WMS Advanced Drainage Systems Inc

Advanced Drainage Systems, Inc. (NYSE: WMS) (“ADS” or the “Company”), a leading provider of innovative water management solutions in the stormwater and onsite septic wastewater industries today announced financial results for the fiscal third quarter ended December 31, 2024.

Third Quarter Fiscal 2025 Results

• Net sales increased $28.2 million or 4.3% to $690.5 million
• Net income decreased $24.6 million or 23.0% to $82.3 million
• Net income per diluted share decreased $0.30 or 22.3% to $1.04
• Adjusted EBITDA (Non-GAAP) decreased $12.7 million or 6.2% to $191.5 million
• Adjusted Earnings per share (Non-GAAP) decreased $0.28 or 20.3% to $1.09

Year-to-Date Fiscal 2025 Results

• Net sales increased $67.9 million or 3.1% to $2.3 billion
• Net income decreased $42.0 million or 10.1% to $375.8 million
• Net income per diluted share decreased $0.47 or 9.0% to $4.77
• Adjusted EBITDA (Non-GAAP) decreased $19.2 million or 2.6% to $712.5 million
• Adjusted Earnings per share (Non-GAAP) decreased $0.31 or 6.0% to $4.86

Scott Barbour, President and Chief Executive Officer of ADS commented, "The fiscal third quarter financial results were in line with expectations. The ADS business progressed on plan while the Infiltrator business modestly outperformed driven by double digit growth in both tanks and advanced treatment products. The construction market demand, pricing environment, material cost and operating performance played out like we thought they would going into the quarter."

"Reflecting on the 2024 hurricane season that concluded in November, it is clear that storm events are growing in their intensity and frequency. At the same time, it is becoming increasingly evident that much of the current stormwater infrastructure has not kept pace with this change, leaving many communities in a challenging position. In fact, a recent survey conducted by ADS and The Harris Poll showed 60% of Americans are concerned with stormwater infrastructure in their communities, up nearly 10% compared to the prior year. Additionally, 64% of Americans reported stormwater having a negative impact on their communities. ADS' solutions are uniquely positioned to address concerns around stormwater management, including flood mitigation and minimizing property damage, while continuing to support the development of more resilient communities."

"With the growing demand for water management solutions, we continue to add products and capacity to ensure we grow our leadership position in both stormwater and decentralized wastewater. In the third quarter, we closed the acquisition of Orenco, expanding our offering in a highly fragmented and fast-growing segment of advanced treatment in decentralized wastewater. We recently broke ground on an ADS Recycling facility expansion in Cordele, GA to increase capacity in the Southeast, and we will continue investing capital to support growth in markets like the Southeast where material conversion opportunities remain."

"As we move into the final quarter of this fiscal year, we are focused on executing our sales strategies and driving increased productivity. We will continue to deliver exceptional service to our customers and pursue profitable growth through attractive products, markets and partnerships, while at the same time investing capital and resources across our business to drive sustainable growth and profitability longer term."

Third Quarter Fiscal 2025 Results

Net sales increased $28.2 million, or 4.3%, to $690.5 million, as compared to $662.4 million in the prior year quarter. Domestic pipe sales decreased $5.7 million, or 1.6%, to $343.4 million. Domestic allied products & other sales increased $5.0 million, or 3.2%, to $161.5 million. Infiltrator sales increased $31.4 million, or 30.3%, to $135.3 million. Excluding the acquisition of Orenco Systems, Inc. ("Orenco"), Infiltrator organic revenue increased 5.8%. The overall increase in domestic net sales was primarily driven by demand in the construction end markets. International sales decreased $2.6 million, or 4.9%, to $50.4 million.

Gross profit decreased $18.3 million, or 7.0%, to $241.6 million as compared to $259.8 million in the prior year. The decrease in gross profit is primarily driven by unfavorable pricing and material cost as well as the mix impact from the inclusion of Orenco. This unfavorability was partially offset by favorable volume and mix of construction market and Infiltrator sales.

Selling, general and administrative expenses increased $9.5 million, or 10.4% to $100.8 million, as compared to $91.3 million. As a percentage of sales, selling, general and administrative expense was 14.6% as compared to 13.8% in the prior year, primarily driven by the acquisition of Orenco.

Net income per diluted share decreased $0.30, or 22.3%, to $1.04, as compared to $1.34 per share in the prior year quarter, primarily due to the factors mentioned above.

