Advanced Drainage Systems Lowers Sales Outlook To $3.300–$3.400 Billion As Demand Weakens
Acquired sales lifted quarterly revenue, but continuing-operations profit fell and management trimmed its adjusted earnings outlook.
Advanced Drainage Systems, which makes pipe and other products for stormwater and onsite wastewater management, cut its fiscal 2027 sales forecast Thursday to $3.300–$3.400 billion from $3.350–$3.550 billion. The earnings presentation accompanying its SEC filing tied the reduction to weaker demand since May and less need to raise prices as materials inflation eased.
Less Pricing, Softer Construction Demand
Management also reduced the upper end of its adjusted earnings outlook: adjusted EBITDA now ranges from $1.000–$1.030 billion, versus $1.000–$1.050 billion previously. That measure excludes interest, taxes, depreciation, amortization, stock-based pay and certain other items; planned capital spending remains approximately $200 million.
“We are experiencing lower inflationary pressure than initially expected on materials,” Scott Barbour, president and CEO of Advanced Drainage Systems, said in the company's earnings statement. Barbour said that reduced the price increases built into the original sales forecast, while higher interest rates and geopolitical uncertainty had weakened demand.
The company's updated market assumptions call for residential demand to decline by under 10% and agriculture demand to fall by double digits. Management expects flat non-residential, infrastructure and international markets, while saying large non-residential projects continue to perform well.
NDS Lifted Sales, Not Quarterly Profit
Unaudited second-quarter results showed sales of $889.4 million, up 4.6% from $850.4 million a year earlier. Profit from continuing operations moved the other way, falling 14.6% to $133.6 million from $156.5 million; diluted earnings per share from those operations fell to $1.77 from $1.99.
National Diversified Sales, the acquired business known as NDS, supplied $77.3 million of quarterly revenue. Stormwater sales reached $712.1 million versus $670.7 million, but fell 5.3% excluding acquisitions. Wastewater revenue slipped to $177.3 million from $179.7 million.
Timing also hurt the quarter. Management now estimates that $40–$50 million of revenue moved into the first quarter from the second, compared with its earlier estimate of approximately $30 million.
Quarterly adjusted EBITDA edged down to $286.8 million from $287.5 million, with its margin falling to 32.2% from 33.8%. Pricing relative to costs helped offset weaker volumes and higher transportation costs, but selling and administrative expenses rose to $129.6 million from $119.2 million, chiefly because of NDS and associated transaction costs.
The first half remained stronger: revenue totaled $1,890.5 million versus $1,680.3 million, with growth excluding acquisitions of 2.3%. Continuing-operations profit reached $310.2 million from $300.6 million, while adjusted EBITDA rose 14.0% to $645.1 million. Its 34.1% margin was the highest first-half adjusted EBITDA margin in company history, Barbour said.
Buybacks And A $530 Million Deal
Advanced Drainage Systems sells drainage and treatment products for residential, commercial, infrastructure and agricultural projects, mostly through distributors. Its stormwater business accounted for 78.6% of fiscal 2026 sales, with wastewater supplying 21.4%.
The company spent $375.1 million repurchasing 2.7 million shares during the first six months of fiscal 2027. Operating cash flow for that period fell to $458.2 million from $509.8 million, and free cash flow—operating cash flow after capital spending—declined to $359.5 million from $398.8 million.
At September 30, 2026, net debt, including finance leases and subtracting cash, stood at $1,619.9 million, up $71.0 million from March 31, 2026. Cash and available committed credit together totaled $891.8 million, and approximately $677.3 million remained authorized for share repurchases.
The board also approved a $0.20 quarterly dividend, 11% above the prior-year payout, payable December 15, 2026.
Management's proposed $530 million StormTrap acquisition would expand its stormwater storage offering for large-volume projects with limited space. Barbour said the business would add opportunities to sell more products together in non-residential and infrastructure markets.
Advanced Drainage Systems expects the StormTrap purchase to close in the fourth calendar quarter of 2026.
Sources
- 8-K Filing — ADVANCED DRAINAGE SYSTEMS, INC. (WMS) — SEC EDGAR
- Exhibit wms-11052026x8kex991.htm — ADVANCED DRAINAGE SYSTEMS, INC. 8-K exhibit — SEC EDGAR
- Exhibit ex992-q2fy27_vfinal.htm — ADVANCED DRAINAGE SYSTEMS, INC. 8-K exhibit — SEC EDGAR
- Exhibit wms-11052026x8kex993.htm — ADVANCED DRAINAGE SYSTEMS, INC. 8-K exhibit — SEC EDGAR
- Advanced Drainage Systems Announces Second Quarter Fiscal 2027 Results — businesswire.com
