Advanced Drainage Systems Stock Falls After Mixed Q1 Results, Raises FY22 Revenue Outlook

Advanced Drainage Systems Inc WMS reported first-quarter sales growth of 31.6% year-over-year to $669.3 million, beating the consensus estimate of $624.84 million.

• Sales by segments: Pipe $374.01 million (+36.7% Y/Y), Infiltrator Water Technologies $126.74 million (+24.1% Y/Y), International $65.67 million (+82.4% Y/Y) and Allied Products & Other $127.04 million (+8.6% Y/Y).
• Gross profit increased by 6.7% Y/Y to $201.1 million, reflecting an increase in sales volume and pricing on pipe, on-site septic, and allied product. Margin contracted by 700 bps to 30.1%.
• Adjusted EPS improved to $0.87 from $0.83 million in 1Q21, missing estimates of $1.26.
• The operating income increased by 2% Y/Y to $109.27 million, and the margin contracted by 473 bps to 16.3%.
• Advanced Drainage generated a YTD operating cash flow of $ 104.35 million. Free cash flow of $78.8 million.
• Adjusted EBITDA was $166.58 million, and margin contracted by 646 bps to 24.9%.
• WMS had total liquidity of $480 million, comprised of cash of $143 million and availability under committed credit facilities $337 million, in Q2. The leverage ratio was 1.2 times.
• It repurchased 1.1 million shares for $115.4 million in Q2 and had ~$176.7 million available under its existing share repurchase authorization.
• The company also declared a quarterly cash dividend of $0.11 per share, payable September 15, 2021, to shareholders of record at the close of business on September 1, 2021.
• FY22 Outlook: Advanced Drainage expects Net sales of $2.5 billion to $2.6 billion vs. a consensus of $2.27 billion (prior guidance $2.22 billion to $2.30 billion) and Adjusted EBITDA of $635 to $665 million. Capital expenditures of $130 million to $150 million.
• Price Action: WMS shares tumble by 4.21% at $116.92 on the last check Thursday.