Advanced Drainage Systems, Inc.

Advanced Drainage Systems, Inc., known as ADS, makes stormwater drainage and onsite wastewater products for commercial, residential, infrastructure and agricultural uses. Its brands include ADS, NDS and Infiltrator Water Technologies. The company uses recycled plastic in its manufacturing operations and serves customers through its manufacturing, distribution and delivery network. Scott Barbour is president and chief executive. ADS trades on the New York Stock Exchange as WMS and ends its financial year on March 31.

Latest quarterly results

The current quarter is fiscal Q2 2027. Revenue excluding NDS removes acquired sales; it fell about 4.5%. Adjusted EBITDA excludes interest, taxes, depreciation, amortization, stock-based compensation and selected other items, including transaction and restructuring costs. Adjusted EPS excludes specified disposal, restructuring and transaction items and their tax effects.

Separate discontinued operations recorded a $23.5 million quarterly loss, largely from revaluing international businesses held for sale. Total net income, including that loss and noncontrolling interests, was $110.1 million. This is separate from the $133.6 million continuing-operations result.

Annual forecast and order timing

The sales midpoint is $100 million lower and the adjusted EBITDA midpoint $10 million lower. ADS attributes the revised sales outlook to softer demand and lower material inflation, which reduces the need for previously planned price increases.

The original August presentation estimated that $25 million to $30 million of sales moved from the September quarter into the June quarter ahead of pricing actions. November's estimate is $40 million to $50 million. First-half sales excluding acquisitions still rose 2.3%, and the adjusted EBITDA margin increased to a company record 34.1% from 33.7%.

Management now assumes flat nonresidential and infrastructure markets, a high-single-digit residential market decline and a double-digit agricultural decline for the year. Those are market assumptions, separate from ADS's own reported sales.

Cash flow, debt and liquidity

Free cash flow is operating cash less capital expenditures. Inventories absorbed $35.8 million of operating cash in the current half, versus a $69.5 million contribution a year earlier; receivables and payables also changed. Lower cash capital spending partly offset the decline in operating cash flow.

At September 30, cash was $153.2 million, versus $223.0 million at March 31. Reported debt and finance lease obligations totaled $1.773 billion on a carrying-value basis; net debt was $1.620 billion after cash. The company's net-debt-to-trailing-adjusted-EBITDA ratio was 1.6 times.

The $750 million revolving facility had no drawn borrowings. Letters of credit reduced available capacity to $738.6 million. ADS reported compliance with its debt covenants. The revolver matures in February 2031 and the term loan in February 2033; senior notes mature in 2030 and 2034.

Buybacks and dividend

ADS recorded $375.1 million of first-half repurchases covering about 2.7 million shares, versus $372.9 million of cash payments. At September 30, $677.3 million remained authorized. The subsequent-events note reports another $114.1 million of repurchases covering about 0.9 million shares after that date, so the September authorization balance predates those purchases.

The quarterly dividend remains $0.20 a share, matching August's rate. It is payable December 15, 2026, to holders of record December 1.

Acquisitions, disposals and operating changes

ADS completed the NDS water-management acquisition from Norma Group on February 2, 2026. Gross purchase consideration was about $984.9 million, funded primarily with existing cash. NDS contributed $77.3 million of second-quarter sales and $172.0 million in the first half. The River Valley Pipe asset acquisition was completed May 8, 2025.

ADS signed the StormTrap acquisition agreement on October 1, 2026, and announced it October 5. The proposed purchase price is approximately $530 million, or about $450 million after the present value of expected tax benefits. Funding is planned from cash and existing credit capacity. The transaction remains pending, with closing expected in the final calendar quarter of 2026, subject to regulatory and customary closing conditions.

StormTrap provides engineered stormwater storage systems for large-volume and space-constrained projects. It generated approximately $165 million of sales and $40 million of adjusted EBITDA in the twelve months ended July 2026.

ADS completed the sales of Teco S.r.l. and Teco Irrigation USA in July 2026. Other acquired international businesses remain classified as held for sale. Its ongoing production and distribution restructuring recorded $9.2 million of first-half expense, including facility closures and operating-model changes.