Adjusted EBITDA (Non-GAAP) decreased $12.7 million, or 6.2%, to $191.5 million, as compared to $204.2 million in the prior year, primarily due to the factors mentioned above. As a percentage of net sales, Adjusted EBITDA was 27.7% as compared to 30.8% in the prior year.

Segment sales results are based on Net sales to external customers. Reconciliations of GAAP to Non-GAAP financial measures for Adjusted EBITDA, Free Cash Flow and Adjusted Earnings per Share have been provided in the financial statement tables included in this press release. An explanation of these measures is also included below under the heading “Non-GAAP Financial Measures.”

Year-to-Date Fiscal 2025 Results

Net sales increased $67.9 million, or 3.1%, to $2,288.5 million, as compared to $2,220.6 million in the prior year. Domestic pipe sales decreased $0.3 million, to $1,185.3 million. Domestic allied products & other sales increased $23.8 million, or 4.6%, to $544.5 million. Infiltrator sales increased $51.1 million, or 14.9%, to $394.0 million. Excluding the acquisition of Orenco Systems, Inc. ("Orenco"), Infiltrator organic revenue increased 7.5%. The overall increase in domestic net sales was primarily driven by demand in the construction end markets. International sales decreased $6.7 million, or 3.9%, to $164.6 million.

Gross profit decreased $26.0 million, or 2.9%, to $868.0 million as compared to $894.0 million in the prior year. The decrease in gross profit is primarily driven by unfavorable pricing and material cost, partially offset by favorable volume, mix and manufacturing costs.

Selling, general and administrative expenses increased $19.4 million, or 7.2% to $289.0 million, as compared to $269.5 million. As a percentage of sales, selling, general and administrative expense was 12.6% as compared to 12.1% in the prior year.

Net income per diluted share decreased $0.47, or 9.0%, to $4.77, as compared to $5.24 per share in the prior year. Results for fiscal 2024 include a $14.9 million gain on the sale of assets, which after considering the income tax impact of this gain impacted net income per diluted share by $0.13.

Adjusted EBITDA (Non-GAAP) decreased $19.2 million, or 2.6%, to $712.5 million, as compared to $731.8 million in the prior year, primarily due to the factors mentioned above. As a percentage of net sales, Adjusted EBITDA was 31.1% as compared to 33.0% in the prior year.

Balance Sheet and Liquidity

Net cash provided by operating activities was $540.3 million, as compared to $700.3 million in the prior year. Free cash flow (Non-GAAP) was $373.9 million, as compared to $563.9 million in the prior year. Net debt (total debt and finance lease obligations net of cash) was $920.8 million as of December 31, 2024, an increase of $59.9 million from March 31, 2024.

On October 1, 2024, the Company completed the acquisition of Orenco, a leading manufacturer of decentralized wastewater management products serving residential and non-residential end markets. Orenco results are included in the Infiltrator segment.

ADS had total liquidity of $1,078.4 million, comprised of cash of $488.9 million as of December 31, 2024 and $589.6 million of availability under committed credit facilities. As of December 31, 2024, the Company’s trailing-twelve-month leverage ratio was 1.0 times Adjusted EBITDA.

In the nine months ended December 31, 2024, the Company repurchased 0.4 million shares of its common stock for a total cost of $69.9 million. As of December 31, 2024, approximately $147.7 million of common stock may be repurchased under the Company's existing share repurchase authorization.

Fiscal 2025 Outlook

Based on current visibility, backlog of existing orders and business trends, the Company is confirming its previously issued financial targets for fiscal 2025. Net sales are expected to be in the range of $2.900 billion to $2.975 billion and Adjusted EBITDA is expected to be in the range of $880 million to $920 million. Capital expenditures are expected to be approximately $225 million.

Conference Call Information

Webcast: Interested investors and other parties can listen to a webcast of the live conference call by logging in through the Investor Relations section of the Company's website at https://investors.ads-pipe.com/events-and-presentations. An online replay will be available on the same website following the call.

Teleconference: To participate in the live teleconference, participants may register at https://registrations.events/direct/Q4I457861292. After registering, participants will receive a confirmation through email, including dial in details and unique conference call codes for entry. Registration is open through the live call. To ensure participants are connected for the full call, please register at least 10 minutes before the start of the call.

