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 first quarter
ended June 30, 2022.
First Quarter Fiscal 2023
Results
- Net sales increased 36.6% to $914.2 million
- Net income increased 144.4% to $188.5 million
- Adjusted EBITDA (Non-GAAP) increased 79.5% to $299.0
million
Scott Barbour, President and Chief Executive Officer of ADS
commented, "We achieved record revenue and Adjusted EBITDA results
in the first quarter of fiscal 2023, with results coming in well
above plan. Sales growth of 37% was driven by favorable pricing at
both ADS and Infiltrator, as well as strong volume growth in Allied
Products, Infiltrator and the residential end market driven by
share gains. In addition, the new production equipment installed
during the fourth quarter of fiscal year 2022, at both ADS and
Infiltrator is producing to expected rates and helping to bring
down elevated backlogs. While pipe volume in our non-residential,
infrastructure and agriculture end markets started slower than
anticipated, year-over-year volume performance improved as the
quarter progressed and we remain confident in the outlook for all
of our end markets for the remainder of the fiscal year."
Barbour continued, "The favorable top line growth we achieved in
the first quarter was broad based across our construction end
markets and geographies, with notable strength in our priority
states. This growth offset inflationary cost pressures that we
continue to see in transportation and our manufacturing operations.
In addition, the pricing actions we have taken have more than
offset our raw material costs, which moderated, but remain at
elevated levels. As a result of these actions, we generated strong
growth in Adjusted EBITDA, which in combination with improvements
in working capital, helped drive significant free cash flow
generation."
Barbour concluded, "Based on better than expected performance
this quarter that we anticipate will continue into the second
quarter, we are raising our fiscal year guidance for both revenue
and Adjusted EBITDA. While there is uncertainty around general
economic conditions, specifically in residential construction, the
strength we see in our leading indicators including project
identification, quoting, book-to-bill and order trends, give us
confidence we can achieve the updated guidance issued today."
First Quarter Fiscal 2023
Results
Net sales increased $244.9 million, or 36.6%, to $914.2 million,
as compared to $669.3 million in the prior year quarter. Domestic
pipe sales increased $150.8 million, or 40.3%, to $524.9 million.
Domestic allied products & other sales increased $71.9 million,
or 56.6%, to $198.9 million. Infiltrator sales increased $39.5
million, or 31.2%, to $166.3 million. These increases were driven
by double-digit sales growth in the U.S. construction end markets.
International sales increased $6.1 million, or 9.4%, to $71.5
million, driven by strong sales growth in the Canadian, Mexican and
Exports businesses.
Gross profit increased $151.0 million, or 75.1%, to $352.1
million as compared to $201.1 million in the prior year. The
increase in gross profit is primarily due to the increase in sales
volume and favorable pricing on pipe, onsite septic and allied
products. The increase in our gross profit was due to an increase
in net sales from improved pricing partially offset by inflationary
pressures of higher material and transportation costs along with
higher manufacturing costs.
Adjusted EBITDA (Non-GAAP) increased $132.5 million, or 79.5%,
to $299.0 million, as compared to $166.6 million in the prior year.
The increase is primarily due to the factors mentioned above. As a
percentage of net sales, Adjusted EBITDA was 32.7% as compared to
24.9% in the prior year.
Reconciliations of GAAP to Non-GAAP financial measures for
Adjusted EBITDA and Free Cash Flow 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.”
Balance Sheet and
Liquidity
Net cash provided by operating activities was $249.8 million, as
compared to $104.3 million in the prior year. Free cash flow
(Non-GAAP) was $213.6 million, as compared to $78.8 million in the
prior year. Net debt (total debt and finance lease obligations net
of cash) was $850.2 million as of June 30, 2022, a decrease of
$74.3 million from March 31, 2021.
On June 9, 2022 the Company issued $500.0 million aggregate
principal amount of 6.375% Senior Notes due 2030. Some of the
proceeds of this issuance were used to repay the outstanding
borrowings under its senior secured revolving credit facility.
ADS had total liquidity of $1,059 million, comprised of cash of
$464 million as of June 30, 2022 and $595 million of availability
under committed credit facilities. As of June 30, 2022, the
Company’s leverage ratio was 1.1 times.
In the three months ended June 30, 2022, the Company repurchased
0.8 million shares of its common stock for a total cost of $67.4
million. As of June 30, 2022, approximately $932.6 million of
common stock may be repurchased under the authorization.
Fiscal 2023 Outlook
Based on current visibility, backlog of existing orders and
business trends, the Company raised its financial targets for
fiscal 2023. Net sales are now expected to be in the range of
$3.250 billion to $3.350 billion. Adjusted EBITDA is expected to be
in the range of $900 to $940 million. Capital expenditures are
expected to be in the range of $150 million to $180 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://ige.netroadshow.com/registration/q4inc/11113/ads/#39-first-quarter-fiscal-year-2023-financial-results/.
