Advanced Drainage Systems — First Quarter Fiscal 2027 Earnings Summary

Financial Performance

• Net sales increased 20.6% year-over-year to $1,001.1 million (from $829.9 million).
• Organic net sales increased 9.2% year-over-year.
• Net income from continuing operations increased 22.5% to $176.6 million (from $144.1 million).
• Diluted EPS from continuing operations increased 22.8% to $2.26 (from $1.84).
• Adjusted EBITDA (Non-GAAP) increased 28.8% to $358.3 million (from $278.2 million).
• Adjusted EBITDA margin expanded 230 basis points to 35.8% (from 33.5%).
• Gross profit increased 23.5% to $408.0 million (from $330.4 million).
• Selling, general and administrative expenses increased 25.8% to $130.8 million (from $104.0 million), representing 13.1% of sales.
• Net cash provided by operating activities was $260.4 million (from $275.0 million).
• Free cash flow (Non-GAAP) was $203.2 million (from $222.4 million).
• Net debt was $1,603.4 million as of June 30, 2026.
• Total liquidity was $900.9 million, comprised of $162.3 million in cash and $738.6 million in availability under committed credit facilities.
• Trailing-twelve-month leverage ratio was 1.5 times Adjusted EBITDA.

Guidance and Future Outlook

• The Company confirmed its fiscal 2027 financial targets.
• Net sales are expected to be in the range of $3.350 billion to $3.550 billion.
• Adjusted EBITDA is expected to be in the range of $1.0 billion to $1.050 billion.
• Capital expenditures are expected to be approximately $200 million for the full fiscal year.
• Management noted demand trends look similar to the prior year with moving pieces across end markets and geographies.
• Management remains confident in the position as a pure-play water company supported by favorable long-term secular tailwinds.

Business Segments and Product Lines

• Stormwater sales increased 24.2% to $809.4 million (from $651.5 million), including $94.7 million from the NDS acquisition.
• Organic stormwater sales increased 9.7%, driven by growth in both pipe and allied products.
• Wastewater sales increased 7.5% to $191.7 million (from $178.4 million).
• Domestic construction market sales increased 20% with growth across all product categories and end markets.
• The NDS acquisition (completed in February) contributed to revenue and expanded reach in residential stormwater management and landscape irrigation.
• Allied Products growth accelerated, with the Company successfully selling the full solutions package alongside core offerings.
• Margin expansion occurred across both Stormwater and Wastewater segments driven by favorable volume and disciplined price/cost management.

Market and Competitive Landscape

• Demand was driven by strength in the non-residential market and customer purchases ahead of pricing actions.
• The Company leverages its position to drive share gains by delivering greater value through full solutions packages.
• Price increases were implemented to cover inflationary cost pressures on transportation and materials, which impacted order patterns.
• The Company operates the industry's largest company-owned fleet, an expansive sales team, and a vast manufacturing network.
• The Company is one of the largest plastic recycling companies in North America.

Risks and Challenges

• Fluctuations in the price and availability of resins and other raw materials.
• New tariff and international trade policies and the ability to pass increased costs to customers.
• Disruption or volatility in general business, political, and economic conditions.
• Cyclicality and seasonality of non-residential and residential construction markets and infrastructure spending.
• Increasing competition in existing and future markets.
• Risks associated with the integration of NDS, including potential unexpected costs, liabilities, and the realization of synergies.
• Risks related to indebtedness, including borrowings under the credit agreement and senior notes.
• Potential impacts from weather, seasonality, and global climate change.
• Cybersecurity incidents and IT system failures.
• Labor costs and the ability to attract and retain qualified employees.

Management Commentary and Tone

• Scott Barbour, President and CEO, stated performance unfolded largely as anticipated with net sales increasing 21% and Adjusted EBITDA increasing 29%.
• Management expressed pleasure with the strong start to the year but noted caution regarding the overall demand environment.
• Management highlighted the resilience of the diversified water management platform and the meaningful contribution from NDS.
• The tone reflected confidence in the differentiated growth strategy, resilient operating platform, and disciplined capital allocation.

Other Key Points

• The Company repurchased 1.6 million shares of common stock for a total cost of $228.5 million in the quarter.
• Approximately $822.5 million of common stock remains available for repurchase under the existing authorization.
• Cash dividends declared per share were $0.20 (compared to $0.18 in the prior year quarter).
• The Company acquired National Diversified Sales ("NDS") in February 2026, contributing $94.7 million to stormwater sales in the quarter.
• An inventory step-up of $14.2 million related to the NDS acquisition was recorded.
• Transaction costs related to business acquisitions were $3.2 million.
• Restructuring and realignment expenses were $5.3 million.
• The Company operates a joint venture in South America accounted for under the equity method.