to the Infiltrator segment. Prior period segment information has been recast to conform to the new presentation[25] Non-GAAP Reconciliations This section provides detailed reconciliations of non-GAAP financial measures, including Adjusted Gross Profit, EBITDA, Free Cash Flow, and Adjusted EPS Reconciliation of Adjusted Gross Profit Total Segment Adjusted Gross Profit for Q1 FY2026 increased to $365.6 million, resulting in a GAAP Gross Profit of $330.4 million Reconciliation of Adjusted Gross Profit (Three Months Ended June 30, in thousands USD) | Description | 2025 | 2024 | | :--- | :--- | :--- | | Total Segment Adjusted Gross Profit | $365,606 | $361,007 | | Depreciation and amortization | (33,512) | (27,212) | | Stock-based compensation expense | (1,656) | (1,341) | | Total Gross Profit (GAAP) | $330,438 | $332,454 | Reconciliation of Adjusted EBITDA Adjusted EBITDA for Q1 FY2026 was $278.2 million, reconciled from GAAP Net Income by adding back non-operating and non-cash expenses Reconciliation of Net Income to Adjusted EBITDA (Three Months Ended June 30, in thousands USD) | Description | 2025 | 2024 | | :--- | :--- | :--- | | Net income | $144,091 | $162,322 | | Depreciation and amortization | 50,228 | 41,098 | | Interest expense | 23,029 | 22,824 | | Income tax expense | 46,674 | 49,886 | | EBITDA | $264,022 | $276,130 | | Other Adjustments | 14,145 | (4,632) | | Adjusted EBITDA | $278,167 | $275,498 | Reconciliation of Free Cash Flow Free Cash Flow significantly improved to $222.4 million in Q1 FY2026, derived from operating cash flow less capital expenditures Reconciliation of Free Cash Flow (Three Months Ended June 30, in thousands USD) | Description | 2025 | 2024 | | :--- | :--- | :--- | | Net cash flow from operating activities | $274,977 | $183,426 | | Capital expenditures | (52,598) | (57,715) | | Free cash flow | $222,379 | $125,711 | Reconciliation of Adjusted Earnings per Share Adjusted Earnings per Share for Q1 FY2026 was $1.95, reflecting adjustments for restructuring, realignment, and transaction costs Reconciliation of Diluted EPS to Adjusted EPS (Three Months Ended June 30, USD) | Description | 2025 | 2024 | | :--- | :--- | :--- | | Diluted Earnings Per Share (GAAP) | $1.84 | $2.06 | | Restructuring and realignment expense | 0.13 | — | | Transaction costs | 0.01 | — | | Income tax impact of adjustments | (0.03) | — | | Adjusted Earnings per Share | $1.95 | $2.06 |