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DATE

Thursday, May 21, 2026 at 10 a.m. ET

CALL PARTICIPANTS

• President & Chief Executive Officer — Donald Scott Barbour
• Chief Financial Officer — Scott A. Cottrill
• Executive Vice President, Sales — Michael Higgins
• President, Infiltrator Water Technologies — Craig J. Taylor

TAKEAWAYS

• Total Revenue -- $677 million, up 10%, with $49 million contributed by the NDS acquisition.
• Organic Stormwater Sales -- Increased 2%, with Allied Products up 12% on an organic basis.
• Allied Product Sales -- Up 43%, explicitly driven by NDS acquisition; double-digit growth also noted for select product lines.
• Pipe Revenue -- Decreased 2% due to softness in residential and infrastructure markets.
• Agriculture Sales -- Rose 30%, attributed to advance purchasing ahead of price increases.
• Wastewater Revenue -- Increased 4%, benefiting from Southeast and South demand and product expansion; tank sales rose double digits.
• Nonresidential Core Market Sales -- Increased 6%, with noted regional strength in the West and Midwest.
• Residential Sales -- Rose 18% including NDS; excluding NDS, residential sales declined 1%.
• Adjusted EBITDA -- Increased 6%, with margin at 27.8% for the quarter.
• NDS Integration -- On track, with $25 million in annual cost synergies expected by year 3.
• Year-End Leverage -- 1.6x including the $1 billion NDS acquisition.
• Free Cash Flow -- $569 million for the year, up from $369 million the prior year.
• Cash from Operations -- $819 million, representing 85% conversion of adjusted EBITDA.
• Capital Deployment -- $1.4 billion, with $1.2 billion invested in growth and $250 million in capital expenditures targeting capacity and automation.
• Shareholder Returns -- $155 million returned via dividends and repurchases, a 29% increase from prior year.
• Dividend -- Announced 11% increase.
• Fiscal 2027 Guidance -- Revenue projected at $3.35 billion–$3.55 billion and adjusted EBITDA at $1 billion–$1.05 billion; guidance includes $300 million in NDS revenue.
• Cost Inflation -- Guidance incorporates significant year-over-year inflation in material and transportation costs, with planned pricing actions to offset dollar-for-dollar.
• SG&A Guidance -- Anticipates normalization to 14% of revenue, down from the prior year's 15%+ level.
• Operational Flexibility -- Ability to toggle between virgin and recycled resin, with new recycling capacity coming online and 70% of deliveries on internal fleet.

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RISKS

• President & CEO Barbour stated, "Demand is very choppy, with order patterns shifting as customers try to get orders in ahead of price increases. This could result in an air pocket this summer though we expect this to normalize overall within the first half of the year."
• Chief Financial Officer Cottrill said, "we are seeing significant inflation on diesel and common carrier rates, and we experienced incremental transportation costs related to the strong demand during the quarter, particularly in the West," indicating near-term margin pressures.
• Management noted that the residential end market "remains under pressure with interest rates as well as economic and geopolitical uncertainty impacting construction activity."

SUMMARY

The revenue uptick was led by substantial contributions from the NDS acquisition, strong Allied Product growth, and stable pricing despite input cost pressures. Management emphasized robust cash generation supporting capital deployment into growth, efficiency, and shareholder returns, underscored by increased dividend and disciplined buyback activity. The updated guidance reflects both increased scale post-acquisition and explicit recognition of volatility in demand patterns and input costs, with expense management and price increases expected to preserve profitability. Capital structure improvements lengthened debt maturities and lowered average interest cost by 30 basis points, enhancing overall financial flexibility. The integration of NDS is progressing above initial expectations, with emerging cross-selling opportunities anticipated to expand the company’s addressable markets.

• Quarterly guidance acknowledges elevated volume in the first quarter due to customer pre-buying, with normalization expected in the second quarter as inventory behaviors stabilize.
• “we are ahead of the acquisition model,” Cottrill said, referencing both pace of NDS integration and synergy achievement, while refraining from specifying near-term dollar values.
• Unique logistics model—with 70% of legacy business delivered on internal fleet—offsets external carrier cost inflation and extends delivery competitiveness during heightened transportation input inflation.
• Wastewater segment outperformance is attributed to expanded tank product offerings, successful integration of Orenco, and increased distribution points, driving share gains in a pressured residential market.
• Normalized working capital target is set for a slight uptick to 21% of sales as of year-end fiscal 2027, reflecting planned inventory and receivable adjustments amid inflationary input costs.

INDUSTRY GLOSSARY

• Allied Products: Complementary water management solutions such as fittings, chambers, filtration, and accessories sold in conjunction with primary pipe products.
• NDS: A company specializing in water management and drainage solutions, recently acquired by Advanced Drainage Systems to expand product offerings and distribution channels.
• Adjusted EBITDA: Earnings before interest, tax, depreciation, and amortization, excluding specified items for comparability of core operating performance.
• Infiltrator: The company's legacy wastewater solutions business, now a defined segment post-restructuring, encompassing advanced septic and treatment technologies following the Orenco acquisition.

Full Conference Call Transcript

Donald Scott Barbour: Thank you, Mike, and good morning, everyone. Thank you all for joining us on today's call. We are pleased to close out fiscal year 26 with strong results and we have a lot to cover today. Including our fourth quarter performance, full year results, an update on the NDS integration and a preview of what lies ahead as we prepare for our upcoming investor day. Okay. A lot happened in the fourth quarter. Despite the quarter being our most weather dependent, a seasonally variable period, we executed well and delivered results that reflect the strength and breadth of our portfolio.

