ADS Concludes Fiscal 2025 with Record-Setting Adjusted EBITDA Margin
Advanced Drainage Systems (ADS) has concluded its fiscal year 2025 on a high note, reporting net sales of $2.9 billion, a modest increase of 1% over the prior year.
The company's domestic construction market sales, however, saw a significant boost, growing by 3% as it continued to drive above-market performance through its material conversion strategy in the storm water and on-site wastewater market.
ADS witnessed strong growth in key regions such as Florida, with double-digit growth in pipe allied products and Infiltrator products, and Texas, where it achieved double-digit growth in Infiltrator products, along with growth in pipe and nonresidential markets.
The company's water quality products saw a remarkable surge, growing by double digits, as did its Coltec retention/detention chambers, which were acquired in 2022. Additionally, the tank and active treatment product within Infiltrator experienced double-digit growth.
ADS' adjusted EBITDA margin stood at 30.6%, marking the second most profitable year in the company's history, a testament to its resilience amidst headwinds in pricing and material costs, as well as a challenging economic backdrop that impacted demand.
The resiliency demonstrated by this year's profitability is partially attributed to ADS' strategy of growing more profitable segments, Infiltrator and allied products, which now represent 44% of revenue. Organic sales in these segments increased 5% and 3%, respectively, solidifying their position as a higher base of overall sales.
ADS has strategically diversified its product mix over the past decade, focusing on driving growth in higher-margin allied products, which grew at a 10% CAGR during this period. The company's exposure to the residential market has driven an 18% CAGR, driven by a focus on building relationships with large national homebuilders and pursuing approvals in fast-growing residential areas.
The acquisition of Infiltrator increased ADS' residential exposure to 36% of its overall business, accelerating growth and enhancing its margin profile. This strategic move has paid off well for the company, making it more resilient in a challenging economic landscape.
ADS has delayed its Investor Day, which was originally planned for June, due to current market dynamics. The company believes that this would be an opportune time to discuss growth, innovation, and customer experience after having a better understanding of the construction economy's outlook in the coming months.
