ADVANCED DRAINAGE SYSTEMS, INC. — Call Transcript 2026

Good morning, ladies and gentlemen, and welcome to Advanced Drainage Systems' 4th quarter and fiscal year 2026 results conference call. My name is Tracy, 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 press star one to raise your hand. To withdrawal your question press star one 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, everyone. Thanks for joining us today. With me today, I have Scott Barbour, our President and CEO, Scott Cottrill, our Chief Financial Officer, and Craig Taylor, President of our Infiltrator Water Technologies 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 8-K 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 Barbour. Thank you, Mike Higgins. Good morning, everyone. Thank you all for joining us on today's call. We are pleased to close out fiscal year 2026 with strong results. We have a lot to cover today, including our fourth quarter performance, full year results, an update on the NDS integration, and a preview of what lies ahead as we prepare for our upcoming Investor Day. A lot happened in the fourth quarter. Despite the quarter being our most weather-dependent and seasonally variable period, we executed well and delivered results that reflect the strength and breadth of our portfolio. The diversification across our Allied Products, Infiltrator business, and the HP Pipe products, combined with the continued execution of our market share model, allowed us to navigate a challenging demand environment and close the fiscal year on a strong note. Let me touch on a few highlights. As you saw in the press release, following the acquisition of NDS, we updated our reporting segments to Stormwater and Wastewater, as reflected in the results today. The Stormwater segment contains the legacy ADS business, pipe and Allied Products, as well as acquisitions we have made in the space, NDS, CULTEC, and River Valley Pipe. The Wastewater segment contains the legacy Infiltrator business as well as the acquisition of Orenco Systems. Excuse me. Stormwater revenue increased 12%, driven by a 43% increase in Allied Product sales, including the $49 million contribution from the NDS acquisition that closed February 2nd. On an organic basis, Stormwater sales increased 2% overall, with a 12% growth in Allied Products. Once again, revenue in several highly profitable products grew double digits, including the StormTech retention/detention chambers, the Nyloplast capture structures, and our water quality product line. These product lines continue to benefit from new product introductions and ongoing customer programs. Pipe revenue decreased 2%, reflecting softness in the residential and infrastructure markets. Agriculture sales increased 30% in the quarter as customers bought ahead of price increases. Pricing remained stable throughout the quarter. Material costs were favorable relative to the prior year. Wastewater revenue increased 4% with strong activity in the Southeast and South. Tank products increased double digits, driven by material conversion, product line expansion, and additional distribution. Leach field sales remains resilient, and our advanced treatment systems, including Orenco, continued to gain share in both residential and commercial applications. From an end market perspective, sales in our core non-residential market increased 6%, with strength in the West and Midwest. Sales of Allied Products experienced broad-based growth across the U.S. as we continue to focus on selling the complete package. Sales in the residential end market increased 18%, including the impact from NDS. Excluding NDS, residential sales decreased 1%. Single-family housing continues to face headwinds from affordability and interest rate dynamics, in addition to geopolitical uncertainty. Importantly, we continue to see improving trends in the multifamily development. The Infiltrator core residential business continues to significantly outperform the market, driven by new products and new distribution partners. We remain confident we have the right strategies and portfolio to increase our participation in the residential market as conditions inevitably improve. Moving to profitability, adjusted EBITDA increased 6% in the quarter, resulting in an adjusted EBITDA margin of 27.8%. This quarter's resilient margin is a reflection of the favorable growth, product mix, and price cost, as well as operational self-help initiatives and the capital invested over the last several years. Turning to the NDS integration, we are pleased with the progress made since closing the acquisition in February. The NDS team is a strong cultural fit. We are on track to achieve our integration milestones. We continue to expect $25 million in annual cost synergies by year three. We are increasingly excited about the revenue synergy opportunities as we expand the collective product portfolio across our distribution and retail channels. We look forward to talking about NDS at Investor Day. Regarding the upcoming Investor Day, which will take place on June 18th at our engineering and technology center in Hilliard, Ohio, we are looking forward to sharing updates on our differentiated growth strategy and our resilient profit platform, as well as our medium-term financial targets and the payoff from the significant capital we have deployed over the last several years. We hope to see you all there. Please reach out to the investor relations team with any questions about the event. Fiscal year 2026 was a milestone year for ADS, and I'm very proud of the entire organization for how we executed. We closed the highly strategic acquisition of NDS, almost entirely with cash on hand, delivered one of our most profitable years in our history, generated significant free cash flow, returned $155 million to shareholders, and continued to invest in the capabilities that will define our next phase of growth. We significantly outperformed our two largest markets, non-residential and residential, increasing 8% and 7% respectively. These two markets represent over 80% of our revenues. The self-help operational initiatives we launched over a one year ago are clearly bearing fruit, and our teams executed at a high level despite a challenging demand environment, resulting in the second highest adjusted EBITDA margin in the company's history of 31.6%. As we look into fiscal 2027, overall demand at this point looks similar to fiscal 2026, with a slightly more negative outlook on agriculture and single-family housing. Demand is very choppy, with order patterns shifting as customers try to get orders in ahead of price increases. This could result in an air pocket this summer, though we expect this to normalize overall within the first half of the year. The non-residential market is modestly more resilient, expected to be flat to up low single digits. Activity in this market is driven by strength in large projects like data centers. We are well-positioned to win these jobs due to the solutions package, installation benefits, last mile delivery, and the national network that we have, all of which position us to capture a larger portion of the stormwater systems. The residential market remains under pressure with interest rates as well as economic and geopolitical uncertainty impacting construction activity. We expect to outperform the market, driven by our sales efforts to work with large national and regional home builders, focus on the cross-selling opportunities, and capitalize on the growing portions of the market, such as advanced treatment in the multifamily development. When you stack up our strengths, the scale, product portfolio, go-to-market strategy, installation benefits, logistics capabilities, and our ability to invest in the business, people, and industry growth, you see the ADS value proposition remains both relevant and powerful. 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 Cottrill. Thanks, Scott. Before I get into the details, I want to step back and highlight a few key takeaways from the quarter. We delivered excellent financial performance, exceeding the top end of both our revenue and adjusted EBITDA guidance ranges. We also closed the NDS acquisition in early February, representing a $1 billion investment that strengthens our portfolio and positions us well for long-term growth. As you saw in our press release, we announced a new segment and reporting structure to better align with how we think about and manage the business. Finally, we fortified the balance sheet through a series of capital structure actions that extended our weighted average maturities to more than six years while lowering our weighted average cost of debt by 30 basis points. These actions, combined with our strong cash generation, resulted in year-end leverage of only 1.6x, inclusive of the $1 billion NDS acquisition, and most importantly, provide the flexibility and optionality to support our capital allocation priorities in fiscal 2027. For the fourth quarter, revenue increased 10% to $677 million, including the impact from NDS. On an organic basis, revenue from Allied Products, tanks, and residential advanced treatment all increased by double digits, as Scott mentioned. Importantly, we believe our results outpaced the underlying end markets, demonstrating the differentiated growth strategy and resiliency of the ADS business model. From a profitability perspective, we are very pleased with the 27.8% adjusted EBITDA margin for the fourth quarter. A couple of things I feel are worth noting regarding the quarterly results. The fourth quarter is the fourth consecutive quarter of volume growth and favorable price costs. Regarding manufacturing and transportation costs, we are seeing significant inflation on diesel and common carrier rates, and we experienced incremental transportation costs related to the strong demand during the quarter, particularly in the West, coupled with increased oil prices and greater macroeconomic uncertainty. Importantly, we continue to benefit from the capital invested over the last several years in new production lines and automation improvements. Regarding SG&A, the year-over-year increase was driven primarily by the acquisition of NDS, as well as incremental compensation expense related to the strong full-year results. On slide eight, we present our free cash flow. For the full fiscal year, we generated $569 million in free cash flow compared to $369 million in the prior year, primarily driven by increased profitability and effective working capital management. The OBBBA contributed an incremental $35 million of free cash flow benefit in fiscal 2026. Cash from operations for the full year totaled $819 million, representing an 85% conversion of our adjusted EBITDA. In February, we refinanced near-term maturities of our 2027 senior notes and our Term Loan B, as well as increased our revolving credit facility to $750 million. Our weighted average cost of debt is now 5.65%, which we view as highly favorable in the current environment, and our weighted average maturities are now over six years, as compared to two years prior to these transactions. We ended the fiscal year with leverage of approximately 1.6x, as I mentioned previously. In addition, in the fourth quarter, we repurchased 720,000 shares of common stock under our existing repurchase authorization. Moving to slide nine. Thoughtful capital deployment continues to be a key focus for the management team and the board, given the strong cash generation of the business. In fiscal 2026, we deployed $1.4 billion of capital with $1.2 billion invested in growth. We spent $250 million of that on capital expenditures, with investments focused on executing growth initiatives in key geographies, customer service, productivity, and automation initiatives, expanding our production capacity at Infiltrator, as well as increasing our recycling capacity in the Southeast. We also returned $155 million to shareholders through dividends and repurchases, an increase of 29% over the prior year. Today, in a separate press release, we announced an 11% increase in our dividend, demonstrating our ongoing commitment to returning capital to shareholders while also continuing to invest in the growth of the business. Moving on to slide 10. We are introducing our fiscal year 2027 guidance today. Based on current visibility, backlog of existing orders, R&R market outlook, and the trends we see entering the fiscal year, including the continued integration of NDS, we're establishing the following guidance ranges for fiscal year 2027. We expect revenue to be in the range of $3.35 billion-$3.55 billion and adjusted EBITDA to be in the range of $1 billion-$1.5 billion. For guidance purposes, we are assuming significant year-over-year inflationary cost pressure on input material costs as well as transportation costs. We have taken pricing actions to offset these inflationary pressures on a dollar-for-dollar basis. We expect normal revenue seasonality with approximately 55% of revenue in the first half of the year. Quarterly revenue patterns in the first half of the year may be affected by customers trying to buy ahead of anticipated price increases. This guidance also includes approximately $300 million of revenue from NDS for the full fiscal year. We remain focused on executing our long-term strategic plan to drive consistent long-term growth, margin expansion, and free cash flow generation. With that, I will open the call for questions. Operator, please open the line. We will now begin the question-and-answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, press star and the number one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by now while we compile the Q&A roster. Your first question comes from the line of Michael Halloran with Baird. Your line is open. Please go ahead. Let's start on the guidance and how you guys are thinking about the composition from here. Obviously, Scott, you talked to a bunch of moving pieces as we sit here. Maybe two things, I guess. One, how are you thinking about the sequential revenue dynamics versus normal? I know you just mentioned some pre-buy activity. How does that functionally play out? That will be the first question, and then I will have a follow-up to it. So is it on the sequential- Yeah. This is Scott Barbour, Mike, and the question is around how is the first half going to perform sequentially. Month by month or quarter to quarter. I got you. All right. Yeah. Quarter to quarter. As we said, Mike, yeah, first half, second half is normally in that 55%-60% range in the first half. You got that 40%-45% in the second half, just based on seasonality. We see it lining up largely the same. The only thing as Scott mentioned, and I did as well on our remarks, we've had a couple price increases already announced into the market. We see some pre-buying going on here in the first fiscal quarter of our year. Again, do we see that kind of evening out and getting to where we've got our guide for that first half dynamic coming and normalizing, is the word I would use, by the end of 1H, first half of the year? Yes, we do. Again, first quarter might be a little bit elevated