The diversification across our allied products, infiltrator business, and the HP pipe products combined with the continued execution of our market share model, allowed us to navigate a challenging demand environment and close the fiscal year on a strong note. Let me touch on a few highlights. As you saw in the press release, following the acquisition of NDS, we updated our reporting segments to stormwater and wastewater as reflected in the results today. The stormwater segment contains the legacy ADS business, Pipe and Allied Products, as well as acquisitions we have made in the space. NDS, Coltech, and River Valley Pipe. The wastewater segment contains the legacy infiltrator business as well as the acquisition of Orenco. Excuse me.

Stormwater revenue increased 12% driven by a 43% increase in allied product sales including the $49 million contribution from the NDS acquisition that closed February 2nd. On an organic basis, stormwater sales increased 2% overall with a 12% growth in Allied Products. Once again, revenue in several highly profitable products grew double digit. Including the StormTech retention, detention chambers, the Nyloplast capture structures, and our water quality product line. These product lines continue to benefit from new product introductions and ongoing customer programs. Pipe revenue decreased 2% reflecting softness in the residential and infrastructure markets. Agriculture sales increased 30% in the quarter as customers bought ahead of price increases.

Pricing remained stable throughout the quarter and material costs were favorable relative to the prior year. Wastewater revenue increased 4% with strong activity in the Southeast and South. Tank products increased double digits. Driven by material conversion product line expansion, and additional distribution. Leachfield sales remained resilient and our advanced treatment systems, including Orenco, continued to gain share in both residential and commercial applications. From an end market perspective, sales in our core nonresidential market increased 6% with strength in the West and Midwest Sales of Allied Products experienced broad based growth across the US as we continue to focus on selling the complete package. Sales in the residential end market increased 18% including the impact from NDS.

Excluding NDS, resident residential sales decreased 1%, Single family housing continues to face headwinds from affordability, interest rate dynamics, in addition to geopolitical uncertainty. Importantly, we continue to see improving trends in the multifamily development. The Infiltrator Core residential business continues to significantly outperform the market driven by new products, and new distribution partners. We remain confident we have the right strategies and portfolio to increase our participation in the residential market as conditions inevitably improve. Moving to profitability. Adjusted EBITDA increased 6% in the quarter resulting in an adjusted EBITDA margin of 27.8%. This quarter's resilient margin is a reflection of the favorable growth, product mix, and price cost.

As well as operational self help initiatives and the capital invested over the last several years. Turning to the NDS integration. We are pleased with the progress made since closing the acquisition in February. The NDS team is a strong cultural fit and we are on track to achieve our integration milestones. Continue to expect $25 million in annual cost synergies by year 3 and we are increasingly excited about the revenue synergy opportunities as we expand the collective product portfolio across our distribution and retail channels. We look forward to talking about NDS at investor day. Regarding the upcoming Investor Day, which will take place on June 18 at our engineering and technology center in Hilliard, Ohio.

We are looking forward to sharing updates on our differentiated growth strategy and our resilient profit platform. As well as our medium term financial targets and the payoff from the significant capital have deployed over the last several years. We hope to see you all there. Please reach out to the investor relations team with any questions about the event. Fiscal year 26 was a milestone year for ADS, and I am very proud of the entire Oregon organization for how we executed.

We closed the highly strategic acquisition of NDS almost entirely with cash on hand, delivered 1 of our most profitable years in our history, generated significant free cash flow, returned a $155 million to shareholders and continue to invest in the capabilities will define our next phase of growth. We significantly outperformed our 2 largest markets, nonresidential and residential, increasing 8% and 7%, respectively. These 2 markets represent over 80% of our revenues. The self help operational initiatives we launched over a year ago are clearly bearing fruit and our teams executed at a high level despite a challenging demand environment. Resulting in the second highest adjusted EBITDA margin in the company's history of 31.6%.

As we look into fiscal 27, overall demand at this point looks similar to fiscal 26. With a slightly more negative outlook on agriculture and single family housing. Demand is very choppy, with order patterns shifting as customers try to get orders in ahead of price increases. This could result in an air pocket this summer though we expect this to normalize overall within the first half of the year. Nonresidential market is modestly more resilient expected to be flat to up low single digits. Activity in this market is driven by strength in large projects like data centers.

We are well positioned to win these jobs due to the solutions package installation benefits, last mile delivery, at the national network that we have. All of which position us to capture a larger portion of the stormwater system. The residential market remains under pressure with interest rates as well as economic and geopolitical uncertainty impacting construction activity. We expect to outperform the market driven by our sales efforts to work with large national and regional homebuilders, focus on the cross selling opportunities, capitalize on the growing portions of the market such as advanced treatment, and the multifamily development.

When you stack up our strengths, the scale, product portfolio, go to market strategy, installation benefits, logistics capabilities, and our ability to invest the business people, and industry growth. You see the ADS value proposition remains both relevant and powerful. Overall, the long term outlook for our business remains strong, supported by compelling secular tailwinds driving demand for water management solutions. Across North America. I will turn the call over to Scott A. Cottrill.