About the Company

Advanced Drainage Systems is a leading manufacturer of innovative stormwater and onsite septic wastewater solutions that manages the world’s most precious resource: water. ADS and its subsidiary, Infiltrator Water Technologies, provide superior stormwater drainage and onsite septic wastewater products used in a wide variety of markets and applications including commercial, residential, infrastructure and agriculture, while delivering unparalleled customer service. ADS manages the industry’s largest company-owned fleet, an expansive sales team, and a vast manufacturing network of approximately 70 manufacturing plants and 40 distribution centers. The company is one of the largest plastic recycling companies in North America, ensuring over half a billion pounds of plastic is kept out of landfills every year. Founded in 1966, ADS’ water management solutions are designed to last for decades. To learn more, visit the Company’s website at www.adspipe.com.

Forward Looking Statements

Certain statements in this press release may be deemed to be forward-looking statements. These statements are not historical facts but rather are based on the Company’s current expectations, estimates and projections regarding the Company’s business, operations and other factors relating thereto. Words such as “may,” “will,” “could,” “would,” “should,” “anticipate,” “predict,” “potential,” “continue,” “expects,” “intends,” “plans,” “projects,” “believes,” “estimates,” “confident” and similar expressions are used to identify these forward-looking statements. Factors that could cause actual results to differ from those reflected in forward-looking statements relating to our operations and business include: fluctuations in the price and availability of resins and other raw materials and our ability to pass any increased costs of raw materials on to our customers in a timely manner; disruption or volatility in general business and economic conditions in the markets in which we operate; cyclicality and seasonality of the non-residential and residential construction markets and infrastructure spending; the risks of increasing competition in our existing and future markets; uncertainties surrounding the integration and realization of anticipated benefits of acquisitions; the effect of weather or seasonality; the loss of any of our significant customers; the risks of doing business internationally; the risks of conducting a portion of our operations through joint ventures; our ability to expand into new geographic or product markets; the risk associated with manufacturing processes; the effect of global climate change; our ability to protect against cybersecurity incidents and disruptions or failures of our IT systems; our ability to assess and monitor the effects of artificial intelligence, machine learning, and robotics on our business and operations; our ability to manage our supply purchasing and customer credit policies; our ability to control labor costs and to attract, train and retain highly qualified employees and key personnel; our ability to protect our intellectual property rights; changes in laws and regulations, including environmental laws and regulations; our ability to appropriately address any environmental, social or governance concerns that may arise from our activities; the risks associated with our current levels of indebtedness, including borrowings under our existing credit agreement and outstanding indebtedness under our existing senior notes; and other risks and uncertainties described in the Company’s filings with the SEC. New risks and uncertainties emerge from time to time and it is not possible for the Company to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this press release. In light of the significant uncertainties inherent in the forward-looking information included herein, the inclusion of such information should not be regarded as a representation by the Company or any other person that the Company’s expectations, objectives or plans will be achieved in the timeframe anticipated or at all. Investors are cautioned not to place undue reliance on the Company’s forward-looking statements and the Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

Financial Statements

ADVANCED DRAINAGE SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(unaudited)

 

 

Three Months Ended

December 31,

 

Nine Months Ended

December 31,

(In thousands, except per share data)

2024

 

2023

 

2024

 

2023

Net sales

$

690,538

 

 

$

662,367

 

 

$

2,288,484

 

 

$

2,220,633

 

Cost of goods sold

 

448,944

 

 

 

402,518

 

 

 

1,420,495

 

 

 

1,326,647

 

Gross profit

 

241,594

 

 

 

259,849

 

 

 

867,989

 

 

 

893,986

 

Operating expenses:

 

 

 

 

 

 

 

Selling, general and administrative

 

100,778

 

 

 

91,289

 

 

 

288,962

 

 

 

269,525

 

(Gain) loss on disposal of assets and costs from exit and disposal activities

 

(477

)

 

 

2,512

 

 

 

432

 

 

 

(10,669

)

Intangible amortization

 

14,429

 

 

 

12,782

 

 

 

38,140

 

 

 

38,376

 

Income from operations

 

126,864

 

 

 

153,266

 

 

 

540,455

 

 

 

596,754

 

Other expense:

 

 

 

 

 

 

 

Interest expense

 

23,094

 

 

 

22,331

 

 

 

69,074

 

 

 

65,984

 

Interest income and other, net

 

(4,792

)

 

 

(4,772

)

 

 

(18,864

)

 

 

(15,827

)

Income before income taxes

 

108,562

 

 

 

