//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 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]

Group 1 - The article does not provide any specific information or data regarding companies or industries [1]

Transaction Overview - ADS will acquire National Diversified Sales (NDS) for approximately $1 billion, or $875 million when adjusted for expected tax benefits[9] - The transaction value represents a multiple of 10x NDS Adjusted EBITDA from TTM ended June 2025, inclusive of expected run-rate cost synergies[9] - Approximately $25 million of annual cost synergies are expected to be realized by year 3[9, 35] - The transaction is expected to close in the first quarter of CY2026[9] NDS Overview - NDS is a leading U S supplier of residential stormwater management, landscape irrigation and connecting flow management components for water infrastructure[10] - Landscape Irrigation accounts for approximately 30% of NDS' business mix, while Flow Management accounts for approximately 15%[12] - The Americas account for 90% of NDS' geographic revenue[12] Financial Impact - Pro forma net sales including $25 million cost synergies is approximately $3 2 billion[34] - Pro forma adjusted EBITDA including $25 million cost synergies is approximately $980 million[34] - Pro forma adjusted EBITDA margin including $25 million cost synergies is approximately 31%[34]

Core Viewpoint - NORMA Group has signed an agreement to sell its Water Management business unit to Advanced Drainage Systems, Inc. for an enterprise value of USD 1.0 billion, marking a significant step in the company's transformation into a focused industrial supplier [3][4][8]. Transaction Details - The transaction is expected to close in the first quarter of 2026, pending regulatory approvals [3]. - NORMA Group anticipates a net cash inflow of approximately EUR 620 million to EUR 640 million from the sale, which will be used to reduce debt by around EUR 300 million and reserve up to EUR 70 million for acquisitions [6][8]. Business Unit Overview - The Water Management business unit includes six plants across the USA, Mexico, India, Malaysia, and Italy, employing around 1,100 people [4]. - In 2024, this unit generated sales of approximately EUR 300 million (around USD 320 million), accounting for about 25% of NORMA Group's total sales of EUR 1.2 billion [4][8]. Strategic Focus - Following the sale, NORMA Group will concentrate on its core business of advanced joining technology, specifically in the Industry Applications and Mobility & New Energy sectors [4][7]. - The company aims to strengthen its core business and position itself for sustainable profitable growth through a transformation program expected to be completed by 2028 [7]. Financial Forecast - Post-transaction, NORMA Group has updated its financial forecast for 2025, projecting sales from continuing operations to be between EUR 810 million and EUR 830 million, down from previous estimates that included the Water Management unit [12]. - The adjusted EBIT margin from continuing operations is now expected to be around 0% to 1%, a decrease from the prior forecast of 6% to 8% [12].