Scott A. Cottrill: Thanks, Scott. Before I get into the details, I want to step back and highlight a few key takeaways from the quarter. We delivered excellent financial performance, exceeding the top end of both our revenue and adjusted EBITDA guidance ranges. Also closed the NDS acquisition in early February, representing a $1 billion investment. That strengthens our portfolio and positions us well for long term growth. As you saw in our press release, we announced a new segment and reporting structure to better align with how we think about and manage the business.

And finally, we fortified the balance sheet through a series of capital structure actions that extended our weighted average maturities to more than 6 years while lowering our weighted average cost of debt by 30 bps. These actions combined with our strong cash generation resulted in year end leverage of only 1.6x,. Inclusive of the $1 billion NDS acquisition. And most importantly, provide the flexibility and optionality to support our capital allocation priorities in fiscal 27. For the fourth quarter, revenue increased 10% to $677 million, including the impact from NDS. On an organic basis, revenue from Allied Products, tanks, and residential advanced treatment all increased by double digits, as Scott mentioned.

Importantly, we believe our results outpaced the underlying end markets demonstrating the differentiated growth strategy and resiliency of the ADS business model. From a profitability perspective, we are very pleased with the 27.8% adjusted EBITDA margin for the fourth quarter. A couple of things I feel worth noting regarding the quarterly results. First, the fourth quarter is the fourth consecutive quarter of volume growth and favorable price cost. Regarding manufacturing and transportation costs, we are seeing significant inflation on diesel and common carrier rates, and we experienced incremental transportation costs related to the strong demand during the quarter, particularly in the West. Coupled with increased oil prices, and greater macroeconomic uncertainty.

Importantly, we continue to benefit from the capital invested over the last several years in new production lines and automation improvements. Regarding SG&A, the year over year increase was driven primarily by the acquisition of NDS, as well as incremental compensation expense related to the strong full year results. On slide 8, we present our free cash flow. For the full fiscal year, we generated $569 million in free cash flow compared to $369 million in the prior year. Primarily driven by increased profitability and effective working capital management. The OBBBA contributed an incremental $35 million of free cash flow benefit in fiscal 26. Cash from operations for the full year totaled $819 million.

Representing an 85% conversion of our adjusted EBITDA. In February, we refinanced near term maturities of our 2027 senior notes and our term loan B. As well as increased our revolving credit facility to $750 million. Our weighted average cost of debt is now 5.65%, which we view as highly favorable in the current environment. And our weighted average maturities are now >6 years. As compared to 2 years prior to these transactions. We ended the fiscal year with leverage of approximately 1.6x as I mentioned previously. In addition, in the fourth quarter, we repurchased 720 thousand shares of common stock under our existing repurchase authorization. Moving to slide 9.

Thoughtful capital deployment continues to be a key focus the management team and the board. Given the strong cash generation of the business. In fiscal 26, we deployed $1.4 billion of capital with $1.2 billion invested in growth. We spent $250 million of that on capital expenditures, with investments focused on executing growth initiatives in key geographies, customer service, productivity, and automation initiatives. Expanding our production capacity at Infiltrator, as well as increasing our recycling capacity in the Southeast. Also returned a $155 million to shareholders through dividends and repurchases. An increase of 29% over the prior year.

Today, in a separate press release, we announced an 11% increase in our dividend demonstrating our ongoing commitment to returning capital to shareholders while also continuing to invest in the growth of the business. Moving on to slide 10. We are introducing our fiscal year 27 guidance today. Based on current visibility, backlog of existing orders, our end market outlook, and the trends we see entering the fiscal year, including the continued integration of NDS, we are establishing the following guidance ranges for fiscal year 27. We expect revenue to be in the range of $3.35 billion to $3.55 billion and adjusted EBITDA to be in the range of $1 billion to $1.05 billion.

For guidance purposes, we are assuming significant year over year inflationary cost pressure on input material cost as well as transportation costs. We have taken pricing actions to offset these inflationary pressures on a dollar for dollar basis. We expect normal revenue seasonality with approximately 55% of revenue in the first half of the year Quarterly revenue patterns in the first half of the year may be affected by customers trying to buy ahead of anticipated price increases. This guidance also includes approximately $300 million of revenue from NDS for the full fiscal year. We remain focused on executing our long term strategic plan, to drive consistent long-term growth, margin expansion, and free cash flow generation.

With that, I will open the call for questions. Operator, please open the line.

Operator: We will now begin the question-and-answer session. Please limit yourself to 1 question and 1 follow-up. If you would like to ask a question, press *1 to raise your hand. To withdraw your question, press *1 again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by now while we compile the Q&A roster. Your first question comes from the line of Mike Halloran with Baird. Your line is open. Please go ahead.

Analyst (Mike Halloran): So let's start on the on the guidance. And how you guys are thinking about the composition from here. Obviously, Scott, you talked to a bunch of moving pieces as we sit here. Maybe, 2 things, I guess. 1, how are you thinking about the sequential revenue dynamic versus normal? I know you just mentioned some prebuy activity. How does that functionally play out? That will be the first question, and then I will have a follow-up to it.

Donald Scott Barbour: So is it on the-- Yeah. And the so this is Scott Barbour, Mike. And the question is around how is the first half going to perform kind of sequentially month by month or quarter to quarter to quarter? And I got you. Alright.