135,707

 

 

 

490,245

 

 

 

546,597

 

Income tax expense

 

27,091

 

 

 

30,131

 

 

 

117,897

 

 

 

132,665

 

Equity in net income of unconsolidated affiliates

 

(818

)

 

 

(1,304

)

 

 

(3,437

)

 

 

(3,880

)

Net income

 

82,289

 

 

 

106,880

 

 

 

375,785

 

 

 

417,812

 

Less: net income attributable to noncontrolling interest

 

1,058

 

 

 

1,241

 

 

 

2,770

 

 

 

2,719

 

Net income attributable to ADS

$

81,231

 

 

$

105,639

 

 

$

373,015

 

 

$

415,093

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

Basic

 

77,540

 

 

 

77,857

 

 

 

77,541

 

 

 

78,455

 

Diluted

 

78,115

 

 

 

78,586

 

 

 

78,196

 

 

 

79,188

 

Net income per share:

 

 

 

 

 

 

 

Basic

$

1.05

 

 

$

1.36

 

 

$

4.81

 

 

$

5.29

 

Diluted

$

1.04

 

 

$

1.34

 

 

$

4.77

 

 

$

5.24

 

Cash dividends declared per share

$

0.16

 

 

$

0.14

 

 

$

0.48

 

 

$

0.42

 

ADVANCED DRAINAGE SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(unaudited)

 

 

As of

(Amounts in thousands)

December 31, 2024

 

March 31, 2024

ASSETS

 

 

 

Current assets:

 

 

 

Cash

$

488,859

 

 

$

490,163

 

Receivables, net

 

247,940

 

 

 

323,576

 

Inventories

 

476,369

 

 

 

464,200

 

Other current assets

 

31,928

 

 

 

22,028

 

Total current assets

 

1,245,096

 

 

 

1,299,967

 

Property, plant and equipment, net

 

1,017,555

 

 

 

876,351

 

Other assets:

 

 

 

Goodwill

 

720,543

 

 

 

617,183

 

Intangible assets, net

 

462,491

 

 

 

352,652

 

Other assets

 

156,569

 

 

 

122,760

 

Total assets

$

3,602,254

 

 

$

3,268,913

 

LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS’ EQUITY

 

 

 

Current liabilities:

 

 

 

Current maturities of debt obligations

$

10,621

 

 

$

11,870

 

Current maturities of finance lease obligations

 

30,944

 

 

 

18,015

 

Accounts payable

 

183,913

 

 

 

254,401

 

Other accrued liabilities

 

162,205

 

 

 

154,260

 

Accrued income taxes

 

407

 

 

 

1,076

 

Total current liabilities

 

388,090

 

 

 

439,622

 

Long-term debt obligations, net

 

1,253,129

 

 

 

1,259,522

 

Long-term finance lease obligations

 

114,927

 

 

 

61,661

 

Deferred tax liabilities

 

193,285

 

 

 

156,705

 

Other liabilities

 

88,437

 

 

 

70,704

 

Total liabilities

 

2,037,868

 

 

 

1,988,214

 

Mezzanine equity:

 

 

 

Redeemable common stock

 

95,250

 

 

 

108,584

 

Total mezzanine equity

 

95,250

 

 

 

108,584

 

Stockholders’ equity:

 

 

 

Common stock

 

11,693

 

 

 

11,679

 

Paid-in capital

 

1,269,230

 

 

 

1,219,834

 

Common stock in treasury, at cost

 

(1,219,404

)

 

 

(1,140,578

)

Accumulated other comprehensive loss

 

(38,378

)

 

 

(29,830

)

Retained earnings

 

1,427,891

 

 

 

1,092,208

 

Total ADS stockholders’ equity

 

1,451,032

 

 

 

1,153,313

 

Noncontrolling interest in subsidiaries

 

18,104

 

 

 

18,802

 

Total stockholders’ equity

 

1,469,136

 

 

 

1,172,115

 

Total liabilities, mezzanine equity and stockholders’ equity

$

3,602,254

 

 

$

3,268,913

 

ADVANCED DRAINAGE SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

 

 

Nine Months Ended December 31,

(Amounts in thousands)

2024

 

2023

Cash Flow from Operating Activities

 

 

 

Net income

$

375,785

 

 

$

417,812

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

Depreciation and amortization

 

133,671

 

 

 

112,014

 

Deferred income taxes

 

510

 

 

 

335

 