from what we've seen on a historical basis, but we see that normalizing in Q2 and getting back to that 55%-60% of the full year in the first half on a revenue performance basis. No, that makes sense. Right. A little pull forward from 2Q to 1Q, but flattens out. Okay. The follow-up is maybe the similar dynamic on the margin side. Given the timing on the pricing, the inflation, the pull forward, does that mean that the fiscal first may be a little compressed on the margin line relative to how that would normally play out, and then 2Q, you start getting more balanced out on a margin dollar basis before being more normal from there sequentially in the back half of the year? Is that the thought process on the margin line within the guidance? I think that's a fair way to look at it, Mike. I think you've got a little bit more of the volume kicking in in that first quarter based on the pull ahead, with the pricing actions we've taken mostly starting to hit in the fiscal second quarter. Again, we've assumed right now that's a dollar for dollar basis. As we move through the year, that's gonna be dilutive to margins. Again, it's focusing on the dollars right now, and that uncertainty that we're managing. That's fair to look at it that way as we progress through the year. Can I add one thing to that, Mike? This is Scott Barbour. Matching those up is really tough as materials and transportation costs. We run a big fleet, uses a lot of diesel every freaking month. Those are tough to match up, and this is based on these things kind of normalizing. It's gonna be a little choppy. I just want to kind of get that out there. We're on top of it, but it's hard to perfectly time these things on a month or a quarter basis. Yeah. That makes sense. And you're saying basically on the dollar side of things, you're covered in relatively neutral. Covered Yeah. It's just the math behind the margins that becomes an optical headache, right? Correct. Yeah. Great. Thanks, everyone. Appreciate it. You get a little bit of SG&A favorability on that fixed cost leverage, but again, that's Yeah. Yes, it's a gross margin dollar for dollar dilution. I think we talked about this with the board yesterday, and clearly, we think the right thing to do is get it dollar for dollar, but don't try to press for the margin on these kind of what we would view as extraordinary escalations driven by these events in some of our really important input markets. That's our strategy. That's what we're gonna do, and we feel good about that. We're willing to kind of work our way through that margin compression optics. When we've done this before, over the long term, we kind of come out favorable on the long end of that. Very similar to how we've done this in the past with, I think, even better tools and positioning than we had before. To Scott's point, we talk a lot about pricing and dollar for dollar, but it's not lost on us that we also have that recycling lever that we can pull on the resident side of the house. We also have the internal fleet versus the external common carrier fleet. There's a bunch of dynamics and other items that we're obviously levering behind the scenes to work on all of that as well to help mitigate those costs. Great. Thanks, guys. Appreciate it. Bye. Your next question comes from the line of Matthew Bouley with Barclays. Morning, everyone. Thanks for taking the question. Apologies that I'm gonna keep beating that horse on price cost for a second here. Big topic today. My question is on your competitive positioning and demand, et cetera. Maybe focusing on the competitive side first. Versus your plastic competitors, you just mentioned your vertical integration and recycling capabilities, also versus concrete pipe, et cetera, and kind of considering the cost of transportation here, what are you seeing out there from the competitive perspective, and how do you think that ultimately plays through with your ability to actually get the price you need in the market given this fairly unprecedented level of cost inflation? Thank you. All right. Okay, Matt. Number one is we're out in the market. We are trying to get ahead of this. Inflation of this magnitude and breadth and speed, if you don't get ahead of it, you're really in bad shape. We went to get ahead of that. Probably ahead of our competitors in many places. We're holding the line, and our orders and rate are holding up nicely. That's in general. As you know, this thing is kind of regional, and it's better behaved in some areas versus others. I'd say right now, versus our competitors, they are experiencing similar inflationary pressures that we are. I'm thinking about the plastic pipe guys. As you said, obviously, we use all of our scale of buying in the virgin market and pivoting to the recycled material quite quickly over the last 60 days. Honestly, faster than I thought we could. Our team is doing a really nice job both procuring the right material and converting the right material. We have that new asset in Cordele, Georgia, ramping up next month. Our timing couldn't be better on this recycling activity, which again, we believe makes us extremely competitive against any regional competitor on the plastic pipe. On the concrete side, they are not facing the same escalations we are. Our value prop is probably compressed a little bit, particularly in certain regions, but we don't think that's a permanent thing. We believe that that's some of the normal dynamics. I would recognize that in certain places, that has become much more competitive, our value prop versus the concrete guys. We'll work our way through that, and we're thinking about other things and products and techniques to get even more competitive against those guys than we have been. Okay. No, that's perfect. I really appreciate all that color, exactly what I was looking for. I'll move to another topic. I'm sure there will be more asked on that, but the non-resi end market. You're guiding that to be modestly positive or flat to up low single digits, excuse me, in the next fiscal year. Sounded like large projects are what's carrying that, but I'm curious if you can kind of just, I guess, unpack that a little bit regionally by vertical. Where are you seeing more of that strength? You highlighted data center a couple times. How much of that is kind of carrying the load here versus other areas that might still be more choppy on the non-resi side? Thank you. I'm going to say a few words, Matt, and then I'm going to hand it over to Michael Higgins. In general, our biggest focus and strength is on that non-res market from the ADS legacy business. In those Allied Products, our coverage, the HP products in there, our N-12. We just have a great product line for a wide breadth of non-residential. I think that's what we've been seeing over the last year or so, is that we are consistently outperforming in that market. It is across lots of kind of jobs. I'll turn it over to Mike. He has a lot of insights around that kind of by segment and geography. Yeah, Matt, you hit on the data centers. That's obviously a lot of activity there. What we've seen all year from answering the project type or project segment thing first is we've just seen pretty solid growth and activity in just kind of general purpose commercial construction, institutional construction has been pretty solid. When you look at geographically for the year, we had probably 35+ states that were showing positive growth in non-res. Again, there was parts of the Midwest that were really good. We still continue to see good non-residential growth in those states that we have a lot of focus on. Florida, Virginia, North Carolina, Texas, and California were very positive for the year as well. Scott touched on this a little bit. That's our best opportunity to sell the complete package, right? Two-thirds of our Allied Products go into that non-residential end market. As the year has evolved, I think our sales team and our product management team has done a really nice job of really just increasing our focus on what we call attachment, managing the project funnel, being upfront. Exploiting is a little bit of a strong word, but exploiting our position in the marketplace, our reach in the engineering firms, and the Project Resource Center that we have that aids these engineers and designs and makes things very simple for them with our tools and our other programs. I think it's just a very high level of execution on that. It's not easy. The market's not great. You know what I mean? Where those opportunities are, our sales force is very nimble and flexible and can go find them and can execute on that. That's what you saw in those results this year. Got it. Okay. No, that's great color, guys. Thank you. Good luck, and I'll see you all next month. Okay. We look forward to it. Your next question comes from the line of Bryan Blair with Oppenheimer. Your line is open. Please go ahead. Thank you. Good morning, everyone. To level set a little bit on the top line outlook, I think you had mentioned $300 million in NDS contribution. With regard to the recast segments, how should we think of organic stormwater and wastewater growth for fiscal 2027? This is Scott. The way I would talk to it or at the midpoint of our guide is roughly a flat end market based on the end market dynamic and what we're seeing out there, basically flat on the volume side of the house. Price cost, we've talked about having the pricing in the market to offset the cost inflation and cost pressures we're seeing. You got the $300 million for the full year for NDS. That's the way to get to that $3,450,000 at the midpoint of our revenue guide. Okay. Understood. It sounds like NDS integration is tracking well. You reiterated confidence in $25 million in cost synergies by year three. What should we assume for fiscal 2027 synergies? Perhaps more importantly, maybe you can speak to some of the cross-selling opportunities that are starting to be realized. Well, I'm going to let Scott Cottrill answer the what's in the plan. I'm not allowed to answer those, Bryan. The cross-selling, we are going to talk a lot about that at the Investor Day. We think that's a great topic to talk about in the Investor Day for the longer term plan. What I would just parenthetically add to that is we get more excited about the cross-selling as we go forward in time over these last two months. They're not all easy to get to quickly, but they're there. It's channel, it's product line, it's sales force, it's a lot of good things. It's just not one-dimensional. I'll hand over the other one to Scott. Yeah. I'll say right now we're, A, really excited, like Scott said on the call, about the opportunities in front of us. B, we're ahead of the acquisition model and where we saw the phasing over those three years. Again, cross-selling is becoming one of those things that's really, as Scott just mentioned, coming out as a even bigger opportunity than what we had thought going into it. I'm not going to give you a dollar amount. All I'll tell you is that in the first year of that three-year plan, it was basically a back end year two, year three kind of ramp, if you will, to get to that run rate synergy by year three. We didn't assume a lot here in the first full year, but I'll tell you that we're well ahead of that. That's the way I would respond to that question. Yeah. Appreciate the color. Thanks, guys. Your next question comes from the line of Jeffrey Hammond with KeyBanc Capital Markets. Your line is open. Please go ahead. Yeah. Hi. Good morning, everyone. Good morning. I think you said wastewater and stormwater, you think flat volumes and I guess wastewater being heavily res and at down to mid to high single market, pretty impressive. Can you just talk about, again, what's driving the outgrowth there? I think you mentioned in the prepared remarks about an air pocket potentially in that res end market. Maybe just expand on that. Let me take the air pocket first, and then I'm going to hand it over to Craig Taylor, who runs the Infiltrator business in that wastewater segment for us to answer what that outgrowth is. The air pocket, Jeff, is simply people buying ahead of these announced price increases. We're limiting that. We're managing that. That's not an open-ended thing, but it's not unfamiliar behavior of our customers in inflationary times or ahead of price increases. What we expect is Q1 to be a little heavy and bountiful from a volume standpoint, but we expect that to correct itself in the second quarter. This guidance, this plan, our discussion really says that it's all normalized within the first half of the year versus the second half of the year, which is usually how we guide is first half, second half revenue. I'm just trying to get the marker out there with you guys that if the volume and the sales are big or above expectations in Q1, there's an air pocket out there for sure. I've been telling the board and in preparing for today, I made it pretty clear I wanted to get this out there with you all so you're not surprised. That's really the wrap on that part of the remarks, Jeff. Craig can tell you how we're outperforming the market and the residential really driven by his business. Morning, Jeff. Yeah, the wastewater business is going to be challenged on the residential side, but we've had a really good run here with our new products that we've introduced into the market, specifically around our tanks business, and then also around our advanced treatment systems, too. The tanks, we've expanded the product category. We've been able to take market share there. On the advanced treatment systems, again, with the Orenco acquisition and the Infiltrator, we've put that together and we're attacking the advanced treatment markets and picking up some pretty good share there. Also, we've been able to get more distribution points for our tanks out in the market, and this has really helped offset that slowdown in the residential market for our business right now. We see the new products continue to provide some growth moving forward. If I would just add one thing, a couple of things to that. Infiltrator had very great spread or distribution points in leach field products. They're traditional. As they've introduced the tanks and expanded the number of displacements or SKUs in that offering, it's really been able to get into the additional distribution points. Think about wherever we sell a leach field, we want to be selling a tank, and we're still relatively under-penetrated on that. That, along with these advanced treatment products and an intense focus on getting the regulatory side of that lined up, which they do very well, I think that's why you're seeing the beat versus the market there. It's the scale, it's their obvious technology prowess and those new products kind of just driving through that market left and right. Okay, great. The balance sheet's in pretty good shape despite the acquisition. I know you were kind of protecting the balance sheet ahead of that NDS deal, stock's really taken a hit around this inflation concern. Just how are you thinking about the lean on buybacks versus maybe what the pipeline looks like here