Scott A. Cottrill: So Yeah. As we said, Mike, the yeah. First half, second half is normally in that 55 to 60% range in the first half, and then you got yeah, that 40 to 45% in the second half. Just based on seasonality. So we see it lining up largely the same. The only thing as Scott mentioned and I did as well in our in our remarks you know, we have had a couple price increases already announced into the market. We see some prebuying going on here in the first fiscal quarter of our year.

So, again, do we see that kind of evening out and getting to where we have got our guide for that first half dynamic coming and normalizing is the word I would kind of use by the end of 1H. First-- first half of the year? Yes. We do. So, again, first quarter might be a little bit elevated from what we have seen. On a historical basis. But we see that normalizing in Q2 and getting back to that 55 to 60% of the full year in the first half on a revenue performance basis. No.

Analyst (Mike Halloran): That makes sense. Right? So a little pull forward from Q2 to Q1, but flattens out. Okay. The then the-- is maybe the similar dynamic on the margin side. Given the timing on the pricing and inflation the pull forward, does that mean that the fiscal first be maybe a little compressed on the margin line relative to how that would normally play out, and then Q2, you start getting more balanced out on a margin dollar basis. Before being more normal from there sequentially in the back half of the year? Is that the thought process? On the margin line within the guidance?

Scott A. Cottrill: Hey, that is a fair way to look at it, Mike. I think you have got a little bit more of the volume kicking in, in that first quarter based on the pull ahead. With the pricing actions we have taken mostly starting to hit in the fiscal second quarter. And again, we have assumed right now that the dollar per dollar basis. As we move through the year, that is gonna be dilutive to margins. I mean, again, it is it is focusing on the dollars right now. And that uncertainty that we are managing. So but that is that is fair to look at it that way as we progress through the year.

Donald Scott Barbour: Can I add 1 thing to that, Mike? This is Scott B. You know, matching those is really tough as materials and transportation cost You know, we run a big fleet. Uses a lot of diesel every freaking month. So those are tough to match up. And we you know, this is based on these things kind of normalizing. But there is it is it is gonna be a little choppy. I just wanna kinda get that out there We are on top of it. But it is hard to perfectly time these things. On a month or a quarter basis.

Analyst (Mike Halloran): Yeah. That makes sense. But you are saying, basically, on the dollar side of things, you are covered in relatively short order. But it. But yeah. But it is just the math behind the margins that becomes an optical habit. Right?

Scott A. Cottrill: Yeah. Great. You get a little bit of SG&A and fixed of the fixed cost leverage. But, again, that is yeah. But, yes, it is a gross margin dollar for dollar.

Donald Scott Barbour: You know, I think we talked about this with the board yesterday, and, clearly, we think the right thing to do is get it dollar for dollar but do not do not try to press for the margin on these kind of what we would view as extraordinary escalations. Driven by on-- Mhmm-- these events. In some of our really important input markets. And that is that is our strategy. that is what we are going to do, and we feel good about that. And we are we are willing to kind of work our way through that margin compression optics.

And when we have done this before, over the long term, we kind of come out favorable on the long end of that. And very similar to how we have done this in the past. With, I think, even better tools and positioning than we had before.

Scott A. Cottrill: Yeah. I mean, to Scott's point, we talk a lot about pricing and dollar for dollar, but it is not lost on us that we also have that recycling lever that we can pull on the resident side of the house. We also have the internal fleet versus the external common carrier. Fleet. So there is a bunch of dynamics and other items that we are obviously levering, but, you know, behind the scenes. To work on all of that as well to help mitigate those costs. Thanks, guys. Appreciate it.

Analyst (Mike Halloran): Thanks. Bye.

Operator: Your next question comes from the line of Matthew Bouley with Barclays. Your line is open. Please go ahead.

Analyst (Matthew Bouley): Morning, everyone. Thanks for taking the question. So apologies that I am going to keep beating that horse on price cost for a second here. Big topic today. So my question is on your competitive position. Positioning and demand, etcetera. So maybe focusing on the competitive side, first. You know, versus your plastic competitors. You just mentioned your vertical integration and recycling capabilities. But then also versus concrete pipe, etcetera, and kind of considering the cost of transportation here. What are you seeing out there from the competitive perspective?

And how do you think that ultimately plays through with your ability to actually get the price you need in the market given, you know, this fairly unprecedented level of cost inflation? Thank you.

Donald Scott Barbour: Mhmm. Alright. Okay, Matthew. We will keep going on price cost. So number 1 is we are we are out in the market. You know, we are trying to get ahead of this. These inflation of this magnitude and breadth and speed if you do not get ahead of it, you are really in bad shape. So we are we went to get ahead of that. Probably ahead of our competitors in many places. But we are we are holding in the line and our orders and rate are holding up nicely. We would in the just so that is in general.

And as you know, this thing is kind of regional, and it is better behaved in some areas versus others. But I would say right now versus our competitors, you know, they are they are experiencing similar inflationary pressures that we are, and I am thinking about the plastic pipe guys. As you said, obviously, we use all of our scale of buying in the virgin market. And pivoting to the recycled material quite quickly over the last 60 days. Honestly, faster than I thought we could. And our team is doing a really nice job, both getting procuring the right material and converting the right material. And we have that new asset in Cordele, Georgia ramping up next month.