Loss (gain) on disposal of assets and costs from exit and disposal activities

 

432

 

 

 

(10,669

)

Stock-based compensation

 

21,758

 

 

 

23,636

 

Amortization of deferred financing charges

 

1,533

 

 

 

1,533

 

Fair market value adjustments to derivatives

 

383

 

 

 

(162

)

Equity in net income of unconsolidated affiliates

 

(3,437

)

 

 

(3,880

)

Other operating activities

 

(1,849

)

 

 

5,720

 

Changes in working capital:

 

 

 

Receivables

 

83,059

 

 

 

67,230

 

Inventories

 

(179

)

 

 

59,752

 

Prepaid expenses and other current assets

 

(2,564

)

 

 

(534

)

Accounts payable, accrued expenses, and other liabilities

 

(68,838

)

 

 

27,475

 

Net cash provided by operating activities

 

540,264

 

 

 

700,262

 

Cash Flows from Investing Activities

 

 

 

Capital expenditures

 

(166,410

)

 

 

(136,385

)

Proceeds from disposition of assets

 

—

 

 

 

19,979

 

Acquisition, net of cash acquired

 

(237,310

)

 

 

—

 

Other investing activities

 

831

 

 

 

527

 

Net cash used in investing activities

 

(402,889

)

 

 

(115,879

)

Cash Flows from Financing Activities

 

 

 

Payments on syndicated Term Loan Facility

 

(5,250

)

 

 

(5,250

)

Payments on Equipment Financing

 

(3,909

)

 

 

(6,361

)

Payments on finance lease obligations

 

(17,820

)

 

 

(8,624

)

Repurchase of common stock

 

(69,922

)

 

 

(178,187

)

Cash dividends paid

 

(37,324

)

 

 

(33,111

)

Proceeds from exercise of stock options

 

8,927

 

 

 

3,956

 

Payment of withholding taxes on vesting of restricted stock units

 

(10,646

)

 

 

(8,859

)

Net cash used in financing activities

 

(135,944

)

 

 

(236,436

)

Effect of exchange rate changes on cash

 

(2,526

)

 

 

1,271

 

Net change in cash

 

(1,095

)

 

 

349,218

 

Cash and restricted cash at beginning of period

 

495,848

 

 

 

217,128

 

Cash and restricted cash at end of period

$

494,753

 

 

$

566,346

 

 

 

 

 

RECONCILIATION TO BALANCE SHEET

 

 

 

Cash

$

488,859

 

 

 

Restricted cash

 

5,894

 

 

 

Total cash and restricted cash

$

494,753

 

 

 

Selected Financial Data

The following tables set forth net sales by reportable segment for each of the periods indicated.

 

Three Months Ended

 

December 31, 2024

 

December 31, 2023

(In thousands)

Net Sales

 

Intersegment

Net Sales

 

Net Sales

from External Customers

 

Net Sales

 

Intersegment

Net Sales

 

Net Sales

from External Customers

Pipe

$

356,010

 

 

$

(12,607

)

 

$

343,403

 

$

360,733

 

 

$

(11,629

)

 

$

349,104

Infiltrator

 

152,384

 

 

 

(17,083

)

 

 

135,301

 

 

131,144

 

 

 

(27,273

)

 

 

103,871

International

 

 

 

 

 

 

 

 

 

 

 

International - Pipe

 

36,909

 

 

 

(2,860

)

 

 

34,049

 

 

44,203

 

 

 

(5,420

)

 

 

38,783

International - Allied Products & Other

 

16,372

 

 

 

(58

)

 

 

16,314

 

 

14,166

 

 

 

(1

)

 

 

14,165

Total International

 

53,281

 

 

 

(2,918

)

 

 

50,363

 

 

58,369

 

 

 

(5,421

)

 

 

52,948

Allied Products & Other

 

165,233

 

 

 

(3,762

)

 

 

161,471

 

 

159,162

 

 

 

(2,718

)

 

 

156,444

Intersegment Eliminations

 

(36,370

)

 

 

36,370

 

 

 

—

 

 

(47,041

)

 

 

47,041

 

 

 

—

Total Consolidated

$

690,538

 

 

$

—

 

 

$

690,538

 

$

662,367

 

 

$

—

 

 

$

662,367

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended

 

December 31, 2024

 

December 31, 2023

(In thousands)

Net Sales

 

Intersegment

Net Sales

 

