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Revenue Growth: 9% increase to $850 million.

Adjusted EBITDA Growth: 17% increase year-over-year.

Adjusted EBITDA Margin: 33.8%.

Allied Products Sales Growth: 13% increase.

Infiltrator Revenue Growth: 25% increase, 7% on an organic basis.

Pipe Revenue Growth: 1% increase.

Nonresidential Sales Growth: 15% increase.

Organic Growth in Nonresidential Market: 12%.

Free Cash Flow: $399 million year-to-date.

Capital Expenditures: Expected $200 million to $225 million for the full year.

Net Leverage: 0.7 turns.

Available Liquidity: Over $1.4 billion, including $813 million of cash on hand.

Updated Revenue Guidance for Fiscal 2026: Increased by 2% at the midpoint to $2.945 billion.

Updated Adjusted EBITDA Guidance for Fiscal 2026: Increased by 5% at the midpoint to $920 million.

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Release Date: November 06, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Advanced Drainage Systems Inc (NYSE:WMS) reported a 9% increase in revenue and a 17% growth in adjusted EBITDA for the second quarter.

The company achieved a 33.8% adjusted EBITDA margin, reflecting strong operational execution.

Allied Products sales increased by 13%, with significant growth in key products like StormTech and water quality products.

Infiltrator revenue rose by 25%, driven by double-digit growth in tanks and advanced products.

The company announced an agreement to acquire NDS, a US supplier of residential storm water and irrigation products, which is expected to be accretive to adjusted earnings per share in the first year.

The residential end market remains mixed, with interest rates affecting single-family housing starts and existing home sales.

The agriculture market showed weakness, impacting pipe revenue growth.

The DIY channel serviced through big box retailers continues to face challenges.

The company remains cautious about market demand in the second half of the year due to seasonality and potential government shutdown impacts.

Incremental transportation costs were incurred due to strong demand and network realignment actions.

Q: How do you see the end markets playing out in the back half of the year, and what's embedded in your guidance? A: Scott Cottrill, CFO, explained that the guidance assumes a slight degradation year-over-year, reflecting a conservative outlook due to demand uncertainties. The company performed well in the first half, but demand remains the riskiest part of the fiscal year, and this is reflected in their guidance.

Q: What is the current state of inventory in the channel? A: Scott Barbour, CEO, stated that inventory levels are appropriately sized for the current demand environment. There is some market friction due to factors like the government shutdown and interest rate uncertainties, but the company is competing well and winning more than its fair share.

Q: Can you discuss the margin expectations for the second half of the year? A: Scott Cottrill, CFO, noted that the margin outlook is demand-driven, with no expected degradation in price/cost. The company uses a 30% to 40% incremental/decremental margin approach to assess potential impacts on EBITDA, with stable price/cost assumptions.

Q: Are you seeing any signs of slowing demand as you move into the second half of the year? A: Scott Barbour, CEO, mentioned that while they are cautious about demand due to market friction, they are not seeing overwhelming signs of a slowdown. The company remains conservative in its outlook, particularly regarding infrastructure-related demand.

Q: How is the residential segment performing, and what are the drivers of growth? A: Scott Barbour, CEO, highlighted strong performance in the residential segment, driven by new products and programs with builders. The company is seeing growth in multifamily activity and has opportunities for market share gains, particularly in geographies like Texas and North Carolina.

Q: What are the expectations for price/cost in the back half of the year? A: Scott Cottrill, CFO, stated that price/cost is expected to remain stable, with no significant changes anticipated. The company is managing material costs well and expects stable pricing.

Q: How is the integration of Orenco progressing, and what synergies are being realized? A: Craig Taylor, President of Infiltrator, reported that the integration is going well, with synergies exceeding expectations. The commercial portion is progressing, and the company is seeing earnings grow faster than sales, with improved margins.

Q: Can you provide more detail on the potential revenue synergies from the NDS acquisition? A: Scott Barbour, CEO, explained that NDS's product line is highly complementary to ADS's offerings. The acquisition will enhance visibility on projects and opportunities, allowing for effective packaging of products and cross-selling opportunities in both turf and irrigation and Waterworks segments.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.