So our timing could not be better on this recycling activity. Again, we believe makes us extremely competitive against any regional competitor on the plastic pipe. On the concrete side, they are not facing the same escalations we are. So our value prop probably compressed a little bit particularly in certain regions. But we do not think that is a permanent thing. We believe that you know, that is some of the normal dynamics. But I would recognize that in certain places, that has become much more competitive. Our value prop versus the concrete guys. But we will work we will work our way through that.

And we are thinking about other things and products and techniques to get even more competitive against those guys than we have been.

Analyst (Matthew Bouley): Okay. No, that is perfect. I really appreciate all that color, exactly what I was looking for. I will move to another topic. I am sure there will be more asked on that. But the nonresi end market, so you are guiding that to be modestly positive or flat to up low single digits, excuse me, in the next fiscal year. Sounded like large projects are what is carrying that, but I am curious if you can kind of just, I guess, unpack that a little bit. You know, regionally, by vertical, where are you seeing more of that strength You highlighted data center a couple times.

How much of that is kind of carrying the load here versus other areas that might still be more choppy on the nonresi side? Thank you.

Donald Scott Barbour: So I am gonna say a few words Matthew, and then I am gonna hand it over to Mike Higgins But in general, you know, our biggest focus and strength is on that non-resi market from the ADS legacy business. You know, in those allied products, our coverage the HP products, in there, our N-12. I mean, we just have a great product line. For a wide, wide breadth of nonresidential. And I think that is what we have been seeing over the last year or so is that we are consistently outperforming in that market. So you know, it is across lots of kind of jobs. I will turn it over to Mike.

He has a lot of insights around that.

Michael Higgins: Kind of by segment and geography. Yeah. I mean, Matthew, you hit on the data centers. that is obviously, you know, a lot of activity there. Again, kind of a small part of what we do. But, you know, what we have seen all year from answering the project type or project segment thing first is, and we have just seen pretty solid growth in activity and just kind of general purpose commercial construction, institutional construction. Has been pretty solid. You know, when you look at geographically for the year, you know, we had probably 35 plus states that were showing positive growth in non res. You know, again, there was parts of the Midwest that were really good.

You know, we still continue to see good nonresidential growth in those states that we have a lot of focus on, Florida, Virginia, North Carolina, Texas, and California were very positive. For the year as well. And, you know, Scott touched on this a little bit. You know, that is our best opportunity to sell the complete package. Right? 2 thirds of our Allied products go into that nonresidential end market.

And as the year has evolved, think our sales team and our product management team has done a really nice job really just increasing our focus on what we call attachment you know, managing the project funnel, being upfront, exploiting is a little bit of a strong word, but, you know, exploiting our position in the market our reach in the engineering firm you know, the project resource center that we have that aids these engineers and designs. It makes things very simple for them. With our tools and our other programs. So I think it is just a very high level, of execution. On that. it is not easy. The market's not great. But you know what I mean?

I mean, but where those opportunities are, our sales is very nimble and flexible. It can go find them and can execute on that. that is what you saw in those results this year.

Analyst (Matthew Bouley): Got it. Okay. No. that is great color, guys. So thank you. Good luck, and I will see you all next month.

Operator: Okay. We look forward to it. Your next question comes from the line of Bryan Blair with Oppenheimer. Your line is open. Please go ahead.

Analyst (Bryan Blair): Thank you. Good morning. So to level-set a little bit on the top line outlook, I think you would mentioned $300 million in NDS contribution With regard to the recast segments, how should we think of organic stormwater and wastewater growth for fiscal 27?

Scott A. Cottrill: Yeah. The way, Brian, the way I would talk to it or at the midpoint of our guide is roughly a flat end market, you know, based on the end market dynamics and what we are seeing out there, basically flat on the volume side of the house. Price cost, we have talked about kind of having the pricing in the market. To offset the cost inflationary cost pressures we are seeing. You got the 300 million of for the full year for NDS. So that is the way to kind of get to that $3.45 billion at the midpoint of our revenue guide.

Analyst (Bryan Blair): Okay. Understood. It sounds like NDS integration is tracking well. You reiterated confidence in $25 million in cost synergies by year 3. What should we assume for fiscal 2027 synergies? And then perhaps more importantly, maybe you can speak to some of the cross selling opportunities that are starting to be realized Well, I am gonna let Cottrill answer the, what is in the plan.

Donald Scott Barbour: I am not allowed to answer those, Brian. But and the cross selling we are going to talk a lot about that at the Investor Day. We think that is a great topic. To talk about in the investor day for the for the for the longer term plan. What I would just kind of parenthetically add to that is we get more excited about the cross selling as we go forward in time. Over these last couple of months. They are not all easy to get to quickly, but they are there. And it is channel, it is product line, it is Salesforce. it is a lot of good things. it is just not 1 dimensional.

But then I will hand over the other 1 to Scott.

Scott A. Cottrill: Yeah. I will say right now, we are, a, really excited, like Scott said on the call, about the opportunities in front of us. B, we are ahead of the acquisition model. Where we saw the phasing over those 3 years. Again, cross selling is becoming 1 of those things that is really, as Scott just mentioned, coming out as a even bigger opportunity than what we had thought going into it. So I am not gonna give you a dollar amount.

All I will tell you is that in the first year of that 3-year plan, it was basically a back end year 2, year 3 kind of ramp, if you will, to get to that run rate synergy by year 3. So we did not assume a lot here in the first full year. But I will tell you that we are well ahead of that. So that is the way I would respond to that question.