in the near term? I'll say a few words. I think Cottrill will want to chime in on this as well, Jeff. You were right. We conserved cash ahead of that deal, practically paid all cash for it. I knew that would give high level of certainty to get the deal done. We got a buyback authorized with the board shortly after that. We weren't immediately exercising on that, but in February, when this conflict began and our stock went down, with the board, we went and authorized that, and we exhausted that $200 billion here recently. We'll go back in and try to use our balance sheet to do that prudently while maintaining the right level of liquidity to run our business. We're going to consume some working capital this year as our receivables go up, as our inventory costs go up. We know that. Don't let that alarm anyone. We're kind of planning and budgeting for that. Even with that, some repurchase and doing that, we really got room to go do something if we really wanted, if the right one came up. You add to that, Scott? I think you did a great job summarizing. I think the only thing I'd say is right now we got to digest NDS, which we're focused on. To Scott's point, if one of those strategic assets becomes available, we've got the financial flexibility to do more than consider that. It would be more management bandwidth. That would be what we'd have to work on. We've got the balance sheet, to your point, where it needs to be. Working capital as a percent of sales came in slightly below the 20% target that we have at the end of 2026. We've got that going up to about 21% at the end of fiscal 2027, just based on the inflationary cost pressures. We saw this same activity in 2021, 2022, we kind of know what happens to the balance sheet. We know how to manage the balance sheet. We have a great S&OP process. NDS has a very active working capital management program underway right now. Significant opportunity to bring that down as part of our synergy program. Our synergy programs for NDS aren't all on the revenue and EBITDA side. Mostly they are, for sure. We've got a bunch going on on the working capital side as well, and the cash flow generation. You'll see us bring that down as well and manage it. To Scott's point, we target two times levered in uncertain times. With the macroeconomic uncertainty, the end markets where they are, we'll be prudent. We'll target staying below the two right now. We're at 1.6x, as we mentioned. We'll manage that actively, and we see it as a really advantage of the company and where we can deploy that capital. We'll keep managing that as we go forward. Okay, perfect. Thanks. Your next question comes from the line of John Lovallo with UBS. Hey, good morning, guys. You've Matt Johnson here on for John. Appreciate the time. I guess, could you guys just talk a little bit about your ability to flex up recycled resin right now? I guess kind of where does your recycled usage sit today? How quickly can you ramp that up? Then also, just any color you guys could give on what the cost spread between virgin and recycled looks like today. I'm going to let Scott Cottrill answer the virgin versus what he's got in there. Like I said, I'm not allowed to answer those questions anymore. What you saw in 2026 is we love our recycling program. We see a lot of advantages. It's usually that 15%-20% benefit, but that can invert at times. What we saw in 2026 is it was a much more friendly virgin resin market for us. You saw us toggle a little bit more toward the virgin than the recycled side of the house. What you see us now doing is toggling back to the recycled resin. The other thing I'll say is we're also putting the cash flow and the balance sheet to work. We have a significant expansion in our recycling capacity and capability going on in the Southeast U.S. right now. Putting that closer to our facilities in that region, which makes a lot of sense on the transportation side and conversion side of the house. Again, we have a lot of capability, capacity and ability and agility to toggle back to recycling pretty quick, and we're already in the middle of doing that right now. Yeah. We won't disclose the % recycled that we're going to. We will acknowledge that the prior year that we just closed was much lower than normal because of the pricing dynamics in the market at the time. That said, this recycling activity for us is a long-term operational component of the company. It really bears a lot of fruit in these inflationary times like this, and it mitigates a lot of cost. We're flexing that pretty hard. In fact, as I said earlier, we're flexing it hard. The team's going faster than I thought we would be able to do. We're also able to get the material into our recycling facilities. In other words, there's enough material out there to get. You got to work that end very hard. I think it's a unique competitive advantage of the company that we're going to press the floor on right now. Appreciate that, guys. I guess just kind of bigger picture here. I know you guys have, I would say, a pretty long history of navigating through different inflationary environments. I think the way you guys typically talk about it is you put through price, and then you hold on to the majority of that, even as costs kind of normalize. I guess, do you guys see that playing out any differently this time around? I guess, asked differently, does the softer demand environment right now make that more challenging to do? That's a good question, and certainly, that is a factor. I think the way you overcome some of that softer demand is selling the package of products that we have, making sure we're using the scale of the distribution that we have across both the wastewater and the stormwater businesses. Will the dynamics on the other end, as you suggest, play out perhaps a little differently than the past because of competitive intensity? Maybe, maybe not. It'll be really regional and local. If it does, it won't be a nationwide outbreak type thing. I feel pretty good about our tools to go and work that on the other side. I feel pretty confident about the value proposition we have versus our competitors on the other side of this. We'll see how it plays out. I appreciate the question. I understand where you're going, but it's not just enough to say we've done this before, we know how to do it. I think it is more, we've done it before. We have a playbook. We have tools. We have experience. We acknowledge that it could be a little different on the other side, but I would never bet against us to be able to understand and adjust to that accordingly in a very profitable manner. Thanks, guys. Appreciate it. Your next question comes from the line of Colin Verron with Deutsche Bank. Your line is open. Please go ahead. Good morning. Thanks for taking my questions. I guess I just wanted to start on one of the other levers that you talked about, other than recycling, was on the transportation side. You made a comment about internal fleet versus common carrier exposure. Can you just sort of help us understand sort of your ability to flex that and kind of what the benefit of that could be from a dollar standpoint? Good. Again, Scott Barbour, good question on our logistics. We are an ultimate last mile carrier with our fleet to our trade deliveries. Anything within a certain mileage of our factories and distribution centers, we deliver on that fleet. It's roughly 70% of our revenue for the legacy business, the ADS business. Here's what I think, and why this is the right long-term investment. In high inflationary transportation times, where both diesel and the rate, in other words, there's two components on common carriers. It's the rate they charge you to carry, and that's a supply and demand, and then it's the cost of diesel to operate that. It also can be their wages of drivers, but it's mainly the diesel. Right now, both rate and diesel are accelerating quickly. On my private fleet, I really only have diesel accelerating, so I've become much more competitive versus common carriers in my fleet. What does that mean? That means I can probably expand my radius of delivery from my points to make myself more competitive against competitors that are largely on common carrier, not last mile delivery like we have. Again, part of our scale, our balance sheet, all those things that we've done over a long period of time to create that kind of thing. This is the time, in these inflationary times, on the logistics, it's our fleet inflates at a lower rate, basically just on the diesel, and on the recycling, where we have an additional tool versus the virgin material buy to mitigate cost. These kinds of times really show the benefit of the long-term investments the company has made and how it positions us in these more difficult periods. That's why I'm so confident we win on the other side, based on that other question. We have these tools and insights that I think are really unique in this industry. Great. That's really helpful color. I guess, after the NDS acquisition, in sort of your portfolio with Infiltrator, I guess is there any way to think about how you guys look at the end markets and your ability to outperform? Is there a category or an end market that you guys expect to see the biggest share gains? I'm looking at that residential assumption being down the most here, but given your expanded portfolio, is the opportunity for share gains really in that resi market? Is it really across the board? I'd just be curious as to how you guys think about the puts and takes on the outperformance within the different end markets. I think we probably have more opportunity in residential, because that's really where NDS is stronger. We have our strength in Infiltrator, in residential kind of participation, and their growth. You guys see where they're growing in residential. The natures of the two are a little different. Infiltrator is more new construction, a third R&R. NDS kind of flips that. There's no doubt we've gotten bigger in residential. Our legacy business is relatively under-penetrated in residential. We think this might give us a few more insights there, that cross-selling comes in play more on the residential. On the non-residential side, there are some great products NDS has that we do not have for our solutions package that we sell basically into these projects. Thinking of these channel drains in particular, those will be a very nice addition to our product lines. I think to answer your question, maybe more on the residential than the non-residential, but both have runway. Great. I appreciate all the commentary and good luck. Your next question comes from the line of Trey Grooms with Stephens. Your line is open. Please go ahead. Hey, good morning, guys. This is Ethan on for Trey. Thanks for taking the question. You briefly touched on the prepared remarks on maybe leveraging SG&A a little bit to mitigate some of that COGS inflation. Any more color on the initiatives here? I know you've previously guided to SG&A as a % of sales in the past, so if you can provide any color on what guide assumes from an SG&A standpoint would be great. Thanks. Yeah. Again, the SG&A for this past year has a lot of moving pieces to it. As you think through next year, I would guide you to use kind of a 14% SG&A as a % of revenue, kind of a number. We're getting back to kind of a normalized number for us as to where we go. Again, you've got NDS coming in on a full year, so obviously that's incremental increase that you've got going on there. You've got the initiatives that we all have here, that we have every year, on managing our costs, all the way from T&E and everything else that we've put into place. We do a really good job, I think, of shining a light on it in the different cost centers in managing that cost bucket really well. We also know that we have to invest for the future. We do that to make sure that we're supporting the long-term growth and strategic initiatives of the company. There's always gonna be some dollar increase there, but in a year like this year coming up, and we look at that revenue growth, due to this price cost dynamic that's happening, we should expect to get some real nice leverage on that SG&A fixed cost line. Going down to about 14% from the 15% + we were this past year is the way I'd think about it. Right. Got it. That's all very clear. Maybe switching gears to just making sure we understand the assumptions around the volume guide. The guide assumes volume flat. Obviously, your performance has been trending above this rate and you still expect to outperform the market, but there's a lot of moving pieces, right? Because of the customer buying ahead of the price increases. You also made comments around some potential regional compression of your value prop relative to concrete pipe. I guess my question is this implied deceleration in volume more a reflection of what you're seeing on the ground in terms of underlying demand, perhaps in response to these price increases? Or just some understandable conservatism on the volume outlook? This is Scott Barbour. I think our conservatism on the volume is really related to the market and the end market and demand. If you recall, I said non-res, that we think it'll be more of the same. Agriculture will be a little compressed year-over-year. The residential, particularly on the pipe side, will be compressed year-over-year because land development projects are slowing down. There's no volume compression due to competitive activity. You're correct, we do think these dynamics will happen in the market, and we will meet what we got to go do to get the business that we want on a local basis. It's more the end market behavior. Got it. That's all very clear. Yeah, your ability to outperform the market in this environment is definitely encouraging. Yep, thanks for taking the questions. You're welcome. Thank you. There are no further questions at this time. Go ahead and hand it back to Bianca. I will turn the call back to Scott Barbour for closing remarks. Thanks. I appreciate it, and I appreciate the questions and the quality of the questions. We probably went a little deeper than we normally do on some of those. As many of you said, there are a lot of moving pieces right now, and I just don't want to have any surprises as we go through the year, as different things are kind of emerging. That's kind of why we went a little deeper than we normally would. Alison prepared us with like three pages of Q&A for this, but we're just trying to let you know what's going on. We feel good about this plan. We feel good about the year we closed. We feel good about this plan. We know it's not gonna be easy, like I said earlier, the tools that we have, the experience, the footing of the company in the broadest possible way, are, I think, a lot better today than they were when we encountered other environments like this. We're very confident of that. We appreciate you all coming in today into the call. Look forward to some discussions later on. Let's have a nice Memorial today, a safe and enjoyable Memorial Day weekend. Thanks. This concludes today's call. Thank you for attending. You may now disconnect.

