ADVANCED DRAINAGE SYSTEMS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

1. BACKGROUND AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of Business- Advanced Drainage Systems, Inc., incorporated in Delaware, and its subsidiaries (collectively referred to as “ADS” or the “Company”) designs, manufactures and markets innovative water management solutions in the stormwater and onsite septic wastewater industries, providing superior drainage solutions for use in the construction and agriculture marketplace. ADS’s products are used across a broad range of end markets and applications, including non-residential, residential, infrastructure and agriculture applications.

The Company is managed and reports results of operations intwo reportable segments: Stormwater and Wastewater.

Historically, sales of the Company’s products have been higher in the first and second quarters of each fiscal year due to favorable weather and longer daylight conditions accelerating construction activity during these periods. Seasonal variations in operating results may also be impacted by inclement weather conditions, such as cold or wet weather, which can delay projects.

Basis of Presentation- The Company prepares its Condensed Consolidated Financial Statements in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The Condensed Consolidated Balance Sheet as of March 31, 2026 was derived from audited financial statements included in the Annual Report on Form 10-K for the year ended March 31, 2026 (“Fiscal 2026 Form 10-K”). The accompanying unaudited Condensed Consolidated Financial Statements contain all adjustments, of a normal recurring nature, necessary to present fairly its financial position as of September 30, 2026, the results of operations for the three and six months ended September 30, 2026 and cash flows for the six months ended September 30, 2026. The interim Condensed Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements, including the notes thereto, filed in the Company’s Fiscal 2026 Form 10-K.

Presentation- Prior period segment results and related disclosures have been recast to conform to the current period segment presentation. See “Note 14. Business Segment Information” for additional information.

Principles of Consolidation- The Condensed Consolidated Financial Statements include the Company, its wholly-owned subsidiaries, its majority-owned subsidiaries and variable interest entities of which the Company is the primary beneficiary. The Company uses the equity method of accounting for equity investments where it exercises significant influence but does not hold a controlling financial interest. Such investments are recorded in Other assets in the Condensed Consolidated Balance Sheets and the related equity earnings from these investments are included in Equity in net income of unconsolidated affiliates in the Condensed Consolidated Statements of Operations. All intercompany balances and transactions have been eliminated in consolidation.

Recent Accounting Guidance

Recently Adopted Accounting Pronouncement

Measurement of Credit Losses for Accounts Receivable and Contract Assets- In July 2025, the FASB issued an accounting standards update (“ASU”) which amends Accounting Standards Codification (“ASC”) 326-20 to provide a practical expedient and an accounting policy election related to the estimation of expected credit losses for current accounts receivable and current contract assets that arise from transactions accounted for under ASC 606. An entity is required to disclose whether it has elected to use the practical expedient and, if so, whether it has also applied the accounting policy election. The Company adopted this pronouncement effective April 1, 2026 and elected to use the practical expedient. The Company’s adoption did not have a material impact on the Company’s Condensed Consolidated Financial Statements.

Except for the pronouncements described above, there have been no new accounting pronouncements issued or adopted since the filing of the Fiscal 2026 Form 10-K that have significance, or potential significance, to the Consolidated Financial Statements.

2. REVENUE RECOGNITION

Revenue Disaggregation - The Company disaggregates Stormwater net sales by Domestic and International and further disaggregates Domestic by product type. This disaggregation level best depicts how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors. The following table presents

• 10 - net sales (including intersegment net sales) disaggregated by product type for the Company’s Stormwater and Wastewater segments.

Contract Balances -The Company recognizes a contract asset representing the Company’s right to recover products upon the receipt of returned products and a contract liability for the customer refund. The following table presents the balance of the Company’s contract asset and liability as of the periods presented:

3. RESTRUCTURING AND LOSS (GAIN) ON DISPOSAL OF ASSETS AND COSTS FROM EXIT AND DISPOSAL ACTIVITIES

In fiscal 2026, the Company undertook certain restructuring and realignment activities (the “2026 Restructuring Plan”) to optimize the Company’s production, recycling and distribution network and to plan and implement go-to-market and operating model enhancements to scale for future growth, including the integration of NDS. Under the 2026 Restructuring Plan, for the three and six months ended September 30, 2026, the Company recorded expense of $3.9 million and $9.2 million, respectively, related to the optimization of the Company’s production, recycling and distribution networks, including the closure offour facilities and changes to the Company’s production footprint. For the three and six months ended September 30, 2025, the Company recorded expense of $7.2 million and $16.0 million, respectively, related to the closure ofone of the Company’s recycling facilities to optimize its recycling network, one offsite storage location andone distribution yard. The Company does not currently have an estimate of additional costs or an expected end date for the restructuring actions. The following table summarizes the activities included in Restructuring and realignment expense during the periods presented.