Analyst (Bryan Blair): Yeah. Appreciate the color. Thanks again.

Operator: Your next question comes from the line of Jeffrey Hammond with KeyBanc Capital Markets. Your line is open. Please go ahead.

Analyst (Jeffrey Hammond): Yeah. Hi. Good morning, everyone. Good morning. Just on I think you said wastewater and storm water. You think flat volumes and I guess wastewater being heavily resi, and with it down to mid to high single market pretty impressive. Can you just talk about again, what is driving the outgrowth there? And then I think you mentioned in the prepared remarks, about an air pocket potentially in that resi end market, maybe just expand on that.

Donald Scott Barbour: So let me take the air pocket. And I am gonna hand it over to Craig J. Taylor who runs the infiltrator business in that storm in that wastewater segment. For us to answer kind of what that outgrowth is. But the air pocket is, Jeffrey, just simply people buying ahead of these pricing announced price increases. You know, we are limiting that. We are managing that. We are that is not a open ended thing. But it is not unfamiliar behavior of our customers in inflationary times or ahead of price increases. We really what we expect is Q1 to be a little heavy. And bountiful from a volume standpoint.

But we expect that to correct itself in the second quarter. And this guidance, this plan, our discussion really says that it is all normalized within the first half of the year versus the second half of the year which is usually how we guide. Is first half, second half revenue. But I am just trying to get the marker out there with you guys that if we if the volume and the sales are you know, big and or above expectations in Q1, there is an air pocket out there for sure. And I just do not want to get I have been telling the board and then preparing for today. I made it pretty clear.

I wanted to get this out there with you all so you are not surprised. So that is really the wrap on that part of the remarks, Jeffrey. Now Craig can tell you how we are outperforming the market the residential really driven by his business. Morning, Jeffrey.

Craig J. Taylor: Yeah. The wastewater business is gonna be challenged on the residential side, but we have had a really good run here with our new products. That we have introduced into the market, specifically around our tanks business. And then also around our advanced treatment systems too. The tanks, we have expanded the product category. We have been able to take market share there. And then on the advanced treatment systems, again, with the Orenco acquisition, and the infiltrator, we have put that together. We are attacking the advanced treatment markets. Picking up some pretty good share there. Also, we have been able to get more distribution points. For our tanks out in the market.

And this has really helped offset that slowdown in the residential market for our business right now. But see that the new products continue to provide some growth moving forward.

Donald Scott Barbour: If I would just add a couple of things to that. That, you know, the very good they had infiltrator had very great spread or distribution points in leachfield products. The traditional. And as they have introduced the tanks and expanded the number of displacements or SKUs in that offering, it is really been able to get into the additional distribution points. So think about wherever we sell a leach field, we wanna be selling the tank. And we are still relatively underpenetrated on that. So that along with these advanced treatment products and an intense focus on getting the regulatory side of that lined up. Which they do very, very well.

I think that is why you are seeing the beat versus the market there. I mean, it is the scale. it is their obvious, you know, technology prowess. And those new products kind of just driving through that market left and right.

Analyst (Jeffrey Hammond): Okay. Great. And then on the balance sheet's in pretty good shape despite the acquisition. I know you were kind of protecting the balance sheet ahead of that NDS deal. But stocks really taken a hit around this inflation concern. Just how are you thinking about you know, kind of the lean on buybacks versus you know, maybe what the pipeline looks like, here in the near term?

Donald Scott Barbour: So I will say a few words. I think Cottrill will wanna chime in on this as well, Jeffrey. But so you were right. We conserve cash ahead of that deal, practically paid all cash for it. I knew that would give high level of certainty to get the deal done. We got a buyback authorized with the board shortly after that. We were not immediately exercising on that, but in February, when this conflict began and our stock went down, with the board. We went and authorized that. And we exhausted that $200 million, you know, here recently. We all go back in. And try to use our balance sheet to do that. Prudently.

While maintaining you know, the right level of liquidity to run our business We are going to consume some working capital this year. As our receivables go up, as our inventory costs go up. We know that. Do not let that alarm anyone. We are we are kind of planning and budgeting for that. And even with that, you know, some repurchase and doing that, We really got room to go do something if we really want it. If the right 1 came up, you add that, Scott.

Scott A. Cottrill: I think you did a great job summarizing. I mean, the only thing I would say is right now, we gotta digest NDS, which we are focused on. But to Scott's point, if 1 of those strategic assets becomes available, we have got the flexibility to do more than consider that. So It would it be more management to Yeah. That would be what we would have to work on. But we have got the balance sheet to your point where it needs to be. Working cap as a percent of sales came in slightly below the 20% target that we have. At the end of 26, we got that going up to about 21%.

At the end of fiscal 27. Just based on the inflationary cost pressures. Again, we saw the same activity in 2021-2022, so we kinda know what happens to the balance sheet. We know how to manage the balance sheet. We have great S&OP process. NDS has a very active working capital management program underway right now, significant opportunity to bring that down. Part of our synergy program. Our synergy programs for NDS are all on the revenue and EBITDA side. Mostly, are, for sure. We have got a bunch going on the working capital side as well on the cash flow generation. So you will see us bring that down as well and manage it.

