ADVANCED DRAINAGE SYSTEMS, INC.
For the period ended Sep 30, 2026. Filed Nov 5, 2026.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2026 · Filed Nov 5, 2026
WMS$124.31+1.4%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2026-06-30; filed 2026-08-06.
0001604028-26-000037
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2026-09-30; filed 2026-11-05.
0001604028-26-000046
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 58 previous paragraphs and 84 current paragraphs.
30 unchanged; 24 reworded; 17 added; 4 removed; 0 previous and 13 current paragraphs rearranged.
Tables are not compared: 10 previous and 15 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (17)
Current report
Second Quarter Fiscal 2027 Results
Current report
•Net sales increased 4.6% to $889.4 million
Current report
•Net income from continuing operations decreased 14.6% to $133.6 million
Current report
•Adjusted EBITDA, a non-GAAP measure, decreased 0.2% to $286.8 million
Current report
Net sales increased $39.0 million, or 4.6%, to $889.4 million, as compared to $850.4 million in the prior year quarter. Stormwater sales increased $41.4 million, or 6.2%, to $712.1 million. Stormwater sales include $77.3 million of revenue from the acquisition of NDS. Wastewater sales decreased $2.4 million, or 1.3%, to $177.3 million.
Current report
Selling, general and administrative expenses increased $10.4 million, or 8.7%, to $129.6 million, as compared to $119.2 million. As a percentage of Net sales, Selling, general and administrative expenses increased to 14.6% as compared to 14.0% in the prior year. The increase was primarily driven by operating and integration expenses related to NDS.
Current report
Adjusted EBITDA, a non-GAAP measure, decreased $0.7 million, or 0.2%, to $286.8 million, as compared to $287.5 million in the prior year. As a percentage of Net sales, Adjusted EBITDA was 32.2% as compared to 33.8% in the prior year.
Current report
Year-to-date Fiscal 2027 Results
Current report
•Net sales increased 12.5% to $1,890.5 million
Current report
•Net income from continuing operations increased 3.2% to $310.2 million
Current report
•Net income from continuing operations per diluted share increased 5.0% to $4.02
Current report
•Adjusted EBITDA, a non-GAAP measure, increased 14.0% to $645.1 million
Current report
Gross profit increased $83.3 million, or 12.4%, to $753.9 million as compared to $670.6 million in the prior year. The increase in gross profit is primarily driven by the acquisition of NDS.
Current report
Selling, general and administrative expenses increased $37.3 million, or 16.7%, to $260.4 million, as compared to $223.2 million. As a percentage of Net sales, Selling, general and administrative expenses increased to 13.8% as compared to 13.3% in the prior year. The increase was primarily driven by operating and integration expenses related to NDS.
Current report
Interest income and other, net - Interest income and other, net increased by $1.1 million for the three months ended September 30, 2026 compared to the same period in fiscal 2026. The increase was due to an increase in derivative fair value adjustments partially offset by a decrease in interest income due to decreased cash balances.
Current report
Comparison of the Six Months Ended September 30, 2026 to the Six Months Ended September 30, 2025
Current report
Selling, general and administrative expenses
Removed paragraphs (4)
Previous report
First Quarter Fiscal 2027 Results
Previous report
•Net sales increased 20.6% to $1,001.1 million
Previous report
•Net income from continuing operations increased 22.5% to $176.6 million
Previous report
•Adjusted EBITDA, a non-GAAP measure, increased 28.8% to $358.3 million
Reworded paragraphs (24)
Previous wording
The following discussion and analysis of the financial condition and results of our operations should be read in conjunction with our Condensed Consolidated Financial Statements and related footnotes included elsewhere in this Form 10-Q and with the audited Consolidated Financial Statements included in our Fiscal 2026 Form 10-K, as filed with the Securities and Exchange Commission (the “SEC”) on May 21, 2026. In addition to historical condensed consolidated financial information, the following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. This discussion contains forward-looking statements that are based on the beliefs of our management, as well as assumptions made by, and information currently available to, our management. Our actual results could differ materially from those discussed in the forward-looking statements. For more information, see the section entitled “Forward-Looking Statements.”
