Executive Summary

Q4 FY2025: Net sales $615.8M (-5.8% y/y), diluted EPS $0.99 (-18.2% y/y), Adjusted EPS $1.03, Adjusted EBITDA $176.7M; softness driven by weather, higher rates, nonresidential choppiness; manufacturing/transportation and SG&A were favorable y/y .
FY2025: Net sales $2.904B (+1.0%), diluted EPS $5.76 (-10.7%), Adjusted EPS $5.89, Adjusted EBITDA $889.2M (-3.7%), FCF $368.5M; mix shift to higher-margin Infiltrator/Allied (44% of revenue) supported margin resiliency (30.6% Adjusted EBITDA margin) .
FY2026 guidance initiated: Net sales $2.825–$2.975B, Adjusted EBITDA $850–$910M, Capex ~$275M; pricing/cost neutral for the year, SG&A ~14% of revenue; Q1 manufacturing absorption expected to be unfavorable; transportation favorable .
Capital return catalyst: Dividend raised 13% to $0.18 per quarter (annual $0.72); FY2025 total shareholder returns $119.7M; liquidity $1.1B, leverage ~1.1x .

What Went Well and What Went Wrong

What Went Well

Infiltrator and Allied products’ mix expanded: Infiltrator sales +15.3% in Q4 to $122.3M (organic -4.5% ex-Orenco), Allied -4.8% but FY mix of onsite wastewater + Allied reached 44% of revenue; management emphasized strategy to grow higher-margin segments (Adjusted EBITDA margin 30.6% FY) .
Cost execution: Q4 manufacturing, transportation, and SG&A costs were favorable y/y; SG&A decreased 9.7% to $91.4M (14.8% of sales vs 15.5% prior year) .
Strategic narrative: CEO highlighted “material conversion” strength, diversified regional exposure, and new product opportunities (e.g., data centers, infrastructure), reinforcing confidence in share gains during macro uncertainty: “orders are positive year-over-year” .

What Went Wrong

Weather and demand headwinds: Q4 net sales -5.8% y/y with U.S. construction/agriculture demand weakness due to unfavorable winter weather and macro uncertainty; domestic pipe -11.3%, International -17.6% .
Price/mix/material cost pressures: Q4 gross profit -10.2% y/y; management cited unfavorable volume, price/mix, and material costs (partially offset by manufacturing/transportation productivity) .
Nonresidential softness and Q1 absorption: FY2026 outlook embeds nonresidential flat-to-down low single digits and manufacturing costs unfavorable in Q1 due to under-absorption from lower winter production volumes .

Financial Results

Quarterly Comparisons (oldest → newest)

Metric	Q2 2025	Q3 2025	Q4 2025
Revenue ($USD Millions)	$782.6	$690.5	$615.8
Diluted EPS (GAAP, $)	$1.67	$1.04	$0.99
Adjusted EPS ($)	$1.70	$1.09	$1.03
Adjusted EBITDA ($USD Millions)	$245.6	$191.5	$176.7
Adjusted EBITDA Margin (%)	31.4%	27.7%	28.7%

Q4 Segment Net Sales (External) vs Prior Year

Segment ($USD Millions)	Q4 2024	Q4 2025
Pipe	$358.7	$318.1
Infiltrator Water Technologies	$106.1	$122.3
International - Pipe	$25.3	$19.1
International - Allied & Other	$11.2	$10.9
Allied Products & Other	$152.7	$145.4
Total	$653.8	$615.8

FY2025 KPIs

KPI	FY 2024	FY 2025
Net Sales ($USD Millions)	$2,874.5	$2,904.2
Diluted EPS ($)	$6.45	$5.76
Adjusted EPS ($)	$6.39	$5.89
Adjusted EBITDA ($USD Millions)	$922.9	$889.2
Adjusted EBITDA Margin (%)	32.1%	30.6%
Cash from Operations ($USD Millions)	$717.9	$581.5
Free Cash Flow ($USD Millions)	$534.1	$368.5
Net Debt ($USD Millions)	$860.9 (derived prior year less change) —	$962.3
Cash ($USD Millions)	$490.2	$463.3
Leverage (x)	1.0x (TTM at Dec-24)	1.1x (Mar-25)

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Net Sales ($USD Billions)	FY2026	—	$2.825–$2.975	Initiated
Adjusted EBITDA ($USD Millions)	FY2026	—	$850–$910	Initiated
Capital Expenditures ($USD Millions)	FY2026	—	~$275	Initiated
SG&A (% of revenue)	FY2026	—	~14%	Initiated
Price/Cost	FY2026	—	Neutral for year (materials lower offset pricing down)	Initiated
Manufacturing costs	FY2026 Q1	—	Unfavorable (fixed cost absorption)	Initiated
Transportation costs	FY2026	—	Favorable (efficiency/route planning)	Initiated
Quarterly Dividend ($/share)	Q1–Q3 FY2025	$0.16	$0.18 (from Jun 16, 2025)	Raised

