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Press Release Details

Advanced Drainage Systems Announces Third Quarter Fiscal 2023 Results

02/02/2023

HILLIARD, Ohio--(BUSINESS WIRE)-- 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, 2022.

Third Quarter Fiscal 2023 Results

  • Net sales decreased 8.4% to $655.2 million
  • Net income increased 11.7% to $83.2 million
  • Adjusted EBITDA (Non-GAAP) decreased 3.6% to $169.7 million

Year-to-Date Fiscal 2023 Results

  • Net sales increased 17.3% to $2,453.6 million
  • Net income increased 86.5% to $425.0 million
  • Adjusted EBITDA (Non-GAAP) increased 44.2% to $732.0 million
  • Cash provided by operating activities increased 240.7% to $660.4 million
  • Free cash flow (Non-GAAP) increased $440.1 million to $533.6 million

Scott Barbour, President and Chief Executive Officer of ADS commented, "The Company executed well in the fiscal third quarter despite a challenging demand environment. Through October and November, demand was largely in line with expectations, but in December domestic construction market demand slowed significantly. As a result, consolidated net sales declined 8% in the fiscal third quarter. The ADS business was down 3%, primarily due to weakness in the non-residential and retail businesses. The 30% decline in Infiltrator sales was a result of the lower residential market demand and inventory destocking, which completed in the fiscal third quarter as we previously communicated."

Barbour continued, "Importantly, though we are facing a challenging demand environment, our market leading position, value proposition and execution enabled us to manage costs, maintain favorable price/material cost and generate significant cash flow. As a result, the Company’s Adjusted EBITDA margin expanded 130 basis points and free cash flow increased $440 million, or 370% over the prior year. It is also important to point out that Net Income increased 11.7%. As demonstrated with the margin performance in the fiscal third quarter, our business model remains resilient in a lower demand environment. Going forward, we expect annual margin performance to be consistent with what we communicated at Investor Day in March 2022."

"As we look at the significant change in market dynamics that impact construction activity since the beginning of the fiscal year – interest rates nearly doubling and significant inflation – there is no doubt this is creating economic uncertainty. This combination has slowed down demand for the ADS and Infiltrator products. We expect the majority of calendar 2023 to remain a challenging demand environment."

Barbour concluded, "The need for the water management solutions and services we provide is as relevant as ever. The Company’s industry leading water management products have significant competitive advantages that will continue to drive above market results. We will work through this period of lower demand by managing our costs, including reducing headcount and optimizing our network. The long-term fundamentals and position of both ADS and Infiltrator remain intact, and we will manage the business through the external conditions appropriately to continue delivering value to our customers and shareholders."

Third Quarter Fiscal 2023 Results

Net sales decreased $60.2 million, or 8.4%, to $655.2 million, as compared to $715.4 million in the prior year quarter. Domestic pipe sales decreased $24.3 million, or 6.1%, to $375.7 million. Domestic allied products & other sales increased $1.6 million, or 1.1%, to $149.0 million. Infiltrator sales decreased $44.8 million, or 30.1%, to $103.9 million. The decrease in domestic net sales was driven by sales in the U.S. construction end markets. International sales increased $3.1 million, or 5.6%, to $59.0 million, driven by growth in the Canadian and Mexican businesses.

Gross profit increased $14.9 million, or 7.1%, to $223.9 million as compared to $209.0 million in the prior year. The increase in gross profit is primarily due to the favorable pricing on pipe, onsite septic and allied products as well as favorable material cost. This increase was partially offset by a decrease in volume, inflationary cost pressures and higher manufacturing costs.

Adjusted EBITDA (Non-GAAP) decreased $6.4 million, or 3.6%, to $169.7 million, as compared to $176.2 million in the prior year. The decrease is primarily due to the factors mentioned above, as well as an increase in selling, general and administrative expenses. As a percentage of net sales, Adjusted EBITDA was 25.9% as compared to 24.6% 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.”

Year-to-Date Fiscal 2023 Results

Net sales increased $362.4 million, or 17.3%, to $2,453.6 million, as compared to $2,091.1 million in the prior year quarter. Domestic pipe sales increased $243.0 million, or 21.0%, to $1,401.6 million. Domestic allied products & other sales increased $129.9 million, or 30.9%, to $550.2 million. Infiltrator sales decreased $0.4 million, or 0.1%, to $420.9 million. The increase in domestic net sales was driven by double-digit sales growth in the U.S. construction end markets. International sales increased $19.2 million, or 10.4%, to $203.9 million, driven by strong sales growth in the Canadian, Mexican and Exports businesses.

