Advanced Drainage Systems, Inc. (NYSE:WMS) Q1 2024 Results Conference Call August 3, 2023 10:00 AM ET

Company Participants

Michael Higgins - Vice President of Corporate Strategy and Investor Relations

Scott Barbour - President and CEO

Scott Cottrill - CFO

Conference Call Participants

Matthew Bouley - Barclays

Michael Halloran - Baird

Garik Shmois - Loop Capital

John Lovallo - UBS

Joe Ahlersmeyer - Deutsche Bank

Josh Pokrzywinski - Morgan Stanley

Bryan Blair - Oppenheimer

Jeff Hammond - KeyBanc Capital Markets Inc

Michael Higgins

Thank you, and good morning. With me today, I have Scott Barbour, our President and CEO; and Scott Cottrill, 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 8-K submitted to the SEC. We will make a replay of this conference call available via webcast on the Company website.

With that said, I'll turn the call over to Scott Barbour.

Scott Barbour

Thank you, Mike. Good morning. Thank you all for joining us on today's call. We appreciate your time. The first quarter was a solid start to the year and highlighted the resiliency of the ADS model even in the face of lower market demand. The net sales and adjusted EBITDA results exceeded expectations, primarily driven by better-than-expected performance from the Infiltrator business and the Allied Products portfolio. Importantly, the positive mix effect from these two segments as well as strong execution on pricing, good control over material and operational cost and the benefit from actions we took during the second half of last year to reduce manufacturing and transportation costs in the lower demand environment led to a record 36.2% adjusted EBITDA margin.

This is the highest quarterly margin in the Company's history and 350 basis points higher than the same quarter last year. This record profitability was achieved despite a 15% demand-driven sales decline in the quarter. I'd like to highlight growth in three highly strategic areas of the business today that are in part representative of the large opportunity in front of the business. Sales of Infiltrators active treatment products and ADS' HP Pipe and Water Quality products all increased this quarter due to the successful execution of the market share model.