The costs incurred under the 2026 Restructuring Plan to date are classified as operating expenses and not allocated to a segment. During the six months ended September 30, 2026 and 2025, the Company recorded accelerated

• 11 - depreciation, severance costs, impairment of right-of-use lease assets and other exit and disposal costs. Other exit and disposal activities include legal and professional fees, inventory and equipment transfer costs and other costs.

The following table summarizes the restructuring liability for the periods presented:

The restructuring liability is recorded in Other accrued liabilities in the Company’s Condensed Consolidated Balance Sheet.

(Gain) Loss on Disposal of Assets and Costs From Exit and Disposal Activities - The Company recorded $17.6 million and $16.4 million gain on disposal of assets in the three and six months ended September 30, 2025, respectively. The sale of properties previously held-for-sale resulted in the gain of $18.1 million. The remaining balance is due to the sale or disposal of other property, plant and equipment.

4. ACQUISITIONS

Acquisition of River Valley Pipe -On May 8, 2025, the Company completed its acquisition of the assets of River Valley Pipe LLC (“River Valley Pipe”), a privately-owned pipe manufacturing company located in the Midwest region of the United States. The preliminary fair value of consideration transferred was approximately $18.8 million. The acquisition was funded from cash on hand. River Valley Pipe is included in the Stormwater reportable segment. The purchase price allocation for assets acquired and liabilities assumed is complete and there were no changes to the valuations of assets acquired and liabilities assumed disclosed in the Fiscal 2026 Form 10-K.

Acquisition of NDS -On February 2, 2026, the Company completed the acquisition of the water management business of Norma Group SE, known as NDS. NDS expands the Company’s water management offering into complementary products through the addition of NDS’ residential water management, access box and irrigation solutions. The preliminary fair value of consideration transferred was approximately $972.5 million, which represented the purchase price of $984.9 million, net of cash acquired of $3.2 million and cash included in held for sale of $9.2 million. The preliminary purchase price excludes transaction costs. The acquisition was primarily funded from cash on hand. NDS is included in the Stormwater reportable segment.

Summary of Consideration Transferred - The Company has applied the acquisition method of accounting in accordance with ASC 805, Business Combinations(“ASC 805”) and recognized assets acquired and liabilities assumed at their fair value as of the date of acquisition, with the excess purchase consideration recorded to goodwill. The purchase price allocation for assets acquired and liabilities assumed is preliminary and will be finalized when valuations are complete and final assessments of the fair value of acquired assets and assumed liabilities are completed. As the Company finalizes the estimation of the fair value of the assets acquired and liabilities assumed, additional adjustments may be recorded during the measurement period (up to one year from the closing date).

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The following table summarizes consideration transferred and the preliminary purchase price allocation of identified assets acquired and liabilities assumed:

(a)Upon acquisition, certain NDS entities met the held-for-sale criteria. The Company accordingly classified the associated assets acquired and liabilities assumed as held for sale.

The preliminary goodwill of $316.3 million represents the excess of consideration transferred over the preliminary fair value of assets acquired and liabilities assumed and is attributable to expected cross-selling and operating efficiencies. The goodwill is assigned to the Stormwater reportable segment and $271.7 million of the preliminary goodwill is deductible for income tax purposes.

Pro Forma Financial Information -The unaudited pro forma information for the three and six months ended September 30, 2025 presented below includes the effects of the NDS acquisition as if it had been consummated as of April 1, 2024, with adjustments to give effect to pro forma events that are directly attributable to the acquisition of NDS. Adjustments include those related to the depreciation and amortization of acquired fixed and intangible assets, transaction costs, inventory step-up and the estimated tax impacts thereof. The unaudited pro forma information does not reflect any operating efficiency or potential cost savings that could result from the consolidation of NDS. Accordingly, the unaudited pro forma information is presented for informational purposes only and is not necessarily indicative of the actual results of the combined company if the acquisition had occurred at the beginning of the period presented, nor is it indicative of the future results of operations.