Gross profit increased $285.8 million, or 46.8%, to $896.0 million as compared to $610.2 million in the prior year. The increase in gross profit is primarily due to the favorable pricing on pipe, onsite septic and allied products as well as favorable material cost. This increase was partially offset by a decrease in volume, inflationary cost pressures and higher manufacturing costs.

Adjusted EBITDA (Non-GAAP) increased $224.4 million, or 44.2%, to $732.0 million, as compared to $507.5 million in the prior year. The increase is primarily due to the factors mentioned above. As a percentage of net sales, Adjusted EBITDA was 29.8% as compared to 24.3% in the prior year.

Balance Sheet and Liquidity

Net cash provided by operating activities was $660.4 million, as compared to $193.8 million in the prior year. Free cash flow (Non-GAAP) was $533.6 million, as compared to $93.5 million in the prior year. Net debt (total debt and finance lease obligations net of cash) was $882.1 million as of December 31, 2022, a decrease of $42.4 million from March 31, 2022.

ADS had total liquidity of $1,017.1 million, comprised of cash of $426.7 million as of December 31, 2022 and $590.4 million of availability under committed credit facilities. As of December 31, 2022, the Company’s trailing-twelve-month leverage ratio was 1.0 times Adjusted EBITDA.

In the nine months ended December 31, 2022, the Company repurchased 3.8 million shares of its common stock for a total cost of $375.0 million. As of December 31, 2022, approximately $625.0 million of common stock may be repurchased under the Company's existing share repurchase authorization.

Fiscal 2023 Outlook

Based on current visibility, backlog of existing orders and business trends, the Company updated its financial targets for fiscal 2023. Net sales are now expected to be in the range of $2.975 billion to $3.050 billion. Adjusted EBITDA is now expected to be in the range of $850 to $890 million. Capital expenditures are expected to be approximately $175 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://www.netroadshow.com/events/login?show=4a232ad6&confId=45958. 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 37 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

December 31,

 

Nine Months Ended

December 31,

(In thousands, except per share data)

 

2022

 

 

 

2021

 

 

 

2022

 

 

 

2021

 

Net sales

$

655,167

 

 

$

715,357

 

 

$

2,453,562

 

 

$

2,091,128

 

Cost of goods sold

 

431,250

 

 

 

506,380

 

 

 

1,557,575

 

 

 

1,480,973

 

Gross profit

 

223,917

 

 

 

208,977

 

 

 

895,987

 

 

 

610,155

 

Operating expenses:

 

 

 

 

 

 

 

Selling, general and administrative

 

85,936

 

 

 

80,059

 

 

 

261,095

 

 

 

230,231

 

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

 

(348

)

 

 

3,466

 

 

 

(147

)

 

 

2,554

 

Intangible amortization

 

13,842

 

 

 

15,138

 

 

 

41,360

 

 

 

46,229

 

Income from operations

 

124,487

 

 

 

110,314

 

 

 

593,679

 

 

 

331,141

 

Other expense:

 

 

 

 

 

 

 

Interest expense

 

20,001

 

 

 

8,756

 

 

 

49,334

 

 

 

25,100

 

Derivative gains and other income, net

 

(4,125

)

 

 

(979

)

 

 

(5,632

)

 

 

(2,791

)

Income before income taxes

 

108,611

 

 

 

102,537

 

 

 

549,977

 

 

 

308,832

 

Income tax expense

 

26,068

 

 

 

28,792

 

 

 

128,641

 

 

 

82,063

 

Equity in net income of unconsolidated affiliates

 

(639

)

 

 

(717

)

 

 

(3,705

)

 

 

(1,128

)

Net income

 

83,182

 

 

 

74,462

 

 

 

425,041

 

 

 

227,897

 

Less: net income attributable to noncontrolling interest

 

1,142

 

 

 

784

 

 

 

3,848

 

 

 

2,873

 

Net income attributable to ADS

 

82,040

 

 

 

73,678

 

 

 

421,193

 

 

 

225,024

 

Dividends to participating securities

 

 

 

 

(1,357

)

 

 

 

 

 

(4,633

)