Net Sales

from External Customers

 

Net Sales

 

Intersegment

Net Sales

 

Net Sales

from External Customers

Pipe

$

1,227,288

 

 

$

(41,972

)

 

$

1,185,316

 

$

1,217,302

 

 

$

(31,672

)

 

$

1,185,630

Infiltrator

 

456,104

 

 

 

(62,093

)

 

 

394,011

 

 

406,361

 

 

 

(63,405

)

 

 

342,956

International

 

 

 

 

 

 

 

 

 

 

 

International - Pipe

 

125,281

 

 

 

(10,150

)

 

 

115,131

 

 

133,787

 

 

 

(9,219

)

 

 

124,568

International - Allied Products & Other

 

49,664

 

 

 

(174

)

 

 

49,490

 

 

46,789

 

 

 

(27

)

 

 

46,762

Total International

 

174,945

 

 

 

(10,324

)

 

 

164,621

 

 

180,576

 

 

 

(9,246

)

 

 

171,330

Allied Products & Other

 

556,920

 

 

 

(12,384

)

 

 

544,536

 

 

528,303

 

 

 

(7,586

)

 

 

520,717

Intersegment Eliminations

 

(126,773

)

 

 

126,773

 

 

 

—

 

 

(111,909

)

 

 

111,909

 

 

 

—

Total Consolidated

$

2,288,484

 

 

$

—

 

 

$

2,288,484

 

$

2,220,633

 

 

$

—

 

 

$

2,220,633

Non-GAAP Financial Measures

This press release contains financial information determined by methods other than in accordance with accounting principles generally accepted in the United States of America (“GAAP”). ADS management uses non-GAAP measures in its analysis of the Company’s performance. Investors are encouraged to review the reconciliation of non-GAAP financial measures to the comparable GAAP results available in the accompanying tables.

Reconciliation of Non-GAAP Financial Measures

This press release includes references to Adjusted EBITDA, Free Cash Flow and Adjusted Earnings per Share, non-GAAP financial measures. These non-GAAP financial measures are used in addition to and in conjunction with results presented in accordance with GAAP. These measures are not intended to be substitutes for those reported in accordance with GAAP. Adjusted EBITDA and Free Cash Flow may be different from non-GAAP financial measures used by other companies, even when similar terms are used to identify such measures.

EBITDA and Adjusted EBITDA are non-GAAP financial measures that comprise net income before interest, income taxes, depreciation and amortization, stock-based compensation, non-cash charges and certain other expenses. The Company’s definition of Adjusted EBITDA may differ from similar measures used by other companies, even when similar terms are used to identify such measures. Adjusted EBITDA is a key metric used by management and the Company’s board of directors to assess financial performance and evaluate the effectiveness of the Company’s business strategies. Accordingly, management believes that Adjusted EBITDA provides useful information to investors and others in understanding and evaluating our operating results in the same manner as the Company’s management and board of directors. In order to provide investors with a meaningful reconciliation, the Company has provided a reconciliation of Adjusted EBITDA to net income.

Free Cash Flow is a non-GAAP financial measure that comprises cash flow from operating activities less capital expenditures. Free Cash Flow is a measure used by management and the Company’s board of directors to assess the Company’s ability to generate cash. Accordingly, management believes that Free Cash Flow provides useful information to investors and others in understanding and evaluating our ability to generate cash flow from operations after capital expenditures. In order to provide investors with a meaningful reconciliation, the Company has provided a reconciliation of cash flow from operating activities to Free Cash Flow.

Adjusted Earnings per Share excludes (gains) losses on disposals of assets or business, restructuring expenses, impairment charges and transaction costs. Adjusted Earnings per Share is a measure used by management and may be useful for investors to evaluate the Company's operational performance.

The following tables present a reconciliation of EBITDA and Adjusted EBITDA to Net Income, Free Cash Flow to Cash Flow from Operating Activities, and Adjusted Earnings per Share to Diluted Earnings per Share, the most comparable GAAP measures, for each of the periods indicated.