During the three and six months ended September 30, 2026, the Company incurred $5.6 million and $8.8 million, respectively, of transaction and integration costs related to the acquisition such as legal, accounting, valuation and other professional services. These costs are included in selling, general and administrative expenses in the Consolidated Statements of Operations. These costs are deductible for income tax purposes.

Acquisition of StormTrap - On October 1, 2026, the Company entered into a definitive agreement to acquire StormTrap Investments LLC (“StormTrap”), an industry leader in large volume, space-constrained, highly engineered stormwater solutions for a purchase price of approximately $530 million. The acquisition will be funded

• 13 - by cash on hand and existing credit line capacity. The transaction is expected to close in the third quarter of fiscal 2027.

5. DISCONTINUED OPERATIONS AND ASSETS AND LIABILITIES HELD FOR SALE

The Company determined Teco S.r.l., Kimplas Piping Systems Private Limited, Kimplas Limited, Teco Irrigation USA, Inc. and Fish Water Products Sdn. Bhd. (collectively, the “NDS International Entities”) met the held for sale criteria upon acquisition. As a result, the assets and liabilities of the NDS International Entities have been classified as held for sale and are reported as assets held for sale and liabilities held for sale on the Consolidated Balance Sheet. The results of the NDS International Entities have been accounted for as discontinued operations and are reported as income or loss from discontinued operations, net of tax, on the Consolidated Statements of Operations. In addition to the NDS International Entities, one property is included as held for sale.

In July 2026, the Company completed the sale of Teco S.r.l. and Teco Irrigation USA. The sale resulted in a loss of $3.0 million included in discontinued operations, net of tax, for the six months ended September 30, 2026.

The Company measured the net assets of the disposal group at fair value less costs to sell. Costs to sell represent incremental direct costs expected to be incurred in connection with the disposal. Fair value was determined based on the valuation techniques noted in “Note 4. Acquisitions” in the Company’s Fiscal 2026 Form 10-K. In the three months ended September 30, 2026, the Company recorded a valuation allowance to adjust the assets to estimated fair value, less costs to sell, based on anticipated sale price. The Company anticipates selling the NDS International Entities in the third quarter of fiscal 2027.

The assets and liabilities classified as held for sale on the Company’s Consolidated Balance Sheet as of September 30, 2026 and March 31, 2026, include the following:

The following table summarizes the major classes of items constituting the results from discontinued operations presented in the Condensed Consolidated Statement of Operations for the three and six months ended September 30, 2026:

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6. LEASES

Nature of the Company’s Leases - The Company has operating and finance leases for plants, yards, corporate offices, tractors, trailers and other equipment. The Company’s leases have remaining terms of less thanone year to 10 years. A portion of the Company’s yard leases include an option to extend the leases for up tofive years. The Company has included renewal options which are reasonably certain to be exercised in its right-of-use assets and lease liabilities.

7. INVENTORIES

Inventories as of the periods presented consisted of the following:

8. RELATED PARTY TRANSACTIONS

ADS Mexicana- ADS conducts business in Mexico and Central America through its joint venture, ADS Mexicana, S.A. de C.V. (“ADS Mexicana”). ADS owns 51% of the outstanding stock of ADS Mexicana and consolidates ADS Mexicana for financial reporting purposes.

On June 6, 2022, the Company and ADS Mexicana amended the Intercompany Revolving Credit Promissory Note (the “Intercompany Note”) with a borrowing capacity of $9.5 million. The Intercompany Note matures on June 8, 2027. The Intercompany Note indemnifies the ADS Mexicana joint venture partner for 49% of any unpaid borrowings. The interest rates under the Intercompany Note are determined by certain base rates or Secured Overnight Financing Rate (“SOFR”) plus an applicable margin based on the Leverage Ratio. As of both September 30, 2026 and March 31, 2026, there wereno borrowings outstanding under the Intercompany Note.