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 provides
superior drainage solutions for use in a wide variety of markets
and applications including commercial, residential, infrastructure
and agriculture. ADS delivers tremendous service to its customers
with the industry’s largest company-owned fleet, an expansive sales
team, and a vast manufacturing network of approximately 70
manufacturing plants and 38 distribution centers. ADS is the
largest plastic recycling company 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; the risks
related to the COVID-19 pandemic or other pandemics in the future;
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; 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; cybersecurity risks; 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; 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 June
30,
(In thousands, except per share data)
2022
2021
Net sales
$
914,186
$
669,300
Cost of goods sold
562,079
468,179
Gross profit
352,107
201,121
Operating expenses:
Selling, general and administrative
86,520
76,221
Loss (gain) on disposal of assets and
costs from exit and disposal activities
303
(11
)
Intangible amortization
13,677
15,645
Income from operations
251,607
109,266
Other expense:
Interest expense
11,072
7,907
Derivative gains and other income, net
(1,902
)
(2,014
)
Income before income taxes
242,437
103,373
Income tax expense
55,065
26,455
Equity in net income of unconsolidated
affiliates
(1,110
)
(205
)
Net income
188,482
77,123
Less: net income attributable to
noncontrolling interest
1,336
1,136
Net income attributable to ADS
187,146
75,987
Dividends to participating securities
—
(1,635
)
Net income available to common
stockholders and participating securities
187,146
74,352
Undistributed income allocated to
participating securities
—
(10,933
)
Net income available to common
stockholders
$
187,146
$
63,419
Weighted average common shares
outstanding:
Basic
83,144
71,534
Diluted
84,389
73,124
Net income per share:
Basic
$
2.25
$
0.89
Diluted
$
2.22
$
0.87
Cash dividends declared per
share
$
0.12
$
0.11
ADVANCED DRAINAGE SYSTEMS,
INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE
SHEETS
(unaudited)
As of
(Amounts in thousands)
June 30, 2022
March 31, 2022
ASSETS
Current assets:
Cash
$
463,696
$
20,125
Receivables, net
427,620
341,753
Inventories
489,492
494,324
Other current assets
20,532
15,696
Total current assets
1,401,340
871,898
Property, plant and equipment, net
636,042
619,383
Other assets:
Goodwill
619,626
610,293
Intangible assets, net
449,115
431,385
Other assets
119,240
116,799
Total assets
$
3,225,363
$
2,649,758
LIABILITIES, MEZZANINE EQUITY AND
STOCKHOLDERS’ EQUITY
Current liabilities:
Current maturities of debt obligations
$
18,113
$
19,451
Current maturities of finance lease
obligations
5,227
5,089
Accounts payable
274,606
224,986
Other accrued liabilities
148,605
134,877
Accrued income taxes
58,207
6,838
Total current liabilities
504,758
391,241
Long-term debt obligations, net
1,279,176
908,705
Long-term finance lease obligations
11,429
11,393
Deferred tax liabilities
166,741
168,435
Other liabilities
66,472
64,939
Total liabilities
2,028,576
1,544,713
Mezzanine equity:
Redeemable common stock
188,828
—
Redeemable convertible preferred stock
—
195,384
Total mezzanine equity
188,828
195,384
Stockholders’ equity:
Common stock
11,623
11,612
Paid-in capital
1,079,701
1,065,628
Common stock in treasury, at cost
(408,861
)
(318,691
)
Accumulated other comprehensive loss
(28,289
)
(24,386
)
Retained earnings
335,822
158,876
Total ADS stockholders’ equity
989,996
893,039
Noncontrolling interest in
subsidiaries
17,963
16,622
Total stockholders’ equity
1,007,959
909,661
Total liabilities, mezzanine equity and
stockholders’ equity
$
3,225,363
$
2,649,758
ADVANCED DRAINAGE SYSTEMS,
INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
CASH FLOWS
(unaudited)
Three Months Ended June
30,
(Amounts in thousands)
2022
2021
Cash Flow from Operating
Activities
Net income
$
188,482
$
77,123
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization
35,578
34,656
Deferred income taxes
(1,272
)
64
Loss (gain) on disposal of assets and
costs from exit and disposal activities
303
(11
)
ESOP and stock-based compensation
6,273
20,806
Amortization of deferred financing
charges
344
95
Fair market value adjustments to
derivatives
(90
)
(675
)
Equity in net income of unconsolidated
affiliates
(1,110
)
(205
)
Other operating activities
(3,535
)
450
Changes in working capital:
Receivables
(79,616
)
(67,388
)
Inventories
8,039
(28,985
)
Prepaid expenses and other current