Speaker 10: Good morning, ladies and gentlemen, and welcome to Advanced Drainage Systems' 4th quarter and fiscal year 2026 results conference call. My name is Tracy, 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 press star one to raise your hand. To withdrawal your question press star one 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, ladies and gentlemen, and welcome to Advanced Drainage Systems' 4th quarter and fiscal year 2026 results conference call. good morning ladies and gentlemen and welcome to advanced drainage systems' 4th quarter and fiscal year 2026 results conference call My name is Tracy, and I am your operator for today's call. my name is tracy and i am your operator for today's call At this time, all participants are in a listen-only mode. at this time all participants are in a listen-only mode Later, we will conduct a question and answer session. later we will conduct a question and answer session If you would like to ask a question press star one to raise your hand. To withdrawal your question press star one 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. if you would like to ask a question press star one to raise your hand. to withdrawal your question press star one 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. sir you may begin

Speaker 9: Good morning, everyone. Thanks for joining us today. With me today, I have Scott Barbour, our President and CEO, Scott Cottrill, our Chief Financial Officer, and Craig Taylor, President of our Infiltrator Water Technologies 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 8-K submitted to the SEC. Good morning, everyone. good morning everyone Thanks for joining us today. thanks for joining us today With me today, I have Scott Barbour, our President and CEO, Scott Cottrill, our Chief Financial Officer, and Craig Taylor, President of our Infiltrator Water Technologies business. with me today i have scott barbour our president and ceo scott cottrill our chief financial officer and craig taylor president of our infiltrator water technologies business I would also like to remind you that we will discuss forward-looking statements. 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. 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. 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. 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. 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. 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. I'll now turn the call over to Scott Barbour. We will make a replay of this conference call available via webcast on the company website. 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 Barbour. i'll now turn the call over to scott barbour

