Advanced Drainage Systems — Second Quarter Fiscal 2027 Earnings Summary

Financial Performance:

• Net sales for the second quarter increased 4.6% year-over-year to $889.4 million; year-to-date net sales increased 12.5% to $1,890.5 million.
• Organic net sales increased 2.3% year-to-date; second-quarter organic Stormwater sales decreased 5.3%.
• Adjusted EBITDA for the quarter was $286.8 million (32.2% margin), a 0.2% decrease year-over-year; year-to-date Adjusted EBITDA increased 14.0% to $645.1 million (34.1% margin).
• Net income from continuing operations decreased 14.6% to $133.6 million for the quarter and increased 3.2% to $310.2 million year-to-date.
• Diluted EPS from continuing operations was $1.77 for the quarter (down 11.0%) and $4.02 year-to-date (up 5.0%).
• Cash from operations was $458.2 million year-to-date; Free Cash Flow was $359.5 million.
• Net debt was $1,619.9 million as of September 30, 2026, an increase of $71.0 million from March 31, 2026.
• The trailing-twelve-month leverage ratio was 1.6 times Adjusted EBITDA.
• Total liquidity was $891.8 million, comprised of $153.2 million in cash and $738.6 million available under committed credit facilities.

Guidance and Future Outlook:

• Fiscal 2027 net sales guidance updated to a range of $3.300 billion to $3.400 billion.
• Fiscal 2027 Adjusted EBITDA guidance remains in the range of $1.000 billion to $1.030 billion.
• Capital expenditures for fiscal 2027 are expected to be approximately $200 million.
• Management expects robust profitability to continue into the second half of the year, driven by favorable price/cost offsetting unfavorable volume and transportation costs.
• The demand environment is softer than previously anticipated due to higher interest rates and geopolitical uncertainty, reflected in the updated revenue outlook.
• Material inflationary pressure is lower than initially expected, reducing the need for pricing actions previously included in the net sales outlook.

Business Segments and Product Lines:

• Stormwater sales increased 6.2% to $712.1 million in the second quarter and 15.1% to $1,521.4 million year-to-date, including $77.3 million and $172.0 million from the NDS acquisition, respectively.
• Wastewater sales decreased 1.3% to $177.3 million in the second quarter and increased 3.1% to $369.1 million year-to-date.
• Advanced wastewater treatment, stormwater capture, and water quality products grew double digits.
• Stormwater organic sales were driven by growth in the core non-residential construction end market.
• Selling, general and administrative expenses increased 8.7% to $129.6 million in the quarter and 16.7% to $260.4 million year-to-date, primarily driven by the NDS acquisition and associated transaction costs.

Market and Competitive Landscape:

• The company operates in the stormwater and onsite wastewater industries, serving commercial, residential, infrastructure, and agricultural applications.
• Management notes the demand environment is softer due to higher interest rates and ongoing geopolitical uncertainty.
• The company is a leading provider of innovative water management solutions and one of the largest plastic recycling companies in North America.

Risks and Challenges:

• Risks include fluctuations in the price and availability of resins and raw materials, new tariff and international trade policies, and the ability to pass increased costs to customers.
• Challenges include disruption or volatility in general business, political, and economic conditions, as well as the cyclicality and seasonality of construction markets.
• Integration risks associated with acquisitions, including NDS and the proposed acquisition of StormTrap, such as unexpected costs, liabilities, delays, or failure to realize synergies.
• Other risks include cybersecurity incidents, labor cost management, intellectual property protection, and changes in environmental laws and regulations.

Management Commentary and Tone:

• CEO Scott Barbour described the results as demonstrating the resilience of the business model and the team's ability to execute in a challenging demand environment.
• Management expressed confidence in the resilient earnings profile and the long-term fundamentals of ADS as a pure-play water management company.
• The first half Adjusted EBITDA margin of 34.1% represents the highest first-half profitability in the Company's history.
• Management highlighted that the Adjusted EBITDA outlook remains largely unchanged despite the revenue guidance adjustment, reflecting a focus on factors within their control.

Other Key Points:

• The company announced a proposed acquisition of StormTrap, a leader in large-volume, space-constrained, and highly engineered stormwater solutions.
• ADS repurchased 2.7 million shares of common stock for a total cost of $375.1 million in the six months ended September 30, 2026.
• Approximately $677.3 million of common stock remains available for repurchase under the existing authorization.
• The acquisition of National Diversified Sales (NDS) contributed significantly to second-quarter and year-to-date sales growth.
• Cash dividends declared per share were $0.20 for the quarter and $0.40 year-to-date.