Advanced Drainage Systems, a leading provider of innovative water management solutions for stormwater and onsite septic wastewater industries, announced its financial results for the fiscal first quarter ending June 30, 2024.
First Quarter Fiscal 2025 Highlights:
- Net Sales: Increased by 4.8% to $815.3 million.
- Net Income: Decreased by 6.7% to $162.3 million.
- Earnings per Share: Declined by 5.5% to $2.06 per diluted share.
- Adjusted EBITDA (Non-GAAP): Decreased by 2.1% to $275.5 million.
- Adjusted Earnings per Share (Non-GAAP): Remained steady at $2.06.
Scott Barbour, President and CEO of ADS, expressed satisfaction with the results, highlighting that they aligned with the company’s strategic plan. Revenue growth was driven by an 8% increase in Allied product sales and a 6% rise in sales from the Infiltrator business. Domestic construction market revenue increased by 6%, supported by volume growth in non-residential, residential, and infrastructure sectors for both ADS and Infiltrator. Barbour emphasized the strong performance in infrastructure revenue, buoyed by the Infrastructure Investment and Jobs Act (IIJA) and ADS’ expanding market share.
The increase in sales mix from Infiltrator and Allied products contributed to an Adjusted EBITDA margin of 33.8%, one of the highest in the company’s history. Barbour credited the company’s robust profitability to its resilient business model, improved fixed cost absorption, and strategic investments in safety, capacity, productivity, and efficiency. He also reaffirmed ADS’ commitment to further investing in these areas, as well as in customer service and strategic inventory, to enhance its competitive edge.
Barbour concluded by reiterating ADS’ focus on sustainable water management solutions, which was recently reinforced with the release of the Fiscal 2024 Sustainability Report. The company also commenced operations at its new Engineering and Technology Center near its corporate headquarters in Hilliard, Ohio, underscoring its leadership in advancing highly engineered solutions to protect water resources.
Detailed First Quarter Fiscal 2025 Financial Results:
- Net Sales: Increased by $37.3 million (4.8%) to $815.3 million compared to $778.0 million in the prior year. Domestic pipe sales grew by $10.6 million (2.5%) to $431.4 million, while domestic allied products and other sales rose by $13.9 million (7.6%) to $196.0 million. Infiltrator sales increased by $7.3 million (5.9%) to $130.2 million. International sales also saw an increase of $5.5 million (10.4%) to $57.7 million.
- Gross Profit: Grew by $1.0 million (0.3%) to $332.5 million, driven by strong demand and a favorable sales mix, particularly from Infiltrator and Allied products, partially offset by unfavorable pricing, material, and transportation costs.
- Operating Expenses: Selling, general, and administrative expenses rose by $7.5 million (8.7%) to $94.1 million, mainly due to higher commissions from increased volume and continued investments in strategic areas. Despite the increase, these expenses remained largely flat as a percentage of sales.
- Earnings per Share: Decreased by $0.12 (5.5%) to $2.06, primarily due to the aforementioned factors and offset by a $0.14 gain from the sale of a non-core asset in the prior year.
- Adjusted EBITDA (Non-GAAP): Decreased by $5.8 million (2.1%) to $275.5 million, representing 33.8% of net sales compared to 36.2% in the previous year.
Balance Sheet and Liquidity:
Net cash provided by operating activities was $183.4 million, down from $244.0 million in the prior year. Free cash flow (Non-GAAP) was $125.7 million, compared to $201.9 million the previous year. Net debt decreased by $31.6 million to $829.3 million as of June 30, 2024. The company had total liquidity of $1,131.2 million, including $541.6 million in cash and $589.6 million available under committed credit facilities. ADS maintained a leverage ratio of 0.9 times Adjusted EBITDA on a trailing twelve-month basis.
During the quarter, the company repurchased 0.3 million shares of its common stock for $49.2 million. Approximately $167.6 million remains under the current share repurchase authorization as of June 30, 2024.
Fiscal 2025 Outlook:
The company confirmed its financial targets for fiscal 2025, expecting net sales to be between $2.925 billion and $3.025 billion. Adjusted EBITDA is projected to range from $940 million to $980 million, with capital expenditures expected between $250 million and $300 million.
Conference Call Information:
Investors and interested parties can listen to the live webcast of the conference call through the Investor Relations section of the ADS website. A replay will be available online following the call. To participate in the live teleconference, participants can register online using the provided Conference ID.
