Advanced Drainage Systems (NYSE: WMS) reported Q2 EPS of $0.93, $0.12 worse than the analyst estimate of $1.05. Revenue for the quarter came in at $544.2 million versus the consensus estimate of $533.94 million.

Second Quarter Fiscal 2021 Results

• Net sales increased 9.7% to $544.2 million
• Net income increased to $80.6 million, compared to $8.5 million in the prior year
• Adjusted EBITDA (Non-GAAP) increased 47.3% to $174.1 million

Scott Barbour, President and Chief Executive Officer of ADS commented, “We had a strong second quarter of fiscal 2021, with 10% net sales growth as demand and business activity remained favorable. We generated strong performance in key growth states including the Carolinas and Florida, as well as more broadly across the South and Southeast regions of the United States. As a whole, ADS benefitted from our national presence as well as our geographic and end market exposure, including the increased exposure to the Residential end market that Infiltrator provides.”

Barbour continued, “We also achieved record second quarter profitability, with an increase of 820 basis points in our Adjusted EBITDA margin. The profitability improvement was driven by favorable material cost, leverage from sales growth, execution of our operational initiatives, contributions from the proactive cost mitigation steps and our synergy programs.”

Barbour concluded. “We are optimistic as we look to the second half of our fiscal year, with our order book, project tracking, book-to-bill ratio and backlog all remaining positive on a year-over-year basis. We expect the normal seasonal patterns to apply to the second half of our fiscal year as installation activity slows down in geographies with colder temperatures. Though uncertainties still exist regarding the broader market environment, we are well positioned to capitalize on residential development and horizontal construction, while continuing to generate above-market growth through the execution of our material conversion and water management solutions strategies. We remain focused on disciplined execution as we look to build off a very strong first half of fiscal 2021.”

GUIDANCE:

Advanced Drainage Systems sees FY2021 revenue of $1.79-1.84 billion, versus the consensus of $1.82 billion.

ADS continues to carefully monitor the pandemic and the impact on its business. Based on current visibility, backlog of existing orders and business trends, the Company issued net sales and Adjusted EBITDA targets for fiscal 2021. Net sales are expected to be in the range of $1.790 billion to $1.840 billion and Adjusted EBITDA is expected to be in the range of $495 to $515 million. Capital expenditures are expected to be in the range of $80 million to $90 million.

Scott Cottrill, Chief Financial Officer of ADS commented, “Today’s guidance is based on the current orderbook, market trends and visibility into the second half of fiscal 2021 as well as our strong financial performance in the first half of fiscal 2021. It does not contemplate any further change in economic conditions due to the COVID-19 pandemic. We expect volume in the second half of the year to be consistent with the prior year, driven by seasonality, with modest improvement in year-over-year profitability despite inflationary pressure as well as investments in both capital and our organization to drive future value.”

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