Current wording
The following discussion and analysis of the financial condition and results of our operations should be read in conjunction with our Condensed Consolidated Financial Statements and related footnotes included elsewhere in this Form 10-Q and with the audited Consolidated Financial Statements included in our Fiscal 2026 Form 10-K, as filed with the Securities and Exchange Commission (the “SEC”) on May 21, 2026. In addition to historical condensed consolidated financial information, the following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. This discussion contains forward-looking statements that are based on the beliefs of our management, as well as assumptions made by, and information currently available to, our management. For more information, see the section entitled “Forward-Looking Statements.”
Previous wording
Gross profit increased $77.6 million, or 23.5%, to $408.0 million as compared to $330.4 million in the prior year. The increase in gross profit is primarily driven by the acquisition of NDS, volume growth, and favorable price/cost and manufacturing costs, partially offset by higher transportation costs.
Current wording
Gross profit increased $5.7 million, or 1.7%, to $345.9 million as compared to $340.1 million in the prior year. The increase in gross profit is primarily driven by the acquisition of NDS.
Previous wording
Net sales increased $171.2 million, or 20.6%, to $1,001.1 million, as compared to $829.9 million in the prior year quarter. Stormwater sales increased $157.8 million, or 24.2%, to $809.4 million. Stormwater sales include $94.7 million of revenue from the acquisition of NDS. Wastewater sales increased $13.4 million, or 7.5%, to $191.7 million.
Current wording
Net sales increased $210.3 million, or 12.5%, to $1,890.5 million, as compared to $1,680.3 million in the prior year. Stormwater sales increased $199.2 million, or 15.1%, to $1,521.4 million. Stormwater sales include $172.0 million of revenue from the acquisition of NDS. Wastewater sales increased $11.0 million, or 3.1%, to $369.1 million.
Previous wording
Adjusted EBITDA, a non-GAAP measure, increased $80.1 million, or 28.8%, to $358.3 million, as compared to $278.2 million in the prior year. As a percentage of Net sales, Adjusted EBITDA was 35.8% as compared to 33.5% in the prior year.
Current wording
Adjusted EBITDA, a non-GAAP measure, increased $79.4 million, or 14.0%, to $645.1 million, as compared to $565.7 million in the prior year. As a percentage of Net sales, Adjusted EBITDA was 34.1% as compared to 33.7% in the prior year.
Previous wording
Selling, general and administrative expenses for the three months ended June 30, 2026 increased $26.9 million from the same period in fiscal 2026 and as a percentage of Net sales, increased by 0.6%. The increase in Selling, general and administrative expenses was primarily due to the operating expenses of NDS, integration costs of $3.2 million and increased stock-based compensation due to performance.
Current wording
Selling, general and administrative expenses for the three months ended September 30, 2026 increased $10.4 million from the same period in fiscal 2026 and as a percentage of Net sales, increased by 0.6%. The increase in Selling, general and administrative expenses was primarily due to the operating expenses and integration costs of NDS.
Previous wording
Intangible amortization -Intangible amortization increased by $6.4 million primarily due to the increase in intangible assets due to the NDS acquisition.
Current wording
Intangible amortization -Intangible amortization increased by $6.5 million primarily due to the increase in intangible assets due to the NDS acquisition.
Previous wording
Interest expense -Interest expense for the three months ended June 30, 2026 increased by $4.0 million from the same period in fiscal 2026. The increase was primarily due to increased debt levels.
Current wording
Interest expense -Interest expense for the three months ended September 30, 2026 increased by $4.4 million from the same period in fiscal 2026. The increase was primarily due to increased debt levels.
Previous wording
Net loss from discontinued operations - The loss from discontinued operations was attributable to the NDS International entities classified as held for sale as of June 30, 2026.
Current wording
Net loss from discontinued operations - The loss from discontinued operations was attributable to recording the NDS International entities classified as held for sale at fair value less cost to sell as of September 30, 2026.
Previous wording
Our consolidated Net sales for the three months ended June 30, 2026 increased by $171.2 million, or 20.6%, compared to the same period in fiscal 2026. The increase in Stormwater sales was primarily driven by NDS net sales of $94.7 million and an increase in volume in both Pipe and Allied Products. The increase in Wastewater sales was primarily driven by volume.
Current wording
Our consolidated Net sales for the six months ended September 30, 2026 increased by $210.3 million, or 12.5%, compared to the same period in fiscal 2026. The increase in Stormwater sales was primarily driven by NDS net sales of $172.0 million and an improvement in price/mix in both Pipe and Allied Products, partially offset by a decrease in volume. The increase in Wastewater sales was primarily driven by price/mix.