Speaker 11: Thank you, Mike Higgins. Good morning, everyone. Thank you all for joining us on today's call. We are pleased to close out fiscal year 2026 with strong results. We have a lot to cover today, including our fourth quarter performance, full year results, an update on the NDS integration, and a preview of what lies ahead as we prepare for our upcoming Investor Day. A lot happened in the fourth quarter. Despite the quarter being our most weather-dependent and seasonally variable period, we executed well and delivered results that reflect the strength and breadth of our portfolio. The diversification across our Allied Products, Infiltrator business, and the HP Pipe products, combined with the continued execution of our market share model, allowed us to navigate a challenging demand environment and close the fiscal year on a strong note. Let me touch on a few highlights. Thank you, Mike Higgins. thank you mike higgins Good morning, everyone. good morning everyone Thank you all for joining us on today's call. thank you all for joining us on today's call We are pleased to close out fiscal year 2026 with strong results. we are pleased to close out fiscal year 2026 with strong results We have a lot to cover today, including our fourth quarter performance, full year results, an update on the NDS integration, and a preview of what lies ahead as we prepare for our upcoming Investor Day. we have a lot to cover today including our fourth quarter performance full year results an update on the nds integration and a preview of what lies ahead as we prepare for our upcoming investor day A lot happened in the fourth quarter. a lot happened in the fourth quarter Despite the quarter being our most weather-dependent and seasonally variable period, we executed well and delivered results that reflect the strength and breadth of our portfolio. despite the quarter being our most weather-dependent and seasonally variable period we executed well and delivered results that reflect the strength and breadth of our portfolio The diversification across our Allied Products, Infiltrator business, and the HP Pipe products, combined with the continued execution of our market share model, allowed us to navigate a challenging demand environment and close the fiscal year on a strong note. the diversification across our allied products infiltrator business and the hp pipe products combined with the continued execution of our market share model allowed us to navigate a challenging demand environment and close the fiscal year on a strong note Let me touch on a few highlights. let me touch on a few highlights As you saw in the press release, following the acquisition of NDS, we updated our reporting segments to Stormwater and Wastewater, as reflected in the results today. The Stormwater segment contains the legacy ADS business, pipe and Allied Products, as well as acquisitions we have made in the space, NDS, CULTEC, and River Valley Pipe. The Wastewater segment contains the legacy Infiltrator business as well as the acquisition of Orenco Systems. Excuse me. Stormwater revenue increased 12%, driven by a 43% increase in Allied Product sales, including the $49 million contribution from the NDS acquisition that closed February 2nd. On an organic basis, Stormwater sales increased 2% overall, with a 12% growth in Allied Products. Once again, revenue in several highly profitable products grew double digits, including the StormTech retention/detention chambers, the Nyloplast capture structures, and our water quality product line. As you saw in the press release, following the acquisition of NDS, we updated our reporting segments to Stormwater and Wastewater, as reflected in the results today. as you saw in the press release following the acquisition of nds we updated our reporting segments to stormwater and wastewater as reflected in the results today The Stormwater segment contains the legacy ADS business, pipe and Allied Products, as well as acquisitions we have made in the space, NDS, CULTEC, and River Valley Pipe. the stormwater segment contains the legacy ads business pipe and allied products as well as acquisitions we have made in the space nds cultec and river valley pipe The Wastewater segment contains the legacy Infiltrator business as well as the acquisition of Orenco Systems. the wastewater segment contains the legacy infiltrator business as well as the acquisition of orenco systems Excuse me. excuse me Stormwater revenue increased 12%, driven by a 43% increase in Allied Product sales, including the $49 million contribution from the NDS acquisition that closed February 2nd. stormwater revenue increased 12% driven by a 43% increase in allied product sales including the $49 million contribution from the nds acquisition that closed february 2nd On an organic basis, Stormwater sales increased 2% overall, with a 12% growth in Allied Products. on an organic basis stormwater sales increased 2% overall with a 12% growth in allied products Once again, revenue in several highly profitable products grew double digits, including the StormTech retention/detention chambers, the Nyloplast capture structures, and our water quality product line. once again revenue in several highly profitable products grew double digits including the stormtech retention/detention chambers the nyloplast capture structures and our water quality product line These product lines continue to benefit from new product introductions and ongoing customer programs. Pipe revenue decreased 2%, reflecting softness in the residential and infrastructure markets. Agriculture sales increased 30% in the quarter as customers bought ahead of price increases. Pricing remained stable throughout the quarter. Material costs were favorable relative to the prior year. Wastewater revenue increased 4% with strong activity in the Southeast and South. Tank products increased double digits, driven by material conversion, product line expansion, and additional distribution. Leach field sales remains resilient, and our advanced treatment systems, including Orenco, continued to gain share in both residential and commercial applications. From an end market perspective, sales in our core non-residential market increased 6%, with strength in the West and Midwest. Sales of Allied Products experienced broad-based growth across the U.S. as we continue to focus on selling the complete package. These product lines continue to benefit from new product introductions and ongoing customer programs. these product lines continue to benefit from new product introductions and ongoing customer programs Pipe revenue decreased 2%, reflecting softness in the residential and infrastructure markets. pipe revenue decreased 2% reflecting softness in the residential and infrastructure markets Agriculture sales increased 30% in the quarter as customers bought ahead of price increases. agriculture sales increased 30% in the quarter as customers bought ahead of price increases Pricing remained stable throughout the quarter. pricing remained stable throughout the quarter Material costs were favorable relative to the prior year. material costs were favorable relative to the prior year Wastewater revenue increased 4% with strong activity in the Southeast and South. wastewater revenue increased 4% with strong activity in the southeast and south Tank products increased double digits, driven by material conversion, product line expansion, and additional distribution. tank products increased double digits driven by material conversion product line expansion and additional distribution Leach field sales remains resilient, and our advanced treatment systems, including Orenco, continued to gain share in both residential and commercial applications. leach field sales remains resilient and our advanced treatment systems including orenco continued to gain share in both residential and commercial applications From an end market perspective, sales in our core non-residential market increased 6%, with strength in the West and Midwest. from an end market perspective sales in our core non-residential market increased 6% with strength in the west and midwest Sales of Allied Products experienced broad-based growth across the U.S. as we continue to focus on selling the complete package. sales of allied products experienced broad-based growth across the u.s as we continue to focus on selling the complete package Sales in the residential end market increased 18%, including the impact from NDS. Excluding NDS, residential sales decreased 1%. Single-family housing continues to face headwinds from affordability and interest rate dynamics, in addition to geopolitical uncertainty. Importantly, we continue to see improving trends in the multifamily development. The Infiltrator core residential business continues to significantly outperform the market, driven by new products and new distribution partners. We remain confident we have the right strategies and portfolio to increase our participation in the residential market as conditions inevitably improve. Moving to profitability, adjusted EBITDA increased 6% in the quarter, resulting in an adjusted EBITDA margin of 27.8%. This quarter's resilient margin is a reflection of the favorable growth, product mix, and price cost, as well as operational self-help initiatives and the capital invested over the last several years. Sales in the residential end market increased 18%, including the impact from NDS. sales in the residential end market increased 18% including the impact from nds Excluding NDS, residential sales decreased 1%. excluding nds residential sales decreased 1% Single-family housing continues to face headwinds from affordability and interest rate dynamics, in addition to geopolitical uncertainty. single-family housing continues to face headwinds from affordability and interest rate dynamics in addition to geopolitical uncertainty Importantly, we continue to see improving trends in the multifamily development. importantly we continue to see improving trends in the multifamily development The Infiltrator core residential business continues to significantly outperform the market, driven by new products and new distribution partners. the infiltrator core residential business continues to significantly outperform the market driven by new products and new distribution partners We remain confident we have the right strategies and portfolio to increase our participation in the residential market as conditions inevitably improve. we remain confident we have the right strategies and portfolio to increase our participation in the residential market as conditions inevitably improve Moving to profitability, adjusted EBITDA increased 6% in the quarter, resulting in an adjusted EBITDA margin of 27.8%. This quarter's resilient margin is a reflection of the favorable growth, product mix, and price cost, as well as operational self-help initiatives and the capital invested over the last several years. moving to profitability adjusted ebitda increased 6% in the quarter resulting in an adjusted ebitda margin of 27.8%. this quarter's resilient margin is a reflection of the favorable growth product mix and price cost as well as operational self-help initiatives and the capital invested over the last several years Turning to the NDS integration, we are pleased with the progress made since closing the acquisition in February. The NDS team is a strong cultural fit. We are on track to achieve our integration milestones. We continue to expect $25 million in annual cost synergies by year three. We are increasingly excited about the revenue synergy opportunities as we expand the collective product portfolio across our distribution and retail channels. We look forward to talking about NDS at Investor Day. Regarding the upcoming Investor Day, which will take place on June 18th at our engineering and technology center in Hilliard, Ohio, we are looking forward to sharing updates on our differentiated growth strategy and our resilient profit platform, as well as our medium-term financial targets and the payoff from the significant capital we have deployed over the last several years. We hope to see you all there. Turning to the NDS integration, we are pleased with the progress made since closing the acquisition in February. turning to the nds integration we are pleased with the progress made since closing the acquisition in february The NDS team is a strong cultural fit. the nds team is a strong cultural fit We are on track to achieve our integration milestones. we are on track to achieve our integration milestones We continue to expect $25 million in annual cost synergies by year three. we continue to expect $25 million in annual cost synergies by year three We are increasingly excited about the revenue synergy opportunities as we expand the collective product portfolio across our distribution and retail channels. we are increasingly excited about the revenue synergy opportunities as we expand the collective product portfolio across our distribution and retail channels We look forward to talking about NDS at Investor Day. we look forward to talking about nds at investor day Regarding the upcoming Investor Day, which will take place on June 18th at our engineering and technology center in Hilliard, Ohio, we are looking forward to sharing updates on our differentiated growth strategy and our resilient profit platform, as well as our medium-term financial targets and the payoff from the significant capital we have deployed over the last several years. regarding the upcoming investor day which will take place on june 18th at our engineering and technology center in hilliard ohio we are looking forward to sharing updates on our differentiated growth strategy and our resilient profit platform as well as our medium-term financial targets and the payoff from the significant capital we have deployed over the last several years We hope to see you all there. we hope to see you all there Please reach out to the investor relations team with any questions about the event. Fiscal year 2026 was a milestone year for ADS, and I'm very proud of the entire organization for how we executed. We closed the highly strategic acquisition of NDS, almost entirely with cash on hand, delivered one of our most profitable years in our history, generated significant free cash flow, returned $155 million to shareholders, and continued to invest in the capabilities that will define our next phase of growth. We significantly outperformed our two largest markets, non-residential and residential, increasing 8% and 7% respectively. These two markets represent over 80% of our revenues. The self-help operational initiatives we launched over a one year ago are clearly bearing fruit, and our teams executed at a high level despite a challenging demand environment, resulting in the second highest adjusted EBITDA margin in the company's history of 31.6%. Please reach out to the investor relations team with any questions about the event. please reach out to the investor relations team with any questions about the event Fiscal year 2026 was a milestone year for ADS, and I'm very proud of the entire organization for how we executed. fiscal year 2026 was a milestone year for ads and i'm very proud of the entire organization for how we executed We closed the highly strategic acquisition of NDS, almost entirely with cash on hand, delivered one of our most profitable years in our history, generated significant free cash flow, returned $155 million to shareholders, and continued to invest in the capabilities that will define our next phase of growth. we closed the highly strategic acquisition of nds almost entirely with cash on hand delivered one of our most profitable years in our history generated significant free cash flow returned $155 million to shareholders and continued to invest in the capabilities that will define our next phase of growth We significantly outperformed our two largest markets, non-residential and residential, increasing 8% and 7% respectively. we significantly outperformed our two largest markets non-residential and residential increasing 8% and 7% respectively These two markets represent over 80% of our revenues. these two markets represent over 80% of our revenues The self-help operational initiatives we launched over a one year ago are clearly bearing fruit, and our teams executed at a high level despite a challenging demand environment, resulting in the second highest adjusted EBITDA margin in the company's history of 31.6%. the self-help operational initiatives we launched over a one year ago are clearly bearing fruit and our teams executed at a high level despite a challenging demand environment resulting in the second highest adjusted ebitda margin in the company's history of 31.6% As we look into fiscal 2027, overall demand at this point looks similar to fiscal 2026, with a slightly more negative outlook on agriculture and single-family housing. Demand is very choppy, with order patterns shifting as customers try to get orders in ahead of price increases. This could result in an air pocket this summer, though we expect this to normalize overall within the first half of the year. The non-residential market is modestly more resilient, expected to be flat to up low single digits. Activity in this market is driven by strength in large projects like data centers. We are well-positioned to win these jobs due to the solutions package, installation benefits, last mile delivery, and the national network that we have, all of which position us to capture a larger portion of the stormwater systems. As we look into fiscal 2027, overall demand at this point looks similar to fiscal 2026, with a slightly more negative outlook on agriculture and single-family housing. as we look into fiscal 2027 overall demand at this point looks similar to fiscal 2026 with a slightly more negative outlook on agriculture and single-family housing Demand is very choppy, with order patterns shifting as customers try to get orders in ahead of price increases. demand is very choppy with order patterns shifting as customers try to get orders in ahead of price increases This could result in an air pocket this summer, though we expect this to normalize overall within the first half of the year. this could result in an air pocket this summer though we expect this to normalize overall within the first half of the year The non-residential market is modestly more resilient, expected to be flat to up low single digits. the non-residential market is modestly more resilient expected to be flat to up low single digits Activity in this market is driven by strength in large projects like data centers. activity in this market is driven by strength in large projects like data centers We are well-positioned to win these jobs due to the solutions package, installation benefits, last mile delivery, and the national network that we have, all of which position us to capture a larger portion of the stormwater systems. we are well-positioned to win these jobs due to the solutions package installation benefits last mile delivery and the national network that we have all of which position us to capture a larger portion of the stormwater systems The residential market remains under pressure with interest rates as well as economic and geopolitical uncertainty impacting construction activity. We expect to outperform the market, driven by our sales efforts to work with large national and regional home builders, focus on the cross-selling opportunities, and capitalize on the growing portions of the market, such as advanced treatment in the multifamily development. When you stack up our strengths, the scale, product portfolio, go-to-market strategy, installation benefits, logistics capabilities, and our ability to invest in the business, people, and industry growth, you see the ADS value proposition remains both relevant and powerful. 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 Cottrill. The residential market remains under pressure with interest rates as well as economic and geopolitical uncertainty impacting construction activity. the residential market remains under pressure with interest rates as well as economic and geopolitical uncertainty impacting construction activity We expect to outperform the market, driven by our sales efforts to work with large national and regional home builders, focus on the cross-selling opportunities, and capitalize on the growing portions of the market, such as advanced treatment in the multifamily development. we expect to outperform the market driven by our sales efforts to work with large national and regional home builders focus on the cross-selling opportunities and capitalize on the growing portions of the market such as advanced treatment in the multifamily development When you stack up our strengths, the scale, product portfolio, go-to-market strategy, installation benefits, logistics capabilities, and our ability to invest in the business, people, and industry growth, you see the ADS value proposition remains both relevant and powerful. when you stack up our strengths the scale product portfolio go-to-market strategy installation benefits logistics capabilities and our ability to invest in the business people and industry growth you see the ads value proposition remains both relevant and powerful Overall, the long-term outlook for our business remains strong, supported by compelling secular tailwinds, driving demand for water management solutions across North America. 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 Cottrill. now i'll turn the call over to scott cottrill