South American Joint Venture- The Tuberias Tigre - ADS Limitada joint venture (the “South American Joint Venture”) manufactures and sells HDPE corrugated pipe in certain South American markets. ADS owns 50% of the South American Joint Venture. ADS is the guarantor of 50% of the South American Joint Venture’s credit arrangement, and the debt guarantee is shared equally with the joint venture partner. The Company’s maximum potential obligation under this guarantee is $5.5 million as of September 30, 2026. The maximum borrowings permitted under the South American Joint Venture’s credit facility are $11.0 million. The Company does not anticipate any required contributions related to the balance of this credit arrangement. As of September 30, 2026 and March 31, 2026, there wasno outstanding principal balance for the South American Joint Venture’s credit facility, including letters of credit.

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9. DEBT

Long-term debt as of the periods presented consisted of the following:

Senior Secured Credit Facility- In February 2026, the Company entered into a Fourth Amendment (the “Fourth Amendment”) to the Company's Base Credit Agreement with Barclays Bank PLC, as administrative agent under the Term Loan Facility and PNC Bank, National Association, as new administrative agent under the Revolving Credit Facility. Among other things, the Fourth Amendment (i) amended the Base Credit Agreement by increasing the Revolving Credit Facility (the “Amended Revolving Credit Facility”) from $600 million to $750 million (including an increase of the sub-limit for the swing-line sub-facility from $60 million to $75 million), (ii) refinanced the outstanding amounts owing under the Initial Term Loan Facility by providing for a new term loan facility in the initial aggregate principal amount of$600 million (the “Term Loan Facility”), (iii) extended the maturity date of the Revolving Credit Facility to February 27, 2031, (iv) extended the maturity date of the Term Loan Credit Facility to February 28, 2033, (v) revised the “applicable margin” to provide for a range of 125 basis points to 225 basis points(for Term Benchmark based loans) and 25 basis points to 125 basis points (for base rate loans), as determined based on the consolidated senior secured net leverage ratio ranging from less than 1.50 to 1.00 to greater than 3.50 to 1.00, (vi) provides for incremental facilities in an aggregate maximum amount of the greater of$350 million or 100% of consolidated EBITDA for the most recently ended four consecutive fiscal quarters, and (vii) amended certain covenant baskets under the Credit Agreement to align with growth of the Company. Letters of credit outstanding at September 30, 2026 and March 31, 2026 amounted to $11.4 million and $10.1 million, respectively, and reduced the availability of the Revolving Credit Facility.

Senior Notes due 2030- On June 9, 2022, the Company issued$500.0 million aggregate principal amount of 6.375% Senior Notes due 2030 (the “2030 Notes”) pursuant to an Indenture, dated June 9, 2022 (the “2030 Indenture”), among the Company, the Guarantors and the Trustee.

Senior Notes due 2034- On February 27, 2026, the Company issued $500.0 million aggregate principal amount of 5.375% Senior Notes due 2034 (the “2034 Notes”) pursuant to an Indenture, dated February 27, 2026 (the “2034 Indenture”), among the Company, the Guarantors and the Trustee.

Other debt-Other debt includes equipment financing and the commercial loan related to the Company’s headquarters. The assets under the Equipment Financing acquired are titled to the Company and included in Property, plant and equipment, net on the Company's Condensed Consolidated Balance Sheet. The equipment financing has an initial term of between 12 and 84 months, based on the life of the equipment, and bears a weighted average interest rate of 1.8%as of September 30, 2026. The current portion of the equipment financing is $1.1 million, and the long-term portion is $1.3 million at September 30, 2026.

The Company entered into a commercial loan agreement of $27.2 million which matures on December 5, 2028. The agreement bears interest based on SOFR plus a margin of 285 basis points, requires interest only payments through December 5, 2026, and beginning January 5, 2027 through maturity, includes principal and interest payments.