Net income available to common stockholders and participating securities

 

82,040

 

 

 

72,321

 

 

 

421,193

 

 

 

220,391

 

Undistributed income allocated to participating securities

 

 

 

 

(9,457

)

 

 

 

 

 

(30,870

)

Net income available to common stockholders

$

82,040

 

 

$

62,864

 

 

$

421,193

 

 

$

189,521

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

Basic

 

82,067

 

 

 

71,267

 

 

 

82,891

 

 

 

71,087

 

Diluted

 

82,987

 

 

 

72,789

 

 

 

83,980

 

 

 

72,752

 

Net income per share:

 

 

 

 

 

 

 

Basic

$

1.00

 

 

$

0.88

 

 

$

5.08

 

 

$

2.67

 

Diluted

$

0.99

 

 

$

0.86

 

 

$

5.02

 

 

$

2.61

 

Cash dividends declared per share

$

0.12

 

 

$

0.11

 

 

$

0.36

 

 

$

0.33

 

 

ADVANCED DRAINAGE SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(unaudited)

 

 

As of

(Amounts in thousands)

December 31, 2022

 

March 31, 2022

ASSETS

 

 

 

Current assets:

 

 

 

Cash

$

426,690

 

 

$

20,125

 

Receivables, net

 

242,485

 

 

 

341,753

 

Inventories

 

459,029

 

 

 

494,324

 

Other current assets

 

29,162

 

 

 

15,696

 

Total current assets

 

1,157,366

 

 

 

871,898

 

Property, plant and equipment, net

 

685,496

 

 

 

619,383

 

Other assets:

 

 

 

Goodwill

 

619,275

 

 

 

610,293

 

Intangible assets, net

 

421,450

 

 

 

431,385

 

Other assets

 

122,071

 

 

 

116,799

 

Total assets

$

3,005,658

 

 

$

2,649,758

 

LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS’ EQUITY

 

 

 

Current liabilities:

 

 

 

Current maturities of debt obligations

$

15,601

 

 

$

19,451

 

Current maturities of finance lease obligations

 

6,556

 

 

 

5,089

 

Accounts payable

 

174,106

 

 

 

224,986

 

Other accrued liabilities

 

170,549

 

 

 

134,877

 

Accrued income taxes

 

3,468

 

 

 

6,838

 

Total current liabilities

 

370,280

 

 

 

391,241

 

Long-term debt obligations, net

 

1,272,040

 

 

 

908,705

 

Long-term finance lease obligations

 

14,571

 

 

 

11,393

 

Deferred tax liabilities

 

163,259

 

 

 

168,435

 

Other liabilities

 

69,767

 

 

 

64,939

 

Total liabilities

 

1,889,917

 

 

 

1,544,713

 

Mezzanine equity:

 

 

 

Redeemable common stock

 

157,128

 

 

 

 

Redeemable convertible preferred stock

 

 

 

 

195,384

 

Total mezzanine equity

 

157,128

 

 

 

195,384

 

Stockholders’ equity:

 

 

 

Common stock

 

11,645

 

 

 

11,612

 

Paid-in capital

 

1,128,915

 

 

 

1,065,628

 

Common stock in treasury, at cost

 

(719,702

)

 

 

(318,691

)

Accumulated other comprehensive loss

 

(29,871

)

 

 

(24,386

)

Retained earnings

 

550,011

 

 

 

158,876

 

Total ADS stockholders’ equity

 

940,998

 

 

 

893,039

 

Noncontrolling interest in subsidiaries

 

17,615

 

 

 

16,622

 

Total stockholders’ equity

 

958,613

 

 

 

909,661

 

Total liabilities, mezzanine equity and stockholders’ equity

$

3,005,658

 

 

$

2,649,758

 

 

ADVANCED DRAINAGE SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

 

 

Nine Months Ended

December 31,

(Amounts in thousands)

 

2022

 

 

 

2021

 

Cash Flow from Operating Activities

 

 

 

Net income

$

425,041

 

 

$

227,897

 

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

 

 

 

Depreciation and amortization

 

107,346

 

 

 

103,687

 

Deferred income taxes

 

(4,165

)

 

 

6,243

 

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

 

(147

)

 

 

2,554

 

ESOP and stock-based compensation

 

19,912

 

 

 

61,900

 

Amortization of deferred financing charges

 

909

 

 

 

286

 