Speaker 12: Thanks, Scott. Before I get into the details, I want to step back and highlight a few key takeaways from the quarter. We delivered excellent financial performance, exceeding the top end of both our revenue and adjusted EBITDA guidance ranges. We also closed the NDS acquisition in early February, representing a $1 billion investment that strengthens our portfolio and positions us well for long-term growth. As you saw in our press release, we announced a new segment and reporting structure to better align with how we think about and manage the business. Finally, we fortified the balance sheet through a series of capital structure actions that extended our weighted average maturities to more than six years while lowering our weighted average cost of debt by 30 basis points. Thanks, Scott. thanks scott Before I get into the details, I want to step back and highlight a few key takeaways from the quarter. before i get into the details i want to step back and highlight a few key takeaways from the quarter We delivered excellent financial performance, exceeding the top end of both our revenue and adjusted EBITDA guidance ranges. we delivered excellent financial performance exceeding the top end of both our revenue and adjusted ebitda guidance ranges We also closed the NDS acquisition in early February, representing a $1 billion investment that strengthens our portfolio and positions us well for long-term growth. we also closed the nds acquisition in early february representing a $1 billion investment that strengthens our portfolio and positions us well for long-term growth As you saw in our press release, we announced a new segment and reporting structure to better align with how we think about and manage the business. as you saw in our press release we announced a new segment and reporting structure to better align with how we think about and manage the business Finally, we fortified the balance sheet through a series of capital structure actions that extended our weighted average maturities to more than six years while lowering our weighted average cost of debt by 30 basis points. finally we fortified the balance sheet through a series of capital structure actions that extended our weighted average maturities to more than six years while lowering our weighted average cost of debt by 30 basis points These actions, combined with our strong cash generation, resulted in year-end leverage of only 1.6x, inclusive of the $1 billion NDS acquisition, and most importantly, provide the flexibility and optionality to support our capital allocation priorities in fiscal 2027. For the fourth quarter, revenue increased 10% to $677 million, including the impact from NDS. On an organic basis, revenue from Allied Products, tanks, and residential advanced treatment all increased by double digits, as Scott mentioned. Importantly, we believe our results outpaced the underlying end markets, demonstrating the differentiated growth strategy and resiliency of the ADS business model. From a profitability perspective, we are very pleased with the 27.8% adjusted EBITDA margin for the fourth quarter. A couple of things I feel are worth noting regarding the quarterly results. The fourth quarter is the fourth consecutive quarter of volume growth and favorable price costs. These actions, combined with our strong cash generation, resulted in year-end leverage of only 1.6x , inclusive of the $1 billion NDS acquisition, and most importantly, provide the flexibility and optionality to support our capital allocation priorities in fiscal 2027. these actions combined with our strong cash generation resulted in year-end leverage of only 1.6x inclusive of the $1 billion nds acquisition and most importantly provide the flexibility and optionality to support our capital allocation priorities in fiscal 2027 For the fourth quarter, revenue increased 10% to $677 million, including the impact from NDS. for the fourth quarter revenue increased 10% to $677 million including the impact from nds On an organic basis, revenue from Allied Products, tanks, and residential advanced treatment all increased by double digits, as Scott mentioned. on an organic basis revenue from allied products tanks and residential advanced treatment all increased by double digits as scott mentioned Importantly, we believe our results outpaced the underlying end markets, demonstrating the differentiated growth strategy and resiliency of the ADS business model. importantly we believe our results outpaced the underlying end markets demonstrating the differentiated growth strategy and resiliency of the ads business model From a profitability perspective, we are very pleased with the 27.8% adjusted EBITDA margin for the fourth quarter. A couple of things I feel are worth noting regarding the quarterly results. from a profitability perspective we are very pleased with the 27.8% adjusted ebitda margin for the fourth quarter. a couple of things i feel are worth noting regarding the quarterly results The fourth quarter is the fourth consecutive quarter of volume growth and favorable price costs. the fourth quarter is the fourth consecutive quarter of volume growth and favorable price costs Regarding manufacturing and transportation costs, we are seeing significant inflation on diesel and common carrier rates, and we experienced incremental transportation costs related to the strong demand during the quarter, particularly in the West, coupled with increased oil prices and greater macroeconomic uncertainty. Importantly, we continue to benefit from the capital invested over the last several years in new production lines and automation improvements. Regarding SG&A, the year-over-year increase was driven primarily by the acquisition of NDS, as well as incremental compensation expense related to the strong full-year results. On slide eight, we present our free cash flow. For the full fiscal year, we generated $569 million in free cash flow compared to $369 million in the prior year, primarily driven by increased profitability and effective working capital management. The OBBBA contributed an incremental $35 million of free cash flow benefit in fiscal 2026. Regarding manufacturing and transportation costs, we are seeing significant inflation on diesel and common carrier rates, and we experienced incremental transportation costs related to the strong demand during the quarter, particularly in the West, coupled with increased oil prices and greater macroeconomic uncertainty. regarding manufacturing and transportation costs we are seeing significant inflation on diesel and common carrier rates and we experienced incremental transportation costs related to the strong demand during the quarter particularly in the west coupled with increased oil prices and greater macroeconomic uncertainty Importantly, we continue to benefit from the capital invested over the last several years in new production lines and automation improvements. importantly we continue to benefit from the capital invested over the last several years in new production lines and automation improvements Regarding SG&A, the year-over-year increase was driven primarily by the acquisition of NDS, as well as incremental compensation expense related to the strong full-year results. regarding sg&a the year-over-year increase was driven primarily by the acquisition of nds as well as incremental compensation expense related to the strong full-year results On slide eight, we present our free cash flow. on slide eight we present our free cash flow For the full fiscal year, we generated $569 million in free cash flow compared to $369 million in the prior year, primarily driven by increased profitability and effective working capital management. for the full fiscal year we generated $569 million in free cash flow compared to $369 million in the prior year primarily driven by increased profitability and effective working capital management The OBBBA contributed an incremental $35 million of free cash flow benefit in fiscal 2026. the obbba contributed an incremental $35 million of free cash flow benefit in fiscal 2026 Cash from operations for the full year totaled $819 million, representing an 85% conversion of our adjusted EBITDA. In February, we refinanced near-term maturities of our 2027 senior notes and our Term Loan B, as well as increased our revolving credit facility to $750 million. Our weighted average cost of debt is now 5.65%, which we view as highly favorable in the current environment, and our weighted average maturities are now over six years, as compared to two years prior to these transactions. We ended the fiscal year with leverage of approximately 1.6x, as I mentioned previously. In addition, in the fourth quarter, we repurchased 720,000 shares of common stock under our existing repurchase authorization. Moving to slide nine. Thoughtful capital deployment continues to be a key focus for the management team and the board, given the strong cash generation of the business. Cash from operations for the full year totaled $819 million, representing an 85% conversion of our adjusted EBITDA. cash from operations for the full year totaled $819 million representing an 85% conversion of our adjusted ebitda In February, we refinanced near-term maturities of our 2027 senior notes and our Term Loan B, as well as increased our revolving credit facility to $750 million. in february we refinanced near-term maturities of our 2027 senior notes and our term loan b as well as increased our revolving credit facility to $750 million Our weighted average cost of debt is now 5.65%, which we view as highly favorable in the current environment, and our weighted average maturities are now over six years, as compared to two years prior to these transactions. our weighted average cost of debt is now 5.65% which we view as highly favorable in the current environment and our weighted average maturities are now over six years as compared to two years prior to these transactions We ended the fiscal year with leverage of approximately 1.6x , as I mentioned previously. we ended the fiscal year with leverage of approximately 1.6x as i mentioned previously In addition, in the fourth quarter, we repurchased 720,000 shares of common stock under our existing repurchase authorization. in addition in the fourth quarter we repurchased 720,000 shares of common stock under our existing repurchase authorization Moving to slide nine. moving to slide nine Thoughtful capital deployment continues to be a key focus for the management team and the board, given the strong cash generation of the business. thoughtful capital deployment continues to be a key focus for the management team and the board given the strong cash generation of the business In fiscal 2026, we deployed $1.4 billion of capital with $1.2 billion invested in growth. We spent $250 million of that on capital expenditures, with investments focused on executing growth initiatives in key geographies, customer service, productivity, and automation initiatives, expanding our production capacity at Infiltrator, as well as increasing our recycling capacity in the Southeast. We also returned $155 million to shareholders through dividends and repurchases, an increase of 29% over the prior year. Today, in a separate press release, we announced an 11% increase in our dividend, demonstrating our ongoing commitment to returning capital to shareholders while also continuing to invest in the growth of the business. Moving on to slide 10. We are introducing our fiscal year 2027 guidance today. In fiscal 2026, we deployed $1.4 billion of capital with $1.2 billion invested in growth. in fiscal 2026 we deployed $1.4 billion of capital with $1.2 billion invested in growth We spent $250 million of that on capital expenditures, with investments focused on executing growth initiatives in key geographies, customer service, productivity, and automation initiatives, expanding our production capacity at Infiltrator, as well as increasing our recycling capacity in the Southeast. we spent $250 million of that on capital expenditures with investments focused on executing growth initiatives in key geographies customer service productivity and automation initiatives expanding our production capacity at infiltrator as well as increasing our recycling capacity in the southeast We also returned $155 million to shareholders through dividends and repurchases, an increase of 29% over the prior year. we also returned $155 million to shareholders through dividends and repurchases an increase of 29% over the prior year Today, in a separate press release, we announced an 11% increase in our dividend, demonstrating our ongoing commitment to returning capital to shareholders while also continuing to invest in the growth of the business. today in a separate press release we announced an 11% increase in our dividend demonstrating our ongoing commitment to returning capital to shareholders while also continuing to invest in the growth of the business Moving on to slide 10. moving on to slide 10 We are introducing our fiscal year 2027 guidance today. we are introducing our fiscal year 2027 guidance today Based on current visibility, backlog of existing orders, R&R market outlook, and the trends we see entering the fiscal year, including the continued integration of NDS, we're establishing the following guidance ranges for fiscal year 2027. We expect revenue to be in the range of $3.35 billion-$3.55 billion and adjusted EBITDA to be in the range of $1 billion-$1.5 billion. For guidance purposes, we are assuming significant year-over-year inflationary cost pressure on input material costs as well as transportation costs. We have taken pricing actions to offset these inflationary pressures on a dollar-for-dollar basis. We expect normal revenue seasonality with approximately 55% of revenue in the first half of the year. Quarterly revenue patterns in the first half of the year may be affected by customers trying to buy ahead of anticipated price increases. Based on current visibility, backlog of existing orders, R&R market outlook, and the trends we see entering the fiscal year, including the continued integration of NDS, we're establishing the following guidance ranges for fiscal year 2027. based on current visibility backlog of existing orders r&r market outlook and the trends we see entering the fiscal year including the continued integration of nds we're establishing the following guidance ranges for fiscal year 2027 We expect revenue to be in the range of $3.35 billion-$3.55 billion and adjusted EBITDA to be in the range of $1 billion-$1.5 billion. we expect revenue to be in the range of $3.35 billion-$3.55 billion and adjusted ebitda to be in the range of $1 billion-$1.5 billion For guidance purposes, we are assuming significant year-over-year inflationary cost pressure on input material costs as well as transportation costs. for guidance purposes we are assuming significant year-over-year inflationary cost pressure on input material costs as well as transportation costs We have taken pricing actions to offset these inflationary pressures on a dollar-for-dollar basis. we have taken pricing actions to offset these inflationary pressures on a dollar-for-dollar basis We expect normal revenue seasonality with approximately 55% of revenue in the first half of the year. we expect normal revenue seasonality with approximately 55% of revenue in the first half of the year Quarterly revenue patterns in the first half of the year may be affected by customers trying to buy ahead of anticipated price increases. quarterly revenue patterns in the first half of the year may be affected by customers trying to buy ahead of anticipated price increases This guidance also includes approximately $300 million of revenue from NDS for the full fiscal year. We remain focused on executing our long-term strategic plan to drive consistent long-term growth, margin expansion, and free cash flow generation. With that, I will open the call for questions. Operator, please open the line. This guidance also includes approximately $300 million of revenue from NDS for the full fiscal year. this guidance also includes approximately $300 million of revenue from nds for the full fiscal year We remain focused on executing our long-term strategic plan to drive consistent long-term growth, margin expansion, and free cash flow generation. we remain focused on executing our long-term strategic plan to drive consistent long-term growth margin expansion and free cash flow generation With that, I will open the call for questions. with that i will open the call for questions Operator, please open the line. operator please open the line