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Valuation of Debt -The carrying amounts of current financial assets and liabilities approximate fair value because of the immediate or short-term maturity of these items. The following table presents the carrying and fair value of the Company’s 2030 Notes, 2034 Notes and Equipment Financing for the periods presented:

The fair values of the 2030 Notes and 2034 Notes were determined based on quoted market data for the Company’s 2030 Notes and 2034 Notes, respectively. The fair value of the Equipment Financing was determined based on a comparison of the interest rate and terms of such borrowings to the rates and terms of similar debt available for the period. The categorization of the framework used to evaluate the 2030 Notes, 2034 Notes and Equipment Financing are considered Level 2. The Company believes the carrying amount of the remaining long-term debt, including the Term Loan Facility, Revolving Credit Facility and commercial loan agreement, is not materially different from its fair value as the interest rates and terms of the borrowings are similar to currently available borrowings.

10. STOCK-BASED COMPENSATION

ADS has several programs for stock-based payments to employees and non-employee members of its Board of Directors, including stock options, performance-based restricted stock units and restricted stock. The Company recognized stock-based compensation expense in the following line items of the Condensed Consolidated Statements of Operations for the periods presented:

The following table summarizes stock-based compensation expense by award type for the periods presented:

2017 Omnibus Incentive Plan- The 2017 Incentive Plan provides for the issuance of a maximum of 5.0 million shares of the Company’s common stock for awards made thereunder, which awards may consist of stock options, restricted stock, restricted stock units, stock appreciation rights, phantom stock, cash-based awards, performance awards (which may take the form of performance cash, performance units or performance shares) or other stock-based awards.

Restricted Stock-During the six months ended September 30, 2026, the Company granted 0.1 million shares of restricted stock with a grant date fair value of $13.8 million.

Performance-based Restricted Stock Units (“Performance Units”)-During the six months ended September 30, 2026, the Company granted 0.1 million shares of performance units at a grant date fair value of $16.7 million.

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Options- During the six months ended September 30, 2026, the Company granted 0.1 million nonqualified stock options under the 2017 Incentive Plan with a grant date fair value of $7.8 million. The Company estimates the fair value of stock options using a Black-Scholes option-pricing model. The following table summarizes the assumptions used to estimate the fair value of stock options during the period presented:

Employee Stock Purchase Plan (“ESPP”) -In July 2022, the Company’s stockholders approved the Advanced Drainage Systems, Inc. Employee Stock Purchase Plan, which provides for a maximum of 0.4 million shares of the Company’s common stock. Eligible employees may purchase the Company's common stock at 85% of the lower of the fair market value of the Company's common stock on the first day or the last day of the offering period. The offering periods are six months in duration beginning either January 1 or July 1 and ending June 30 and December 31.

11. INCOME TAXES

The Company’s effective tax rate will vary based on a variety of factors, including overall profitability, the geographical mix of income before taxes and related tax rates in jurisdictions where it operates and other one-time charges, as well as the occurrence of discrete events. For the three months ended September 30, 2026 and 2025, the Company utilized an effective tax rate of 25.0% and 25.2%, respectively, to calculate its provision for income taxes from continuing operations. For the six months ended September 30, 2026 and 2025, the Company utilized an effective tax rate of 24.1% and 24.9%, respectively, to calculate its provision for income taxes from continuing operations. State and local income taxes increased the effective rate for the three and six months ended September 30, 2026 and 2025. Additionally, the discrete income tax benefit related to the change in valuation allowance on deferred tax assets for net losses on outside basis differences decreased the effective tax rate for the six months ended September 30, 2026.

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12. NET INCOME PER SHARE AND STOCKHOLDERS' EQUITY

Net Income per Share - The following table presents information necessary to calculate net income per share for the periods presented, as well as potentially dilutive securities excluded from the weighted average number of diluted common shares outstanding because their inclusion would have been anti-dilutive:

Stockholders’ Equity – During the six months ended September 30, 2026, the Company repurchased 2.7 million shares of common stock at a cost of $375.1 million. The repurchases were made under the Board of Directors’ authorization in February 2026 to repurchase up to an additional $1.0 billion of ADS Common Stock in accordance with applicable securities laws. As of September 30, 2026, approximately $677.3 million of common stock may be repurchased under the authorization. The repurchase program does not obligate the Company to acquire any particular amount of common stock and may be suspended or terminated at any time at the Company’s discretion.

