Advanced Drainage Systems, Inc.

Thank you for your patience. The advanced drainage systems first quarter fiscal 2023 results conference call will be starting in a few minutes time. Thank you for your patience. And if you'd like to ask a question today, please remember that is star followed by one on your telephone keypads. Thank you. © transcript Emily Beynon Thank you. Good morning, ladies and gentlemen, and welcome to Advanced Training Systems First Quarter Fiscal 2023 Results Conference Call. My name is Brika and I am your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, please press star then two. And for operator assistance at any time, please press star zero. I would now like to turn the presentation over to your host of today's call, Mr. Mike Higgins, Vice President of Corporate Strategy and Investor Relations. Sir, you may begin.

Thank you. Good morning, everyone. Thanks for joining us today. With me today, I have Scott Barber, our President and CEO, and Scott Cottrell, our CFO. I would also like to remind you that we will discuss forward-looking statements. Actual results may differ materially from those forward-looking statements because of various factors, including those discussed in our press release and the risk factors identified in our Form 10-K filed with the SEC. While we may update forward-looking statements in the future, we disclaim any obligation to do so. You should not place undue reliance on these forward-looking statements, all of which speak only as of today. Lastly, the press release we issued earlier this morning is posted on the investor relations section of our website. A copy of the release has also been included in an 8K submitted to the SEC. We will make a replay of this conference call available via webcast on the company website. With that, I'll turn the call over to Scott Barber.

Thank you, Mike, and good morning. Thank you for joining us. on today's call. We achieved a record $914 million in sales in the first quarter, an increase of 37% compared to the same period last year. Sales growth was primarily driven by strong demand across our geographies and construction in markets supported by continued strength in our priority states. We saw attractive volume growth in Allied Products, Infiltrator, and within our residential in-market driven by share gains from our storm sewer pipe and on-site septic products. Pipe volume in our non-residential and agriculture end markets started slower than anticipated due to a wet spring for agriculture, job site delays, production limitations, and difficult comps relative to the last year. However, volumes improved month over month through the end of June and into the second quarter. In working closely with our distribution partners, engineering partners, and contractors to monitor market demand, we collectively remain bullish on activity through fiscal 2023. Infiltrator sales increased 31%, driven by favorable pricing and strong volumes of septic tanks and storm tech chambers. Growth was strong in the southern and western regions of the U.S. The new production equipment installed during the fourth quarter of fiscal year 2022 at both Infiltrator and ADS is producing to expected rates and helping to bring down elevated backlogs. Although housing growth has slowed from the previous levels, Infiltrator has a good line of sight and continued, if somewhat moderated, growth for the remainder of fiscal 2023, given its healthy backlog and the impact of new capacity additions that will accelerate share gains. Looking beyond Infiltrator into the legacy ADS residential business, performance was strong overall. ADS residential sales increased 62% compared to the first quarter of fiscal 2022. Growth was robust in both our residential segments, with growth related to single-family and multifamily development increasing 75% year-over-year, led by share gains against traditional materials, pricing, and demand in single-family subdivision development and multifamily development. Our retail segment increased 40%, primarily driven by pricing. We continue to see a strong pace of orders and sales in the residential end market and are closely watching our leading indicators with the uncertainty that exists with forward-looking housing construction. We also continue to see strong growth in our non-residential end market. Revenue growth through the quarter was 47% and driven by strong sales of pipe and allied products. specifically our StormTech and Myloplast product lines. Project identification, quoting, and order activity remains positive in the horizontal, low-rise type of non-residential projects we participate in, including warehouse, distribution centers, commercial, and institutional projects. Rounding out our top-line performance, international sales increased 9% this quarter, driven by sales growth and our Mexican and exports businesses. Moving to profitability, our adjusted EBITDA increased 80% this quarter. Favorable pricing continued to cover inflationary cost pressures on transportation and labor, as well as raw material costs, which have moderated but remained elevated as compared to previous years. This is our third consecutive quarter, dating back to Q3 of fiscal 2022, that we have covered inflationary cost increases, and the second consecutive quarter where we have experienced year-over-year adjusted EBITDA margin improvement. Overall, our backlog and cadence of orders remain favorable, as well as our ability to capture price in the market. While there is uncertainty around the current macroeconomic environment, especially in residential construction, the momentum we are seeing in project identification, quoting, book-to-bill, and order trends gives us confidence in our ability to achieve the updated guidance we issued today. Now I want to highlight some other recent announcements. The integration of our two recent acquisitions, Jet Polymer and Caltech, are progressing well. Integration activities remain on plan and both businesses are meeting expectations. As previously announced in May, Bob Kidder retired as Chairman of our Board of Directors effective as of our annual shareholder meeting on July 21st, 2022. Bob Ebersole was previously selected and announced as the new chairman of our board of directors in May and was reelected as a director at our annual shareholder meeting. I'm excited to continue working with Bob as chairman as we execute on the growth strategies of ADS. We also elected Kelly Gast to our board of directors at our annual meeting on July 21, 2022. Kelly brings broad financial experience from her leadership positions at Bayer, as well as business strategy and commercial expertise. Her capabilities strengthen our board, and we look forward to working closely with her going forward. Lastly, we issued our fiscal year 2022 sustainability report this week. Sustainability is a core part of ADS, and we are pleased to share how we are furthering our commitment to reducing our environmental impact enhancing the safety of our people, creating a diverse, inclusive, and equitable workforce, and improving the communities we touch in this report. With that, I will turn the call over to Scott Cottrell to further discuss our financial results. Thanks, Scott.