Previous wording
Our consolidated Cost of goods sold for the three months ended June 30, 2026 increased by $93.6 million, or 18.7%, and our consolidated Gross profit increased by $77.6 million, or 23.5%, compared to the same period in fiscal 2026. The increase in gross profit for Stormwater is primarily due to the acquisition of NDS, volume growth, and favorable price/cost and manufacturing costs, partially offset by higher transportation costs. The increase in gross profit for Wastewater was driven by volume.
Current wording
Our consolidated Cost of goods sold for the six months ended September 30, 2026 increased by $126.9 million, or 12.6%, and our consolidated Gross profit increased by $83.3 million, or 12.4%, compared to the same period in fiscal 2026. The increase in gross profit for Stormwater is primarily due to the acquisition of NDS, favorable price/cost and manufacturing costs, partially offset by higher material and higher transportation costs. The increase in gross profit for Wastewater was driven by improved price/cost.
Previous wording
Loss on disposal of assets and costs from exit and disposal activities - The loss on disposal in fiscal 2026 was due to exit and disposal activities. See “Note 3. Restructuring and Loss (Gain) on Disposal of Assets and Costs from Exit and Disposal Activities” for additional information.
Current wording
Loss (gain) on disposal of assets and costs from exit and disposal activities - The loss on disposal in fiscal 2027 was due to exit and disposal activities. The gain on disposal in fiscal 2026 was due to the sale of properties held-for-sale partially offset by exit and disposal activities. See “Note 3. Restructuring and Loss (Gain) on Disposal of Assets and Costs from Exit and Disposal Activities” for additional information.
Previous wording
Interest income and other, net - Interest income and other, net decreased by $5.3 million for the three months ended June 30, 2026 compared to the same period in fiscal 2026. The decrease was primarily due to decreased cash balances.
Current wording
Interest income and other, net - Interest income and other, net decreased by $4.1 million for the six months ended September 30, 2026 compared to the same period in fiscal 2026. The decrease was primarily due to decreased cash balances.
Previous wording
The change in the effective tax rate for the three months ended June 30, 2026 was primarily related to a discrete income tax benefit for the change in valuation allowance on deferred tax assets for net losses on outside basis differences. See “Note 11. Income Taxes” for additional information.
Current wording
The change in the effective tax rate for the six months ended September 30, 2026 was primarily driven by a discrete income tax benefit for the change in valuation allowance on deferred tax assets for net losses on outside basis differences. See “Note 11. Income Taxes” for additional information.
Previous wording
Adjusted EBITDA and Adjusted EBITDA Margin contain certain other limitations, including the failure to reflect our cash expenditures, cash requirements for working capital needs, cash expenditures to replace assets being depreciated and amortized and interest expense, or the cash requirements necessary to service interest on principal payments on our indebtedness. In evaluating Adjusted EBITDA and Adjusted EBITDA Margin, you should be aware that in the future we will incur expenses that are the same as or similar to some of the adjustments in this presentation, such as stock-based compensation expense, derivative fair value adjustments, and foreign currency transaction losses. Management compensates for these limitations by relying on our GAAP results and using non-GAAP measures on a supplemental basis.
Current wording
Adjusted EBITDA and Adjusted EBITDA Margin contain certain other limitations, including the failure to reflect our cash expenditures, cash requirements for working capital needs, cash expenditures to replace assets being depreciated and amortized and interest expense, or the cash requirements necessary to service interest on principal payments on our indebtedness. In evaluating Adjusted EBITDA and Adjusted EBITDA Margin, you should be aware that in the future we will incur expenses that are the same as or similar to some of the adjustments in this presentation, such as stock-based
Previous wording
(a)Includes costs associated with closure of one distribution yard, as well as professional fees incurred in connection with supporting enterprise-wide restructuring and realignment initiatives. Excludes gain on sale of properties previously held-for-sale and equipment. See “Note 3. Restructuring and (Loss) Gain on Disposal of Assets and Costs from Exit and Disposal Activities” for additional information.
Current wording
(a)Includes costs associated with closure of facilities, as well as professional fees incurred in connection with supporting enterprise-wide restructuring and realignment initiatives. Excludes gain on sale of properties previously held-for-sale and equipment. See “Note 3. Restructuring and Loss (Gain) on Disposal of Assets and Costs from Exit and Disposal Activities” for additional information.