Speaker 10: We will now begin the question-and-answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, press star and the number one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by now while we compile the Q&A roster. Your first question comes from the line of Michael Halloran with Baird. Your line is open. Please go ahead. We will now begin the question- and- answer session. we will now begin the question- and- answer session Please limit yourself to one question and one follow-up. please limit yourself to one question and one follow-up If you would like to ask a question, press star and the number one to raise your hand. if you would like to ask a question press star and the number one to raise your hand To withdraw your question, press star one again. to withdraw your question press star one again We ask that you pick up your handset when asking a question to allow for optimum sound quality. we ask that you pick up your handset when asking a question to allow for optimum sound quality If you are muted locally, please remember to unmute your device. if you are muted locally please remember to unmute your device Please stand by now while we compile the Q&A roster. please stand by now while we compile the q&a roster Your first question comes from the line of Michael Halloran with Baird. your first question comes from the line of michael halloran with baird Your line is open. your line is open Please go ahead. please go ahead

Speaker 8: Let's start on the guidance and how you guys are thinking about the composition from here. Obviously, Scott, you talked to a bunch of moving pieces as we sit here. Maybe two things, I guess. One, how are you thinking about the sequential revenue dynamics versus normal? I know you just mentioned some pre-buy activity. How does that functionally play out? That will be the first question, and then I will have a follow-up to it. Let's start on the guidance and how you guys are thinking about the composition from here. let's start on the guidance and how you guys are thinking about the composition from here Obviously, Scott, you talked to a bunch of moving pieces as we sit here. obviously scott you talked to a bunch of moving pieces as we sit here Maybe two things, I guess. maybe two things i guess One, how are you thinking about the sequential revenue dynamics versus normal? one how are you thinking about the sequential revenue dynamics versus normal I know you just mentioned some pre-buy activity. i know you just mentioned some pre-buy activity How does that functionally play out? how does that functionally play out That will be the first question, and then I will have a follow-up to it. that will be the first question and then i will have a follow-up to it

Speaker 12: So is it on the sequential- So is it on the sequential- so is it on the sequential-

Speaker 11: Yeah. This is Scott Barbour, Mike, and the question is around how is the first half going to perform sequentially. Yeah. yeah This is Scott Barbour, Mike, and the question is around how is the first half going to perform sequentially. this is scott barbour mike and the question is around how is the first half going to perform sequentially Month by month or quarter to quarter. Month by month or quarter to quarter. month by month or quarter to quarter

Speaker 12: I got you. All right. Yeah. Quarter to quarter. As we said, Mike, yeah, first half, second half is normally in that 55%-60% range in the first half. You got that 40%-45% in the second half, just based on seasonality. We see it lining up largely the same. The only thing as Scott mentioned, and I did as well on our remarks, we've had a couple price increases already announced into the market. We see some pre-buying going on here in the first fiscal quarter of our year. Again, do we see that kind of evening out and getting to where we've got our guide for that first half dynamic coming and normalizing, is the word I would use, by the end of 1H, first half of the year? Yes, we do. I got you. i got you All right. all right Yeah. yeah quarter to quarter Quarter to quarter. yeah quarter to quarter As we said, Mike, yeah, first half, second half is normally in that 55%-60% range in the first half. as we said mike yeah first half second half is normally in that 55%-60% range in the first half You got that 40%-45% in the second half, just based on seasonality. you got that 40%-45% in the second half just based on seasonality We see it lining up largely the same. we see it lining up largely the same The only thing as Scott mentioned, and I did as well on our remarks, we've had a couple price increases already announced into the market. the only thing as scott mentioned and i did as well on our remarks we've had a couple price increases already announced into the market We see some pre-buying going on here in the first fiscal quarter of our year. we see some pre-buying going on here in the first fiscal quarter of our year Again, do we see that kind of evening out and getting to where we've got our guide for that first half dynamic coming and normalizing, is the word I would use, by the end of 1H, first half of the year? again do we see that kind of evening out and getting to where we've got our guide for that first half dynamic coming and normalizing is the word i would use by the end of 1h first half of the year Yes, we do. yes we do Again, first quarter might be a little bit elevated from what we've seen on a historical basis, but we see that normalizing in Q2 and getting back to that 55%-60% of the full year in the first half on a revenue performance basis. Again, first quarter might be a little bit elevated from what we've seen on a historical basis, but we see that normalizing in Q2 and getting back to that 55%-60% of the full year in the first half on a revenue performance basis. again first quarter might be a little bit elevated from what we've seen on a historical basis but we see that normalizing in q2 and getting back to that 55%-60% of the full year in the first half on a revenue performance basis

Speaker 8: No, that makes sense. Right. A little pull forward from 2Q to 1Q, but flattens out. Okay. The follow-up is maybe the similar dynamic on the margin side. Given the timing on the pricing, the inflation, the pull forward, does that mean that the fiscal first may be a little compressed on the margin line relative to how that would normally play out, and then 2Q, you start getting more balanced out on a margin dollar basis before being more normal from there sequentially in the back half of the year? Is that the thought process on the margin line within the guidance? No, that makes sense. no that makes sense Right. right A little pull forward from 2Q to 1Q, but flattens out. a little pull forward from 2q to 1q but flattens out Okay. okay The follow-up is maybe the similar dynamic on the margin side. the follow-up is maybe the similar dynamic on the margin side Given the timing on the pricing, the inflation, the pull forward, does that mean that the fiscal first may be a little compressed on the margin line relative to how that would normally play out, and then 2Q, you start getting more balanced out on a margin dollar basis before being more normal from there sequentially in the back half of the year? given the timing on the pricing the inflation the pull forward does that mean that the fiscal first may be a little compressed on the margin line relative to how that would normally play out and then 2q you start getting more balanced out on a margin dollar basis before being more normal from there sequentially in the back half of the year Is that the thought process on the margin line within the guidance? is that the thought process on the margin line within the guidance

Speaker 12: I think that's a fair way to look at it, Mike. I think you've got a little bit more of the volume kicking in in that first quarter based on the pull ahead, with the pricing actions we've taken mostly starting to hit in the fiscal second quarter. Again, we've assumed right now that's a dollar for dollar basis. As we move through the year, that's gonna be dilutive to margins. Again, it's focusing on the dollars right now, and that uncertainty that we're managing. That's fair to look at it that way as we progress through the year. I think that's a fair way to look at it, Mike. i think that's a fair way to look at it mike I think you've got a little bit more of the volume kicking in in that first quarter based on the pull ahead, with the pricing actions we've taken mostly starting to hit in the fiscal second quarter. i think you've got a little bit more of the volume kicking in in that first quarter based on the pull ahead with the pricing actions we've taken mostly starting to hit in the fiscal second quarter Again, we've assumed right now that's a dollar for dollar basis. again we've assumed right now that's a dollar for dollar basis As we move through the year, that's gonna be dilutive to margins. as we move through the year that's gonna be dilutive to margins Again, it's focusing on the dollars right now, and that uncertainty that we're managing. again it's focusing on the dollars right now and that uncertainty that we're managing That's fair to look at it that way as we progress through the year. that's fair to look at it that way as we progress through the year

Speaker 11: Can I add one thing to that, Mike? This is Scott Barbour. Matching those up is really tough as materials and transportation costs. We run a big fleet, uses a lot of diesel every freaking month. Those are tough to match up, and this is based on these things kind of normalizing. It's gonna be a little choppy. I just want to kind of get that out there. We're on top of it, but it's hard to perfectly time these things on a month or a quarter basis. Can I add one thing to that, Mike? can i add one thing to that mike This is Scott Barbour. this is scott barbour Matching those up is really tough as materials and transportation costs. matching those up is really tough as materials and transportation costs We run a big fleet, uses a lot of diesel every freaking month. we run a big fleet uses a lot of diesel every freaking month Those are tough to match up, and this is based on these things kind of normalizing. those are tough to match up and this is based on these things kind of normalizing It's gonna be a little choppy. it's gonna be a little choppy I just want to kind of get that out there. i just want to kind of get that out there We're on top of it, but it's hard to perfectly time these things on a month or a quarter basis. we're on top of it but it's hard to perfectly time these things on a month or a quarter basis

Speaker 8: Yeah. That makes sense. And you're saying basically on the dollar side of things, you're covered in relatively neutral. Yeah. yeah That makes sense. that makes sense And you're saying basically on the dollar side of things, you're covered in relatively neutral. and you're saying basically on the dollar side of things you're covered in relatively neutral

Speaker 12: Covered Covered covered

Speaker 8: Yeah. It's just the math behind the margins that becomes an optical headache, right? Yeah. yeah It's just the math behind the margins that becomes an optical headache, right? it's just the math behind the margins that becomes an optical headache right

Speaker 12: Correct. Correct. correct

Speaker 8: Yeah. Great. Thanks, everyone. Appreciate it. Yeah. yeah Great. great Thanks, everyone. thanks everyone appreciate it Appreciate it. everyone appreciate it

Speaker 12: You get a little bit of SG&A favorability on that fixed cost leverage, but again, that's Yeah. Yes, it's a gross margin dollar for dollar dilution. You get a little bit of SG&A favorability on that fixed cost leverage, but again, that's Yeah. you get a little bit of sg&a favorability on that fixed cost leverage but again that's yeah Yes, it's a gross margin dollar for dollar dilution. yes it's a gross margin dollar for dollar dilution

Speaker 11: I think we talked about this with the board yesterday, and clearly, we think the right thing to do is get it dollar for dollar, but don't try to press for the margin on these kind of what we would view as extraordinary escalations driven by these events in some of our really important input markets. That's our strategy. That's what we're gonna do, and we feel good about that. We're willing to kind of work our way through that margin compression optics. When we've done this before, over the long term, we kind of come out favorable on the long end of that. Very similar to how we've done this in the past with, I think, even better tools and positioning than we had before. I think we talked about this with the board yesterday, and clearly, we think the right thing to do is get it dollar for dollar, but don't try to press for the margin on these kind of what we would view as extraordinary escalations driven by these events in some of our really important input markets. i think we talked about this with the board yesterday and clearly we think the right thing to do is get it dollar for dollar but don't try to press for the margin on these kind of what we would view as extraordinary escalations driven by these events in some of our really important input markets That's our strategy. that's our strategy That's what we're gonna do, and we feel good about that. that's what we're gonna do and we feel good about that We're willing to kind of work our way through that margin compression optics. we're willing to kind of work our way through that margin compression optics When we've done this before, over the long term, we kind of come out favorable on the long end of that. when we've done this before over the long term we kind of come out favorable on the long end of that Very similar to how we've done this in the past with, I think, even better tools and positioning than we had before. very similar to how we've done this in the past with i think even better tools and positioning than we had before