Earnings Call Themes & Trends

Topic	Q2 FY2025 (Nov 2024)	Q3 FY2025 (Feb 2025)	Q4 FY2025 (May 2025)	Trend
Pricing/Cost Dynamics	Price stable sequentially; materials inflation pressured margins; offset by volume/mix and manufacturing gains	Price stable; sequential material costs flattening; Q4 sequential stability expected	FY2026 price/cost neutral; pricing down low-single digits, materials lower; absorption headwind in Q1	Stabilizing sequentially; neutral in FY2026
Nonresidential Demand	Choppy; reduced FY2025 outlook; delays in Allied projects	Variable by geography; Allied strength focus, new water quality products	FY2026 nonres flat-to-down low single digits	Soft; pockets of strength (SE, TX)
Residential/Onsite Wastewater	Infiltrator tanks +40% advanced treatment growth; residential +6%	Residential +9%; Infiltrator organic +6%	Infiltrator +15.3% in Q4 (organic -4.5% ex-Orenco); positive orders y/y	Structural strength; mix tailwind
Infrastructure/IIJA	+7% Q2; underparticipated historically; building capacity	-6% Q3 on tough comp; long-term favorable, IIJA funds supportive	Low-single-digit growth expected in FY2026	Long-term tailwind
Logistics/Transportation	Repositioning products; headwind turning favorable in 2H	Efficiency gains; fleet refresh	Favorable expected FY2026	Improving
Tariffs/Macro	Macro uncertainty, storms impacting near-term	Investor Day postponed due to end-market volatility	Minimal direct tariff impact; demand delays possible	Uncertain; limited tariff exposure
Product/Innovation	Engineering & Technology Center opened; EcoStream biofiltration, new chambers/crates	Biofiltration approvals (WA DOE, NJCAT) accelerating roadmap	Continued focus on new products, design tools, capacity	Pipeline expanding
M&A	Orenco acquisition; mid-teens margin initially; synergy path	Orenco slightly ahead of expectations; margin trajectory above 20% over time	River Valley Pipe acquisition (ag markets IL/IA)	Active, strategic fit

Management Commentary

CEO on Q4/FY outlook: “In the fourth quarter, net sales decreased 6%… Despite the demand environment, pricing/cost remained in line with expectations… Fourth quarter manufacturing, transportation and SG&A costs were all favorable to the prior year.” .
Strategy/mix: “Organic sales in our most profitable segments, Infiltrator and Allied Products, increased 4.6% and 2.5%, respectively… The resiliency demonstrated by this year's 30.6% Adjusted EBITDA margin is due in part to our strategy to grow these more profitable products…” .
FY2026 setup: “Orders are positive year-over-year… Opportunities for growth with new products into… data centers and infrastructure… give us confidence in our ability to grow and increase market share during this period of market uncertainty.” .
CFO on FY2026 bridge: “Volume up low digits and pricing down low single digits… price/cost should be neutral… Manufacturing costs will be unfavorable due to fixed cost absorption… Transportation costs are expected to be favorable… SG&A… ~14% of revenue.” .

Q&A Highlights

Price/cost cadence: Pricing pressure concentrated in Q1; sequential pricing largely stable through the year after lapping comps; materials expected lower y/y; net price/cost neutral for FY2026 .
Order trends: Orders positive y/y; seasonality shift from Q4 to Q1 due to weather; watching June reorder patterns, particularly for core leach field products .
Tariffs: Minimal direct impact; main risk is project timing/demand; recent 90-day delay did not materially change pipeline yet .
Orenco margins/synergies: Mid-teens margin initially; pathway above 20% over several years via manufacturing efficiencies, cross-sell tanks/controls, broader distribution; Q3 performance slightly ahead of plan .
Cadence: Typical phasing 55–60% revenue in 1H; Q1 to see absorption headwind; transportation efficiencies continue .

Estimates Context

Results vs S&P Global Wall Street consensus:

Metric	Q2 2025 Estimate*	Q2 2025 Actual	Q3 2025 Estimate*	Q3 2025 Actual	Q4 2025 Estimate*	Q4 2025 Actual
Revenue ($USD Millions)	819.4*	782.6	675.4*	690.5	653.2*	615.8
Primary EPS ($)	1.8935*	1.70 (Adj EPS)	1.23*	1.09 (Adj EPS)	1.098*	1.03 (Adj EPS)

Values retrieved from S&P Global.*
Interpretation: Q2 missed both revenue and EPS; Q3 beat revenue but missed EPS; Q4 missed both revenue and EPS against consensus.*

Key Takeaways for Investors

Mix strategy intact: Despite Q4 demand/weather headwinds, ADS’ mix shift toward Infiltrator/Allied sustains margin profile; monitor execution on Orenco integration and advanced treatment growth to support medium-term margin expansion .
Near-term headwinds vs controlled levers: Expect Q1 manufacturing absorption drag, neutral price/cost for FY2026, transportation cost tailwinds, and SG&A discipline (~14% of revenue) .
Demand cadence: Nonresidential remains choppy; residential/infrastructure and select geographies (SE, TX) provide offsets; watch order trajectory into June/seasonal reorder cycle .
Capital allocation and catalysts: Dividend increased to $0.18; strong liquidity ($1.1B) and modest leverage (1.1x) enable ongoing investments/M&A; recently added River Valley Pipe expands ag footprint in IL/IA .
Estimate revisions likely: Given Q4 miss vs consensus and FY2026 guidance ranges, expect near-term estimate recalibration, particularly for margin cadence (Q1 absorption) and revenue trajectory (nonresidential softness) .
Trading implications: Initial FY2026 guide (EBITDA margin 30.1–30.6%) with neutral price/cost may cap upside near term; dividend hike and mix resilience provide support; watch management commentary around orders and manufacturing absorption for inflection signals .

ADVANCED DRAINAGE SYSTEMS, INC. (WMS)·Q4 2025 Earnings Summary