Previous wording
As of June 30, 2026, we had $24.8 million in cash that was held by our foreign subsidiaries, including $9.8 million held by our Canadian subsidiaries. We continue to evaluate our strategy regarding foreign cash, but our earnings in foreign subsidiaries still remain indefinitely reinvested, except for Canada. We plan to repatriate earnings from Canada and believe that there will be no additional tax costs associated with the repatriation of such earnings other than any potential non-U.S. withholding taxes.
Current wording
As of September 30, 2026, we had $22.2 million in cash that was held by our foreign subsidiaries, including $12.7 million held by our Canadian subsidiaries. We continue to evaluate our strategy regarding foreign cash, but our earnings in foreign subsidiaries still remain indefinitely reinvested, except for Canada. We plan to repatriate earnings from Canada and believe that there will be no additional tax costs associated with the repatriation of such earnings other than any potential non-U.S. withholding taxes.
Previous wording
As of June 30, 2026, we had $900.9 million in liquidity, including $162.3 million of cash and $738.6 million in borrowings available under our Revolving Credit Agreement, net of outstanding letters of credit. We believe that our cash on hand, together with the availability of borrowings under our Credit Agreement and other financing arrangements and cash generated from operations, will be sufficient to meet our working capital requirements, anticipated capital expenditures, and scheduled principal and interest payments on our indebtedness for at least the next twelve months.
Current wording
As of September 30, 2026, we had $891.8 million in liquidity, including $153.2 million of cash and $738.6 million in borrowings available under our Revolving Credit Agreement, net of outstanding letters of credit. We believe that our cash on hand, together with the availability of borrowings under our Credit Agreement and other financing arrangements and cash generated from operations, will be sufficient to meet our working capital requirements, anticipated capital expenditures, and scheduled principal and interest payments on our indebtedness for at least the next twelve months.
Previous wording
Working Capital - Working capital decreased to $655.3 million as of June 30, 2026, from $721.4 million as of March 31, 2026. The decrease in working capital is primarily due to decreased cash on hand and increased accounts payable offset by increased accounts receivable due to seasonality.
Current wording
Working Capital - Working capital decreased to $632.5 million as of September 30, 2026, from $721.4 million as of March 31, 2026. The decrease in working capital is primarily due to decreased cash on hand and increased accounts payable offset by increased accounts receivable and inventory due to seasonality.
Previous wording
Operating Cash Flows -Cash flows from operating activities decreased $14.6 million during the three months ended June 30, 2026 primarily driven by changes in working capital.
Current wording
Operating Cash Flows -Cash flows from operating activities decreased $51.6 million during the six months ended September 30, 2026 primarily driven by changes in working capital.
Previous wording
Investing Cash Flows- Cash flows used in investing activities during the three months ended June 30, 2026 decreased by $14.9 million compared to the same period in fiscal 2026. The decrease in cash used in investing activities was due to the prior period acquisition of River Valley Pipe.
Current wording
Investing Cash Flows- Cash flows used in investing activities during the six months ended September 30, 2026 decreased by $8.1 million compared to the same period in fiscal 2026. The decrease in cash used in investing activities was due to the prior period acquisition of River Valley Pipe and decreased capital expenditures offset by the prior period proceeds from the sale of properties held-for-sale.
Previous wording
Capital expenditures totaled $57.2 million and $52.6 million for the three months ended June 30, 2026 and 2025, respectively. Our capital expenditures for the three months ended June 30, 2026 were used primarily to support facility expansions, equipment replacements and technology improvement initiatives. We also acquired $2.8 million of property, plant and equipment under finance leases, which includes material handling transportation equipment to update our fleet of forklifts, trucks and trailers.
Current wording
Capital expenditures totaled $98.8 million and $111.0 million for the six months ended September 30, 2026 and 2025, respectively. Our capital expenditures for the six months ended September 30, 2026 were used primarily to support facility expansions, equipment replacements and technology improvement initiatives. We also acquired $21.4 million of property, plant and equipment under finance leases, which includes material handling transportation equipment to update our fleet of forklifts, trucks and trailers.
Previous wording
We currently anticipate that we will make capital expenditures of approximately $200 million in fiscal year 2027, including approximately $110 million of open orders as of June 30, 2026. Such capital expenditures are expected to be financed using funds generated by operations.