assets
(4,840
)
(7,442
)
Accounts payable, accrued expenses, and
other liabilities
101,209
75,860
Net cash provided by operating
activities
249,765
104,348
Cash Flows from Investing
Activities
Capital expenditures
(36,189
)
(25,546
)
Acquisition, net of cash acquired
(47,492
)
—
Other investing activities
13
53
Net cash used in investing activities
(83,668
)
(25,493
)
Cash Flows from Financing
Activities
Payments on syndicated Term Loan
Facility
(1,750
)
(1,750
)
Proceeds from Revolving Credit
Agreement
26,200
—
Payments on Revolving Credit Agreement
(140,500
)
—
Proceeds from Amended Revolving Credit
Agreement
97,000
—
Payments on Amended Revolving Credit
Agreement
(97,000
)
—
Proceeds from Senior Notes due 2030
500,000
—
Debt issuance costs
(11,575
)
—
Payments on Equipment Financing
(3,548
)
—
Payments on finance lease obligations
(1,721
)
(5,379
)
Repurchase of common stock
(57,699
)
(102,013
)
Cash dividends paid
(10,170
)
(9,451
)
Dividends paid to noncontrolling interest
holder
—
(957
)
Proceeds from exercise of stock
options
1,249
1,336
Payment of withholding taxes on vesting of
restricted stock units
(22,809
)
(12,976
)
Other financing activities
—
(131
)
Net cash provided by (used in) financing
activities
277,677
(131,321
)
Effect of exchange rate changes on
cash
(203
)
290
Net change in cash
443,571
(52,176
)
Cash at beginning of period
20,125
195,009
Cash at end of period
$
463,696
$
142,833
Selected Financial Data
The following tables set forth net sales by reportable segment
for each of the periods indicated.
Three Months Ended
June 30, 2022
June 30, 2021
(In thousands)
Net Sales
Intersegment Net Sales
Net Sales from External
Customers
Net Sales
Intersegment Net Sales
Net Sales from External
Customers
Pipe
$
524,857
$
(9,874
)
$
514,983
$
374,010
$
(1,903
)
$
372,107
Infiltrator Water Technologies
166,290
(28,906
)
137,384
126,742
(19,037
)
107,705
International
International - Pipe
53,419
(5,859
)
47,560
50,838
(2,914
)
47,924
International - Allied Products &
Other
18,095
—
18,095
14,528
—
14,528
Total International
71,514
(5,859
)
65,655
65,366
(2,914
)
62,452
Allied Products & Other
198,909
(2,745
)
196,164
127,036
—
127,036
Intersegment Eliminations
(47,384
)
47,384
—
(23,854
)
23,854
—
Total Consolidated
$
914,186
$
—
$
914,186
$
669,300
$
—
$
669,300
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 organic results,
Adjusted EBITDA and Free Cash Flow, 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 below
reconciliations 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 below a
reconciliation of cash flow from operating activities to Free Cash
Flow.
The following tables present a reconciliation of EBITDA and
Adjusted EBITDA to Net Income and Free Cash Flow to Cash Flow from
Operating Activities, the most comparable GAAP measures, for each
of the periods indicated.
Reconciliation of Segment Adjusted Gross Profit to Gross
profit
Three Months Ended
June 30,
(Amounts in thousands)
2022
2021
Segment adjusted gross profit
Pipe
$
168,579
$
84,143
Infiltrator Water Technologies
75,794
59,402
International
20,484
21,378
Allied Products & Other
109,041
63,299
Intersegment Eliminations
(815
)
(14
)
Total Segment Adjusted Gross Profit
373,083
228,208
Depreciation and amortization
20,302
17,532
ESOP and stock-based compensation
expense
674
9,555
Total Gross Profit
$
352,107
$
201,121
Reconciliation of Adjusted EBITDA to Net Income
Three Months Ended
June 30,
(Amounts in thousands)
2022
2021
Net income
$
188,482
$
77,123
Depreciation and amortization
35,578
34,656
Interest expense
11,072
7,907
Income tax expense
55,065
26,455
EBITDA
290,197
146,141
Loss (gain) on disposal of assets and
costs from exit and disposal activities
303
(11
)
Stock-based compensation expense
6,273
6,651
ESOP compensation expense
—
14,155
Transaction costs
1,715
43
Other adjustments(a)
555
(397
)
Adjusted EBITDA
$
299,043
$
166,582
(a)
Includes derivative fair value
adjustments, foreign currency transaction (gains) losses, 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
Three Months Ended
June 30,
(Amounts in thousands)
2022
2021
Net cash flow from operating
activities
$
249,765
$
104,348
Capital expenditures
(36,189
)
(25,546
)
Free cash flow
$
213,576
$
78,802
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220804005112/en/
Michael Higgins VP, Corporate Strategy & Investor Relations
(614) 658-0050 Michael.Higgins@adspipe.com
Advanced Drainage Systems (NYSE:WMS)
Historical Stock Chart
From Oct 2024 to Nov 2024
Advanced Drainage Systems (NYSE:WMS)
Historical Stock Chart
From Nov 2023 to Nov 2024