So to Scott's point, we target 2x levered in time uncertain times. And with the macroeconomic uncertainty, the end markets where they are, we will be prudent. So we will we will target staying below 2.0x right now. We are at 1.6x as we mentioned. But we will manage that actively. And we see it as a really advantage of the company and where we could deploy that capital. So we will we will keep managing that as we go forward. Okay. Perfect. Thanks.

Operator: Your next question comes from the line of John Lovallo with UBS. Your line is open. Please go ahead.

Analyst (John Lovallo): Hey. Good morning, guys. it is Matthew Johnson here on for John. Appreciate the time. I guess, could you guys just talk a little bit about your ability to flex up recycled resin right now? I guess, kinda where does your recycled usage sit today? How quickly can you ramp that up? And then also, just any color you guys could give on what the cost spread between virgin and recycled looks like today?

Scott A. Cottrill: So I am going to let Scott A. Cottrill answer the version versus what he is got in there. Like I said, I am not allowed to answer those questions anymore. So what you saw in 2026 is, you know, we love our recycling program. We have a lot of advantages. it is usually that 15 to 20% benefit. But that can invert at times. And what we saw in 2026 is it was a much more friendly virgin resin market for us. So you saw us toggle a little bit more toward the virgin than the recycled side of the house. What you see us now doing is toggling back to the recycled resin.

The other thing I will say is we are also putting the cash flow and the balance sheet to work. We have a significant expansion in our recycling capacity and capability. Going on in the Southeast US right now. Putting that closer to our facilities in that region. Which makes a lot of sense on the transportation side and conversion side of the house. Again, we have a lot of capability, capacity, and ability and agility to toggle back to recycling pretty quick. And we are already in the middle of doing that right now.

Donald Scott Barbour: So we will not we will not disclose, you know, kind of the you know, the percentage recycled that we are going to. We will acknowledge that the prior year that we just closed was much lower than normal. Because of the pricing dynamics in the market at the time. That said, you know, this recycling activity for us is a long-term operational component of the company. It really bears a lot of fruit in these inflationary times like this. And, and mitigates a lot of cost. And so we are flexing that pretty hard. And in fact, as I have said earlier, we are flexing it hard.

The team's going faster than I thought we would be able to do. Also able to get the material into our recycling facilities. In other words, there is there is enough material out there to get that is always a you know, you gotta work that in. End very, very hard. So I think it is a unique competitive advantage of the company that we are we are going to press the floor on right now.

Analyst (John Lovallo): Appreciate that, guys. I guess just kind of bigger picture here. I know you guys have I would say, a pretty long history of navigating through different inflationary environments. I think the way you guys typically talk about it is you put through price, then you hold on to the majority of that. Even as costs kind of normalize. But I guess, you guys see that playing out any differently this time around? Or, I guess, asked differently, does the softer demand environment right now make that more challenging to do?

Donald Scott Barbour: that is a good question. And, certainly, that is a factor. I think the way you overcome some of that softer demand is selling the package of products that we have, making sure we are using the scale of the distribution that we have across both the wastewater and the stormwater businesses. Will the dynamics on the other end, as you suggest, play out perhaps a little differently than the past? Because of competitive intensity? Maybe. Maybe not. It will be really regional and local if it does. It will not it will not be a nationwide outbreak type thing. But I feel pretty good about our tools to go and work that on the other side.

Feel pretty confident about the value proposition we have versus our competitors. On the other side of this. So we will we will see how it plays out. I appreciate the question. I understand where you are going. But you know, it is not just enough to say we have done this before. We know how to do it. I think it is more we have done it before. We have a playbook. We have tools. We have experience. We acknowledge that it could be a little different on the other side. But I would never bet against us to be able to understand and adjust to that accordingly. In a very profitable manner.

Analyst (John Lovallo): Thanks, guys. Appreciate it.

Operator: Your next question comes from the line of Collin Verron with Deutsche Bank.

Analyst (Collin Verron): Your line is open. Please go ahead. Good morning. Thanks for, taking my I guess I just wanted to start on 1 of the other levers that you talked about other than recycling was on the transportation side. You made a comment about internal fleet versus common carrier exposure. Can you just sort of help us understand sort of your ability to flex that and kind of what the benefit of that could be from a dollar standpoint?

Donald Scott Barbour: So good Again, Scott Barbour. Good question on our on our logistics-- you know, we are an ultimate last mile carrier. You know, with our fleet to our trade deliveries. And anything within, you know, a certain mileage of our factories and distribution centers know, we deliver on that fleet. it is roughly 70% of our revenue for the for the legacy business. The ADS business. And what here's what I think is, you know, why this is the right long term investment.

In inflationary high inflationary transportation times, where both diesel and the rate in other words, there is 2 components on common carriers. it is the rate they charge you to carry, and that is a supply and demand and then it is the cost of diesel to operate that. It also could be their wages of drivers, but it is mainly the diesel. Right now, both rate and diesel are accelerating quickly. On my private fleet, I really only have diesel accelerating. So I have become much more competitive versus common carriers in my fleet. Now what does that mean?

That means I could probably expand my radius of delivery from my points to make myself more competitive against competitors that are largely on common carrier not last mile delivery like we have. So, again, part of our scale, our balance sheet, all those things we have done over a long period of time. To create that kind of thing. So this is the time when these kinds of in these inflationary times, on the logistics, it is our fleet inflates at a lower rate. Basically, just on the diesel. And on the recycling, where we have an additional tool versus the virgin material by to mitigate cost.