Reconciliation of Adjusted Gross Profit to Gross Profit

 

 

Three Months Ended

December 31,

 

Nine Months Ended

December 31,

(Amounts in thousands)

2024

 

2023

 

2024

 

2023

Segment Adjusted Gross Profit

 

 

 

 

 

 

 

Pipe

$

90,900

 

$

115,621

 

 

$

348,559

 

$

402,126

 

Infiltrator

 

78,285

 

 

68,392

 

 

 

250,835

 

 

216,319

 

International

 

12,071

 

 

14,012

 

 

 

49,179

 

 

51,380

 

Allied Products & Other

 

92,938

 

 

88,150

 

 

 

314,129

 

 

300,574

 

Intersegment Elimination

 

1,749

 

 

(1,922

)

 

 

180

 

 

(4,431

)

Total Segment Adjusted Gross Profit

 

275,943

 

 

284,253

 

 

 

962,882

 

 

965,968

 

Depreciation and amortization

 

30,754

 

 

23,088

 

 

 

88,502

 

 

68,509

 

Stock-based compensation expense

 

1,335

 

 

1,316

 

 

 

4,131

 

 

3,473

 

Inventory step-up related to Orenco acquisition

 

2,260

 

 

—

 

 

 

2,260

 

 

—

 

Total Gross Profit

$

241,594

 

$

259,849

 

 

$

867,989

 

$

893,986

 

Reconciliation of Adjusted EBITDA to Net Income

 

 

Three Months Ended

December 31,

 

Nine Months Ended

December 31,

(Amounts in thousands)

2024

 

2023

 

2024

 

2023

Net income

$

82,289

 

 

$

106,880

 

 

$

375,785

 

 

$

417,812

 

Depreciation and amortization

 

47,766

 

 

 

38,053

 

 

 

133,671

 

 

 

112,014

 

Interest expense

 

23,094

 

 

 

22,331

 

 

 

69,074

 

 

 

65,984

 

Income tax expense

 

27,091

 

 

 

30,131

 

 

 

117,897

 

 

 

132,665

 

EBITDA

 

180,240

 

 

 

197,395

 

 

 

696,427

 

 

 

728,475

 

(Gain) loss on disposal of assets and costs from exit and disposal activities

 

(477

)

 

 

2,512

 

 

 

432

 

 

 

(10,669

)

Stock-based compensation expense

 

7,798

 

 

 

7,402

 

 

 

21,758

 

 

 

23,636

 

Transaction costs

 

5,924

 

 

 

1,030

 

 

 

8,619

 

 

 

3,054

 

Interest income

 

(4,545

)

 

 

(6,515

)

 

 

(18,478

)

 

 

(15,141

)

Other adjustments(a)

 

2,545

 

 

 

2,382

 

 

 

3,775

 

 

 

2,414

 

Adjusted EBITDA

$

191,485

 

 

$

204,206

 

 

$

712,533

 

 

$

731,769

 

(a)

Includes derivative fair value adjustments, foreign currency transaction (gains) losses, legal settlements, inventory step-up costs, the proportionate share of interest, income taxes, depreciation and amortization related to the South American Joint Venture, which is accounted for under the equity method of accounting and executive retirement expense.

Reconciliation of Free Cash Flow to Cash flow from Operating Activities  

 

Nine Months Ended

December 31,

(Amounts in thousands)

2024

 

2023

Net cash flow from operating activities

$

540,264

 

 

$

700,262

 

Capital expenditures

 

(166,410

)

 

 

(136,385

)

Free cash flow

$

373,854

 

 

$

563,877

 

Reconciliation of Diluted Earnings per Share to Adjusted Earnings per Share

The following table presents diluted earnings per share on an adjusted basis to supplement the Company's discussion of its results of operations herein.

 

Three Months Ended

December 31,

 

Nine Months Ended

December 31,

 

2024

 

2023

 

2024

 

2023

Diluted Earnings Per Share

$

1.04

 

 

$

1.34

 

 

$

4.77

 

 

$

5.24

 

(Gain) loss on disposal of assets and costs from exit and disposal activities

 

(0.01

)

 

 

0.03

 

 

 

0.01

 

 

 

(0.13

)

Transaction costs

 

0.08

 

 

 

0.01

 

 

 

0.11

 

 

 

0.04

 

Income tax impact of adjustments (a)

 

(0.02

)

 

 

(0.01

)

 

 

(0.03

)

 

 

0.02

 

Adjusted Earnings per Share

$

1.09

 

 

$

1.37

 

 

$

4.86

 

 

$

5.17

 

(a)

The income tax impact of adjustments to each period is based on the statutory tax rate.

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20250206524020/en/

For more information, please contact: Michael Higgins VP, Corporate Strategy & Investor Relations (614) 658-0050 Michael.Higgins@adspipe.com