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13. COMMITMENTS AND CONTINGENCIES

Purchase Commitments- The Company has historically secured supplies of resin raw material by agreeing to purchase quantities during a future given period at a fixed price. These purchase contracts typically ranged from 1 to 12 months and occur in the ordinary course of business. The Company doesnot have any outstanding purchase commitments with fixed price and quantity as of September 30, 2026. The Company also enters into equipment purchase contracts with manufacturers.

Litigation and Other Proceedings- The Company is involved from time to time in various legal proceedings that arise in the ordinary course of business, including but not limited to commercial disputes, environmental matters, employee related claims, intellectual property disputes and litigation in connection with transactions including acquisitions and divestitures. The Company does not believe that such litigation, claims, and administrative proceedings will have a material adverse impact on the Company’s financial position or results of operations. The Company records a liability when a loss is considered probable, and the amount can be reasonably estimated.

14. BUSINESS SEGMENT INFORMATION

The Company operates its business intwo distinct reportable segments: “Stormwater” and “Wastewater”, which are primarily organized based on products. The CODM for ADS is the Chief Executive Officer (“CEO”). The CEO reviews financial information and makes operational decisions based on Net sales and a measure of operating profit, Segment Adjusted EBITDA, a non-GAAP financial measure.

Certain selling and general and administrative expenses are not allocated to the segments, including non-operating functions such as legal, facilities management, and investor relations. A measure of assets is not applicable, as segment assets are not regularly reviewed by the CODM for evaluating performance or allocating resources. The Company does not aggregate operating segments to form reportable segments.

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The following table sets forth reportable segment information with respect to the amount of Net sales contributed by each class of similar products for the periods presented:

(a)Other segment items include depreciation, amortization recorded within cost of goods sold, stock-based compensation expense, restructuring and realignment expense, and transaction costs.

(b)The Company calculates Segment Adjusted EBITDA as net income from continuing operations before interest, income taxes, depreciation and amortization, stock-based compensation expense, non-cash charges and certain other gains and expenses.

(e)Includes derivative fair value adjustments, foreign currency transaction (gains) losses, legal settlements, restructuring and realignment expense, and executive retirement expense (benefit).

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(a)Other segment items include depreciation, amortization recorded within cost of goods sold, stock-based compensation expense, inventory step-up costs, restructuring and realignment expense, and transaction costs.

(b)The Company calculates Segment Adjusted EBITDA as net income from continuing operations before interest, income taxes, depreciation and amortization, stock-based compensation expense, non-cash charges and certain other gains and expenses.

(e)Includes derivative fair value adjustments, foreign currency transaction (gains) losses, legal settlements, inventory step-up costs, restructuring and realignment expense, and executive retirement expense (benefit).

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(a)Other segment items include depreciation, amortization recorded within cost of goods sold, stock-based compensation expense, inventory step-up costs, restructuring and realignment expense, and transaction costs.

(b)The Company calculates Segment Adjusted EBITDA as net income from continuing operations before interest, income taxes, depreciation and amortization, stock-based compensation expense, non-cash charges and certain other gains and expenses.

(e)Includes derivative fair value adjustments, foreign currency transaction (gains) losses, legal settlements, inventory step-up costs, restructuring and realignment expense, and executive retirement expense (benefit).

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(a)Other segment items include depreciation, amortization recorded within cost of goods sold, stock-based compensation expense, inventory step-up costs, restructuring and realignment expense, and transaction costs.

(b)The Company calculates Segment Adjusted EBITDA as net income from continuing operations before interest, income taxes, depreciation and amortization, stock-based compensation expense, non-cash charges and certain other gains and expenses.

(e)Includes derivative fair value adjustments, foreign currency transaction (gains) losses, legal settlements, inventory step-up costs, restructuring and realignment expense, and executive retirement expense (benefit).

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The following table sets forth certain financial information attributable to the reportable segments for the periods presented:

15. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

Supplemental disclosures of cash flow information for the six months ended September 30, were as follows:

16. SUBSEQUENT EVENTS

Common Stock Dividend - Subsequent to the end of the quarter, the Company declared a quarterly cash dividend of $0.20 per share of common stock. The dividend is payable on December 15, 2026, to stockholders of record at the close of business on December 1, 2026.

Share Repurchase Program - Subsequent to the end of the quarter,0.9 million shares of common stock at a cost of $114.1 million were repurchased under the Board of Directors’ authorization.

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