Financial Performance - Q1 Fiscal 2026 revenue shows mixed results, with ADS Legacy sales decreasing by 2% from $668 million to $652 million, while Infiltrator sales increased by 21% from $147 million to $178 million[9] - Adjusted EBITDA margin slightly decreased by 30 bps, from 33.8% in Q1 FY25 to 33.5% in Q1 FY26[11] - Consolidated Adjusted EBITDA increased from $275 million in FY 2025 to $278 million in FY 2026[20] - Consolidated Free Cash Flow increased from $126 million in FY 2025 to $222 million in FY 2026[20] Business Operations and Strategy - The company completed the River Valley Pipe acquisition in Q1 FY26 and launched Arcadia™ Hydrodynamic Separator technology[14, 16] - Capital expenditures are expected to remain elevated in Fiscal 2026 due to investments in growth, recycling capacity, productivity, and automation[16] - The company's diversified product mix is shifting towards higher margin categories, with Allied Products accounting for 56.2% of revenue and Water Management Solutions contributing 53.6% to Adjusted Gross Margin[26] Market Outlook - The company anticipates net sales between $2.825 billion and $2.975 billion for Fiscal Year 2026, representing a change of -3% to +2% year-over-year[22] - Adjusted EBITDA is projected to be between $850 million and $910 million for Fiscal Year 2026, indicating a change of -4% to +2% year-over-year[22] - Adjusted EBITDA margin is expected to be between 30.1% and 30.6% for Fiscal Year 2026, reflecting a change of -50 bps to flat[22]

Financial Data and Key Metrics Changes - The company reported net sales of $2.9 billion for fiscal year 2025, representing a 1% increase from the previous year [7] - Adjusted EBITDA margin for the year was 30.6%, marking the second most profitable year in the company's history, although it was down modestly from peak levels due to pricing and material cost headwinds [9][10] - Free cash flow generated during fiscal year 2025 was $581 million, showcasing strong cash flow generation even in a challenging macro environment [34] Business Line Data and Key Metrics Changes - Infiltrator Water Technologies reported sales of $516 million, a 15% increase year-over-year, with organic sales up 5% driven by double-digit growth in septic tanks and advanced treatment products [26][28] - The company's focus on higher-margin Allied Products resulted in a 10% compound annual growth rate (CAGR) over the past ten years, outpacing the core pipe business [12] Market Data and Key Metrics Changes - Domestic construction market sales increased by 3%, with notable growth in Florida and Texas, particularly in pipe and infiltrator products [7][8] - The infrastructure market is expected to grow low single digits next year, benefiting from IIJA funds, while agriculture and international markets are anticipated to decline by double digits [40] Company Strategy and Development Direction - The company has strategically diversified its product, geography, and end market mix to enhance profitability and resilience, evolving from a pipe manufacturer to a broader water management solutions provider [13] - The focus on residential land development has grown at an 18% CAGR, driven by relationships with national homebuilders and approvals in fast-growing areas [12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving above-market growth in core domestic construction markets despite a challenging demand environment [24] - The company plans to postpone its Investor Day to later in the year to provide a clearer three-year outlook amid current economic uncertainties [11][60] Other Important Information - The company announced a 13% increase in its annual dividend to $0.72 per share, reflecting its commitment to returning value to shareholders [39] - Capital spending increased by 15% to $212 million in fiscal year 2025, with plans to further increase to $275 million in fiscal year 2026 [97] Q&A Session Summary Question: Clarification on pricing trends and pressures - Management indicated that pricing has been largely stable sequentially, with expectations of price-cost neutrality throughout the year [45][46] Question: Revenue cadence and year-over-year growth implications - The company expects a similar revenue dynamic in Q1 as seen in Q4, with 55% to 60% of revenue typically generated in the first half of the year [53] Question: Postponement of Investor Day - Management postponed the Investor Day to ensure a solid three-year plan could be presented, citing current market conditions as a reason for the delay [60] Question: Order rates and market trends - Order rates are trending positively, supporting the guidance provided, with management focused on understanding the impact of seasonal shifts in demand [64] Question: Integration of recent acquisitions - The company is targeting a 1,000 basis point margin improvement from the Orenco acquisition over the next three to five years, with positive early integration results [68][70] Question: SG&A expense outlook for 2026 - Management is implementing various initiatives to manage SG&A expenses, aiming to keep them manageable despite flat revenue expectations [102]