These kinds of times really show that long term the benefit of the long term investments the company has made and how it positions us in these more difficult periods. that is why I am so confident we went on the other side. Based on that other question. I mean, because we have these tools and insights that I think are really unique in this industry.

Analyst (Collin Verron): Great. that is really helpful color. And I guess, after the NDS acquisition, and sort of your portfolio with Infiltrator, I guess, is there any way to think about sort of how you guys look at the end markets and your ability to outperform? Is there a category or an end market that you guys expect to see the biggest share gains? I am looking at that residential assumption being down the most here, but, like, given your new portfolio or your expanded portfolio, is the opportunity share gains really in that resi market? Is it really across the board?

I just curious as to how you guys think about the puts and takes on outperformance within the different end markets.

Donald Scott Barbour: I think we probably have more opportunity in residential. Because that is really where NDS is stronger. You know, we have our strength in infiltrator in residential kind of participation, and their growth You can see where they are growing in residential. The natures of the 2 are a little different. Infiltrator is more new construction, the third R and R. NDS kind of flips that. But no doubt we have gotten bigger in residential. Our legacy business relatively underpenetrated in residential, We think this might give us a few more insights there. That cross selling comes into play more on the residential.

However, on the nonresidential side, there are some great products NDS has that we do not have for our package solutions package that we sell basically into these projects. Thinking of these channel drains in particular, those will be a very nice addition to our product lines. I think to answer your question, maybe more on the residential than the nonresidential, but both have runway.

Analyst (Collin Verron): Great. I appreciate all the commentary, and good luck.

Operator: Your next question comes from the line of Trey Grooms with Stephens. Your line is open. Please go ahead.

Analyst (Trey Grooms): Yeah. Hi. Good morning, guys. This is Ethan on for Trey. Thanks for taking the question. You briefly touched in the prepared remarks on maybe leveraging SG&A little bit to mitigate some of that COGS inflation. Any more color on the initiatives here? I know you have guided to SG&A as a percent of sales in the past. So if you can provide any color on what guide assumes from an SG&A standpoint would be great. Thanks.

Scott A. Cottrill: Yeah. I mean, again, the SG&A for this past year has a lot of moving pieces to it. But as you think through next year, I would guide you to use kind of a 14% SG&A as a percent of revenue, kind of a number. We are getting back to kind of a normalized number for us as to, where we go. So, again, you have got NDS coming in on a full year. So, obviously, that is incremental increase that you have got going on there. But then you have got the initiatives that we all have here, that we have every year.

On managing our costs all the way from T and E and everything else that we put into place. We do a really good job, I think, of putting shining a light on it in the different cost centers. In managing that cost bucket really well. But we also know that we have to invest for the future. So we do that to make sure that we are supporting the long term growth and strategic initiatives of the company. So there is always gonna be some dollar increase there.

But in a year like this year coming up and we look at that revenue growth, due to this price cost dynamic that is happening, we should expect to get some real nice leverage on that SG&A fixed cost line. So going down to about 14% from the 15%+ we were this past year is the way I think about it.

Analyst (Trey Grooms): Right. Right. Got it. that is that is all very clear. And maybe switching gears to just making sure we understand the assumptions around the volume guide. The guide assumes volume flat. Obviously, your performance has been trending above this rate. And you still expect to outperform the market, but there is a lot of moving pieces, right, because of the customer buying ahead of the price increases. And you also made comments around some per potential regional compression of your value prop relative to concrete pipes. So I guess my question is, is this implied deceleration in volume more a reflection of what you are seeing on the ground in terms of underlying demand?

Perhaps in response to these price increases or just some understandable conservatism on the volume outlook?

Donald Scott Barbour: I think this is Scott Barber. I think our conservatism on the volume is really related to the market. And the end market and demand. And if you re if you recall, I said, nonres, that we think it will be more of the same. Agriculture will be a little compressed. Year over year and the residential particularly on the pipe side, will be compressed year over year. Because land development projects are slowing down. there is no volume compression due to competitive activity. Even you are correct. We are we do think these dynamics will happen in the market, and we will meet we will meet what we gotta go do. To get the business that we want.

On a local basis. So it is more the end market behavior.

Analyst (Trey Grooms): Got it. that is all very clear. And, yeah, your ability to outperform the market in this environment is definitely encouraging. So, yes, thanks for taking the questions.

Operator: There are no further questions at this time.

Donald Scott Barbour: I will turn the call back to Scott Barbour for closing remarks. I appreciate it, and I appreciate the questions, the quality of the questions. But we probably went a little deeper than we normally do on some of those you know, as many of you said, there are a lot of moving pieces right now. And I just do not want to have any surprises as we go through the year. As different things are kind of emerging. And so that is kind of why we went a little deeper than we normally would. Allison prepared us with, like, 3 pages of Q&A for this.

But, you know, we are just trying to let you know what is going on. We feel good about this plan. We feel good about the year we closed. We feel good about this plan. Know it is not gonna be easy. But like I said earlier, the tools the that we have the experience, the footing of the company, in the broadest possible way. are, I think, a lot better today than they were when we encountered other environments like this. And we are very confident of that. So we appreciate you all coming in today into the call. Look forward to some discussions later on. And, let's have a nice Memorial Day.

We wish you a safe and enjoyable Memorial Day weekend. Thanks.

Operator: This concludes today's call. Thank you for attending. You may now disconnect.