Advanced Drainage Systems, Inc.

Good morning, ladies and gentlemen, and welcome to Advanced Drainage Systems' third quarter of fiscal year 2026 results conference call. My name is Ellen, and I am your operator for today's call. At this time, all participants are in listen-only mode. Later, we will conduct a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. To withdraw your question, press star 1 again. I would now like to turn the presentation over to your host for today's call, Mr. Mike Higgins, Vice President of Corporate Strategy and Investor Relations. Sir, you may begin.

Good morning, everybody. Thanks for joining us today. With me today, I have Scott Barber, our President and CEO, Scott Cottrell, our CFO, and Craig Taylor, President of our Infiltrator business. 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. I'll now turn the call over to Scott Barber.

Thank you, Mike, and good morning, everyone. Thank you all for joining us on today's call. We are excited to talk to you today and have a lot to cover, including the strong results we delivered in a challenging market environment, the acquisition of NDS that closed on Monday, and other business updates. Let me start with the third quarter results. We outperformed the market again this quarter through the infiltrator business, the allied products portfolio, and HP pipe sales as we continue to drive the market share model, introduce new products, distribution, and customer programs. These strategic priorities continue to help us achieve growth in the mixed demand environment we see today and reflect ADS's strategy to prioritize higher growth, higher margin allied and infiltrator products that strengthen the resiliency in our profitability. This resulted in one of the most profitable third quarters in our history with a 30.2% adjusted EBITDA margin. Let me touch on a few highlights. Allied product sales increased 8% with growth in several key products, including the StormTech storage chambers, the Nyloplast capture structures, and the water quality products, all of which benefited from new products introduced over the last year. Infiltrator revenue increased 2% with good activity in the southeast and the south, The Enrico acquisition is now fully lapped, and its impact is embedded in our reported growth. Growth in tanks continues to be driven by conversion, product line expansion, and additional distribution. Leach field sales remain resilient despite the market sluggishness, and advanced treatment systems continue to gain share in residential due to new product launches and the growth in commercial systems. Pipe revenue was down slightly with growth in the HP pipe products being offset by weaker sales into the residential and infrastructure markets. Importantly, pricing remains stable and materials are favorable compared to the prior year. From an in-market perspective, sales in our core non-residential market increased 5% with growth driven by sales in the southeast, midwest, and up the Atlantic coast into the northeast. Based on market indicators we follow, we are updating our in-market demand forecast for the non-residential market to down low to mid single digits compared to the previous outlook of flat to down low single digits. In spite of a challenging demand environment, ADS's third quarter performance highlights the strength and balance of our portfolio and the execution of the sales team on selling the high growth products, we continue to highlight HP Pipe and the Allied products. Sales in the residential end market were down slightly as it remains under pressure. However, the Infiltrator core residential business continues to significantly outperform the market due to new products and distribution. In addition, for the third quarter in a row, Allied product sales increased in the residential market driven by the multifamily construction activity. Single-family residential land development activity was better in the Atlantic coast and southeast, but the DIY channel continues to experience significant weakness. Based on our performance in the current end market, which was down high single digits, we are confident that we have the right strategies the right product portfolio, and the go-to-market model to increase participation in the residential market, and we will benefit as that market inevitably recovers. Moving to profitability, adjusted EBITDA increased 9% despite the flat revenue base, resulting in a 250 basis point increase in the adjusted EBITDA margin to 30.2%. Profitability increased across all facets of the business, including pipe, Allied Products, and Infiltrator due in part to the capital invested over the last several years and the cost improvement programs we started over a year ago. The sales team has also done an excellent job strengthening the product mix as well as managing a challenging in-market environment to achieve favorable price costs in this period. We are excited to have closed the NDS acquisition on Monday of this week. NDS's products are highly complementary to ADS's stormwater capture portfolio and enhance our offering in both the distribution and retail channels. We now operate the three most relevant brands in stormwater and wastewater management, Advanced Drainage Systems, Infiltrator, and NDS. The portfolio of products available across these brands is the largest and broadest in the industry which gives us unmatched ability to meet customer needs across applications and in markets. We are in the early days of integration, and we look forward to sharing more about the business and our synergy plan at our investor day this summer. And on that note, I'm pleased to share the date for our ADS's third investor day, June 18, 2026. Management will host a presentation at ADS's Engineering and Technology Center in Columbus, Ohio, followed by a tour for in-person guests. Invitations will go out in the coming months, but at this event, you can expect us to cover growth priorities and updates to our key sales strategies, a deeper look at acquisitions, particularly of NDS and Orenco, the resiliency of our profitability, payoff from the capital deployed over the last several years, as well as the next capital programs we will invest in going forward, and, of course, new medium-term financial targets. We look forward to providing the business updates and showing off the Engineering and Technology Center, the largest stormwater research facility in the world, which will drive innovation for many years to come. If you have questions about the event, please reach out to our investor relations team. To summarize, we continue to execute effectively in a challenging environment. Our self-help operational initiatives continue to bear fruit, as demonstrated by the profitability reported today. The outperformance here today is driven by strong execution, and I'm very proud of the team for doing so in a challenging environment. When you stack up our strengths, the scale, the product portfolio, our go-to-market strategy, and the ability to invest in our business, our people, and the industry's growth, you can see ADS's value proposition remains both relevant and powerful. While we navigate this near-term environment, we will do so with an eye toward the future. We remain firmly committed to our long-term vision and will continue investing in the capabilities that will position us for the future success. Overall, the long-term outlook for our business remains strong, supported by compelling secular tailwinds driving demand for water management solutions across North America. Now I'll turn the call over to Scott Cottrell.