Fair market value adjustments to derivatives

 

2,309

 

 

 

118

 

Equity in net income of unconsolidated affiliates

 

(3,705

)

 

 

(1,128

)

Other operating activities

 

2,732

 

 

 

(9,898

)

Changes in working capital:

 

 

 

Receivables

 

99,958

 

 

 

(59,821

)

Inventories

 

34,871

 

 

 

(161,878

)

Prepaid expenses and other current assets

 

(4,532

)

 

 

(5,199

)

Accounts payable, accrued expenses, and other liabilities

 

(20,091

)

 

 

29,086

 

Net cash provided by operating activities

 

660,438

 

 

 

193,847

 

Cash Flows from Investing Activities

 

 

 

Capital expenditures

 

(126,858

)

 

 

(100,367

)

Acquisition, net of cash acquired

 

(48,010

)

 

 

(49,210

)

Other investing activities

 

46

 

 

 

(463

)

Net cash used in investing activities

 

(174,822

)

 

 

(150,040

)

Cash Flows from Financing Activities

 

 

 

Payments on syndicated Term Loan Facility

 

(5,250

)

 

 

(5,250

)

Proceeds from Revolving Credit Agreement

 

26,200

 

 

 

258,100

 

Payments on Revolving Credit Agreement

 

(140,500

)

 

 

(124,600

)

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

)

 

 

 

Proceeds from Equipment Financing

 

 

 

 

35,963

 

Payments on Equipment Financing

 

(10,213

)

 

 

(1,177

)

Payments on finance lease obligations

 

(4,954

)

 

 

(49,365

)

Repurchase of common stock

 

(375,027

)

 

 

(292,000

)

Cash dividends paid

 

(30,111

)

 

 

(27,826

)

Dividends paid to noncontrolling interest holder

 

(3,652

)

 

 

(1,471

)

Proceeds from exercise of stock options

 

5,145

 

 

 

4,274

 

Payment of withholding taxes on vesting of restricted stock units

 

(28,653

)

 

 

(13,055

)

Other financing activities

 

 

 

 

(167

)

Net cash used in financing activities

 

(78,590

)

 

 

(216,574

)

Effect of exchange rate changes on cash

 

(461

)

 

 

(69

)

Net change in cash

 

406,565

 

 

 

(172,836

)

Cash at beginning of period

 

20,125

 

 

 

195,009

 

Cash at end of period

$

426,690

 

 

$

22,173

 

Selected Financial Data

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

 

 

Three Months Ended

 

December 31, 2022

 

December 31, 2021

(In thousands)

Net Sales

 

Intersegment

Net Sales

 

Net Sales from

External Customers

 

Net Sales

 

Intersegment

Net Sales

 

Net Sales from

External Customers

Pipe

$

375,719

 

 

$

(10,839

)

 

$

364,880

 

$

400,027

 

 

$

(3,332

)

 

$

396,695

Infiltrator

 

103,895

 

 

 

(14,961

)

 

 

88,934

 

 

148,677

 

 

 

(26,314

)

 

 

122,363

International

 

 

 

 

 

 

 

 

 

 

 

International - Pipe

 

44,882

 

 

 

(5,311

)

 

 

39,571

 

 

41,156

 

 

 

(5,700

)

 

 

35,456

International - Allied Products & Other

 

14,075

 

 

 

 

 

 

14,075

 

 

14,687

 

 

 

 

 

 

14,687

Total International

 

58,957

 

 

 

(5,311

)

 

 

53,646

 

 

55,843

 

 

 

(5,700

)

 

 

50,143

Allied Products & Other

 

149,044

 

 

 

(1,337

)

 

 

147,707

 

 

147,476

 

 

 

(1,320

)

 

 

146,156

Intersegment Eliminations

 

(32,448

)

 

 

32,448

 

 

 

 

 

(36,666

)

 

 

36,666

 

 

 

Total Consolidated

$

655,167

 

 

$

 

 

$

655,167

 

$

715,357

 

 

$

 

 

$

715,357

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended

 

December 31, 2022

 

December 31, 2021

 

Net Sales

 

Intersegment

Net Sales

 

Net Sales from

External Customers

 

Net Sales

 

Intersegment

Net Sales

 

Net Sales from

External Customers

Pipe

$

1,401,554

 

 

$

(31,483

)

 

$

1,370,071

 