Current wording
We currently anticipate that we will make capital expenditures of approximately $200 million in fiscal year 2027, including approximately $80 million of open orders as of September 30, 2026. Such capital expenditures are expected to be financed using funds generated by operations.
Previous wording
Financing Cash Flows- During the three months ended June 30, 2026, cash used in financing activities included the repurchase of common stock of $233.2 million, $15.3 million of dividend payments, $10.7 million for shares withheld for tax purposes and $9.5 million of payments of finance lease obligations.
Current wording
Financing Cash Flows- During the six months ended September 30, 2026, cash used in financing activities included the repurchase of common stock of $372.9 million, $30.5 million of dividend payments, $19.1 million of payments of finance lease obligations and $10.7 million for shares withheld for tax purposes.
Previous wording
During the three months ended June 30, 2025, cash used in financing activities included $14.0 million of dividend payments, $8.3 million of payments of finance lease obligations and $6.7 million for shares withheld for tax purposes.
Current wording
During the six months ended September 30, 2025, cash used in financing activities included $28.1 million of dividend payments, $17.2 million of payments of finance lease obligations and $6.7 million for shares withheld for tax purposes.
Rearranged current paragraphs (13)
Current report — wording carried from elsewhere
Our consolidated Net sales for the three months ended September 30, 2026 increased by $39.0 million, or 4.6%, compared to the same period in fiscal 2026. The increase in Stormwater sales was primarily driven by NDS net sales of $77.3 million and an increase in price/mix in both Pipe and Allied Products, partially offset by a decrease in volume in both Pipe and Allied Products. The decrease in Wastewater sales was primarily driven by volume partially offset by an improvement in price/mix.
Current report — wording carried from elsewhere
Our consolidated Cost of goods sold for the three months ended September 30, 2026 increased by $33.3 million, or 6.5%, and our consolidated Gross profit increased by $5.7 million, or 1.7%, compared to the same period in fiscal 2026. The increase in gross profit for Stormwater is primarily due to the acquisition of NDS, partially offset by higher material costs and higher transportation costs.
Current report — wording carried from elsewhere
Loss (gain) on disposal of assets and costs from exit and disposal activities - The loss on disposal in fiscal 2027 was due to exit and disposal activities. The gain on disposal in fiscal 2026 was due to the sale of a property held-for-sale partially offset by exit and disposal activities. See “Note 3. Restructuring and Loss (Gain) on Disposal of Assets and Costs from Exit and Disposal Activities” for additional information.
Current report — wording carried from elsewhere
See “Note 11. Income Taxes” for additional information.
Current report — wording carried from elsewhere
The following table summarizes our operating results as a percentage of Net sales that have been derived from our Condensed Consolidated Financial Statements for the periods presented. We believe this presentation is useful to investors in comparing historical results.
Current report — wording carried from elsewhere
Net sales -The following table presents Net sales to external customers by reportable segment for the six months ended September 30, 2026 and 2025.
Current report — wording carried from elsewhere
Cost of goods sold and Gross profit -The following table presents gross profit by reportable segment for the six months ended September 30, 2026 and 2025.
Current report — wording carried from elsewhere
Selling, general and administrative expenses for the six months ended September 30, 2026 increased $37.3 million from the same period in fiscal 2026 and as a percentage of Net sales, increased by 0.5%. The increase in Selling, general and administrative expenses was due to operating expenses and integration expenses for NDS and increased stock-based compensation due to performance.
Current report — wording carried from elsewhere
Intangible amortization -Intangible amortization increased by $12.9 million primarily due to the increase in intangible assets due to the NDS acquisition.
Current report — wording carried from elsewhere
Interest expense -Interest expense for the six months ended September 30, 2026 increased by $8.4 million from the same period in fiscal 2026. The increase was primarily due to increased debt levels.
Current report — wording carried from elsewhere
Income tax expense - The following table presents the effective tax rates for the six months ended September 30, 2026 and 2025.
Current report — wording carried from elsewhere
Net loss from discontinued operations - The loss from discontinued operations was attributable to recording the NDS International entities classified as held for sale at fair value less cost to sell as of September 30, 2026.
Current report — wording carried from elsewhere
30 - compensation expense, derivative fair value adjustments, and foreign currency transaction losses. Management compensates for these limitations by relying on our GAAP results and using non-GAAP measures on a supplemental basis.