$

1,158,558

 

 

$

(7,903

)

 

$

1,150,655

Infiltrator

 

420,920

 

 

 

(66,317

)

 

 

354,603

 

 

421,330

 

 

 

(67,763

)

 

 

353,567

International

 

 

 

 

 

 

 

 

 

 

 

International - Pipe

 

154,762

 

 

 

(18,509

)

 

 

136,253

 

 

142,135

 

 

 

(13,784

)

 

 

128,351

International - Allied Products & Other

 

49,172

 

 

 

 

 

 

49,172

 

 

42,648

 

 

 

 

 

 

42,648

Total International

 

203,934

 

 

 

(18,509

)

 

 

185,425

 

 

184,783

 

 

 

(13,784

)

 

 

170,999

Allied Products & Other

 

550,153

 

 

 

(6,690

)

 

 

543,463

 

 

420,231

 

 

 

(4,324

)

 

 

415,907

Intersegment Eliminations

 

(122,999

)

 

 

122,999

 

 

 

 

 

(93,774

)

 

 

93,774

 

 

 

Total Consolidated

$

2,453,562

 

 

$

 

 

$

2,453,562

 

$

2,091,128

 

 

$

 

 

$

2,091,128

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 Adjusted Gross Profit to Gross Profit

 

Three Months Ended

December 31,

 

Nine Months Ended

December 31,

(Amounts in thousands)

 

2022

 

 

2021

 

 

 

2022

 

 

2021

Segment Adjusted Gross Profit

 

 

 

 

 

 

 

Pipe

$

106,279

 

$

92,066

 

 

$

421,011

 

$

258,681

Infiltrator

 

46,497

 

 

60,546

 

 

 

193,569

 

 

178,795

International

 

13,342

 

 

13,240

 

 

 

51,456

 

 

49,695

Allied Products & Other

 

78,401

 

 

72,785

 

 

 

293,472

 

 

204,063

Intersegment Elimination

 

714

 

 

(44

)

 

 

329

 

 

1,421

Total Segment Adjusted Gross Profit

 

245,233

 

 

238,593

 

 

 

959,837

 

 

692,655

Depreciation and amortization

 

20,573

 

 

18,042

 

 

 

61,675

 

 

52,824

ESOP and stock-based compensation

 

743

 

 

11,574

 

 

 

2,175

 

 

29,676

Total Gross Profit

$

223,917

 

$

208,977

 

 

$

895,987

 

$

610,155

Reconciliation of Adjusted EBITDA to Net Income

 

Three Months Ended

December 31,

 

Nine Months Ended

December 31,

(Amounts in thousands)

 

2022

 

 

 

2021

 

 

2022

 

 

 

2021

Net income

$

83,182

 

 

$

74,462

 

$

425,041

 

 

$

227,897

Depreciation and amortization

 

35,846

 

 

 

34,837

 

 

107,346

 

 

 

103,687

Interest expense

 

20,001

 

 

 

8,756

 

 

49,334

 

 

 

25,100

Income tax expense

 

26,068

 

 

 

28,792

 

 

128,641

 

 

 

82,063

EBITDA

 

165,097

 

 

 

146,847

 

 

710,362

 

 

 

438,747

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

 

(348

)

 

 

3,466

 

 

(147

)

 

 

2,554

Stock-based compensation expense

 

6,179

 

 

 

6,242

 

 

19,912

 

 

 

18,511

ESOP compensation expense

 

 

 

 

17,221

 

 

 

 

 

43,389

Transaction costs

 

1,334

 

 

 

2,145

 

 

3,417

 

 

 

3,022

Other adjustments(a)

 

(2,525

)

 

 

234

 

 

(1,562

)

 

 

1,318

Adjusted EBITDA

$

169,737

 

 

$

176,155

 

$

731,982

 

 

$

507,541

(a)

Includes derivative fair value adjustments, foreign currency transaction (gains) losses, interest income, 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)

 

2022

 

 

 

2021

 

Net cash flow from operating activities

$

660,438

 

 

$

193,847

 

Capital expenditures

 

(126,858

)

 

 

(100,367

)

Free cash flow

$

533,580

 

 

$

93,480

 

 

Michael Higgins
VP, Corporate Strategy & Investor Relations
(614) 658-0050
Michael.Higgins@adspipe.com

Source: Advanced Drainage Systems, Inc.