Speaker 12: To Scott's point, we talk a lot about pricing and dollar for dollar, but it's not lost on us that we also have that recycling lever that we can pull on the resident side of the house. We also have the internal fleet versus the external common carrier fleet. There's a bunch of dynamics and other items that we're obviously levering behind the scenes to work on all of that as well to help mitigate those costs. To Scott's point, we talk a lot about pricing and dollar for dollar, but it's not lost on us that we also have that recycling lever that we can pull on the resident side of the house. to scott's point we talk a lot about pricing and dollar for dollar but it's not lost on us that we also have that recycling lever that we can pull on the resident side of the house We also have the internal fleet versus the external common carrier fleet. we also have the internal fleet versus the external common carrier fleet There's a bunch of dynamics and other items that we're obviously levering behind the scenes to work on all of that as well to help mitigate those costs. there's a bunch of dynamics and other items that we're obviously levering behind the scenes to work on all of that as well to help mitigate those costs

Speaker 8: Great. Thanks, guys. Appreciate it. Great. great Thanks, guys. thanks guys Appreciate it. appreciate it

Speaker 11: Bye. Bye. bye

Speaker 10: Your next question comes from the line of Matthew Bouley with Barclays. Your next question comes from the line of Matthew Bouley with Barclays. your next question comes from the line of matthew bouley with barclays

Speaker 7: Morning, everyone. Thanks for taking the question. Apologies that I'm gonna keep beating that horse on price cost for a second here. Big topic today. My question is on your competitive positioning and demand, et cetera. Maybe focusing on the competitive side first. Versus your plastic competitors, you just mentioned your vertical integration and recycling capabilities, also versus concrete pipe, et cetera, and kind of considering the cost of transportation here, what are you seeing out there from the competitive perspective, and how do you think that ultimately plays through with your ability to actually get the price you need in the market given this fairly unprecedented level of cost inflation? Thank you. Morning, everyone. morning everyone Thanks for taking the question. thanks for taking the question Apologies that I'm gonna keep beating that horse on price cost for a second here. apologies that i'm gonna keep beating that horse on price cost for a second here Big topic today. big topic today My question is on your competitive positioning and demand, et cetera. my question is on your competitive positioning and demand et cetera Maybe focusing on the competitive side first. maybe focusing on the competitive side first Versus your plastic competitors, you just mentioned your vertical integration and recycling capabilities, also versus concrete pipe, et cetera, and kind of considering the cost of transportation here, what are you seeing out there from the competitive perspective, and how do you think that ultimately plays through with your ability to actually get the price you need in the market given this fairly unprecedented level of cost inflation? versus your plastic competitors you just mentioned your vertical integration and recycling capabilities also versus concrete pipe et cetera and kind of considering the cost of transportation here what are you seeing out there from the competitive perspective and how do you think that ultimately plays through with your ability to actually get the price you need in the market given this fairly unprecedented level of cost inflation Thank you. thank you

Speaker 11: All right. Okay, Matt. Number one is we're out in the market. We are trying to get ahead of this. Inflation of this magnitude and breadth and speed, if you don't get ahead of it, you're really in bad shape. We went to get ahead of that. Probably ahead of our competitors in many places. We're holding the line, and our orders and rate are holding up nicely. That's in general. As you know, this thing is kind of regional, and it's better behaved in some areas versus others. I'd say right now, versus our competitors, they are experiencing similar inflationary pressures that we are. I'm thinking about the plastic pipe guys. All right. all right Okay, Matt. okay matt Number one is we're out in the market. number one is we're out in the market We are trying to get ahead of this. we are trying to get ahead of this Inflation of this magnitude and breadth and speed, if you don't get ahead of it, you're really in bad shape. inflation of this magnitude and breadth and speed if you don't get ahead of it you're really in bad shape We went to get ahead of that. Probably ahead of our competitors in many places. we went to get ahead of that. probably ahead of our competitors in many places We're holding the line, and our orders and rate are holding up nicely. we're holding the line and our orders and rate are holding up nicely That's in general. that's in general As you know, this thing is kind of regional, and it's better behaved in some areas versus others. as you know this thing is kind of regional and it's better behaved in some areas versus others I'd say right now, versus our competitors, they are experiencing similar inflationary pressures that we are. i'd say right now versus our competitors they are experiencing similar inflationary pressures that we are I'm thinking about the plastic pipe guys. i'm thinking about the plastic pipe guys As you said, obviously, we use all of our scale of buying in the virgin market and pivoting to the recycled material quite quickly over the last 60 days. Honestly, faster than I thought we could. Our team is doing a really nice job both procuring the right material and converting the right material. We have that new asset in Cordele, Georgia, ramping up next month. Our timing couldn't be better on this recycling activity, which again, we believe makes us extremely competitive against any regional competitor on the plastic pipe. On the concrete side, they are not facing the same escalations we are. Our value prop is probably compressed a little bit, particularly in certain regions, but we don't think that's a permanent thing. We believe that that's some of the normal dynamics. As you said, obviously, we use all of our scale of buying in the virgin market and pivoting to the recycled material quite quickly over the last 60 days. as you said obviously we use all of our scale of buying in the virgin market and pivoting to the recycled material quite quickly over the last 60 days Honestly, faster than I thought we could. honestly faster than i thought we could Our team is doing a really nice job both procuring the right material and converting the right material. our team is doing a really nice job both procuring the right material and converting the right material We have that new asset in Cordele, Georgia, ramping up next month. we have that new asset in cordele georgia ramping up next month Our timing couldn't be better on this recycling activity, which again, we believe makes us extremely competitive against any regional competitor on the plastic pipe. our timing couldn't be better on this recycling activity which again we believe makes us extremely competitive against any regional competitor on the plastic pipe On the concrete side, they are not facing the same escalations we are. on the concrete side they are not facing the same escalations we are Our value prop is probably compressed a little bit, particularly in certain regions, but we don't think that's a permanent thing. our value prop is probably compressed a little bit particularly in certain regions but we don't think that's a permanent thing We believe that that's some of the normal dynamics. we believe that that's some of the normal dynamics I would recognize that in certain places, that has become much more competitive, our value prop versus the concrete guys. We'll work our way through that, and we're thinking about other things and products and techniques to get even more competitive against those guys than we have been. I would recognize that in certain places, that has become much more competitive, our value prop versus the concrete guys. i would recognize that in certain places that has become much more competitive our value prop versus the concrete guys We'll work our way through that, and we're thinking about other things and products and techniques to get even more competitive against those guys than we have been. we'll work our way through that and we're thinking about other things and products and techniques to get even more competitive against those guys than we have been

Speaker 7: Okay. No, that's perfect. I really appreciate all that color, exactly what I was looking for. I'll move to another topic. I'm sure there will be more asked on that, but the non-resi end market. You're guiding that to be modestly positive or flat to up low single digits, excuse me, in the next fiscal year. Sounded like large projects are what's carrying that, but I'm curious if you can kind of just, I guess, unpack that a little bit regionally by vertical. Where are you seeing more of that strength? You highlighted data center a couple times. How much of that is kind of carrying the load here versus other areas that might still be more choppy on the non-resi side? Thank you. Okay. okay No, that's perfect. no that's perfect I really appreciate all that color, exactly what I was looking for. i really appreciate all that color exactly what i was looking for I'll move to another topic. i'll move to another topic I'm sure there will be more asked on that, but the non-resi end market. i'm sure there will be more asked on that but the non-resi end market You're guiding that to be modestly positive or flat to up low single digits, excuse me, in the next fiscal year. you're guiding that to be modestly positive or flat to up low single digits excuse me in the next fiscal year Sounded like large projects are what's carrying that, but I'm curious if you can kind of just, I guess, unpack that a little bit regionally by vertical. sounded like large projects are what's carrying that but i'm curious if you can kind of just i guess unpack that a little bit regionally by vertical Where are you seeing more of that strength? where are you seeing more of that strength You highlighted data center a couple times. you highlighted data center a couple times How much of that is kind of carrying the load here versus other areas that might still be more choppy on the non-resi side? how much of that is kind of carrying the load here versus other areas that might still be more choppy on the non-resi side Thank you. thank you

Speaker 11: I'm going to say a few words, Matt, and then I'm going to hand it over to Michael Higgins. In general, our biggest focus and strength is on that non-res market from the ADS legacy business. In those Allied Products, our coverage, the HP products in there, our N-12. We just have a great product line for a wide breadth of non-residential. I think that's what we've been seeing over the last year or so, is that we are consistently outperforming in that market. It is across lots of kind of jobs. I'll turn it over to Mike. He has a lot of insights around that kind of by segment and geography. I'm going to say a few words, Matt, and then I'm going to hand it over to Michael Higgins. i'm going to say a few words matt and then i'm going to hand it over to michael higgins In general, our biggest focus and strength is on that non-res market from the ADS legacy business. in general our biggest focus and strength is on that non-res market from the ads legacy business In those Allied Products, our coverage, the HP products in there, our N-12. in those allied products our coverage the hp products in there our n-12 We just have a great product line for a wide breadth of non-residential. we just have a great product line for a wide breadth of non-residential I think that's what we've been seeing over the last year or so, is that we are consistently outperforming in that market. i think that's what we've been seeing over the last year or so is that we are consistently outperforming in that market It is across lots of kind of jobs. it is across lots of kind of jobs I'll turn it over to Mike. i'll turn it over to mike He has a lot of insights around that kind of by segment and geography. he has a lot of insights around that kind of by segment and geography

Speaker 9: Yeah, Matt, you hit on the data centers. That's obviously a lot of activity there. What we've seen all year from answering the project type or project segment thing first is we've just seen pretty solid growth and activity in just kind of general purpose commercial construction, institutional construction has been pretty solid. When you look at geographically for the year, we had probably 35+ states that were showing positive growth in non-res. Again, there was parts of the Midwest that were really good. We still continue to see good non-residential growth in those states that we have a lot of focus on. Florida, Virginia, North Carolina, Texas, and California were very positive for the year as well. Scott touched on this a little bit. That's our best opportunity to sell the complete package, right? Yeah, Matt, you hit on the data centers. yeah matt you hit on the data centers That's obviously a lot of activity there. that's obviously a lot of activity there What we've seen all year from answering the project type or project segment thing first is we've just seen pretty solid growth and activity in just kind of general purpose commercial construction, institutional construction has been pretty solid. what we've seen all year from answering the project type or project segment thing first is we've just seen pretty solid growth and activity in just kind of general purpose commercial construction institutional construction has been pretty solid When you look at geographically for the year, we had probably 35+ states that were showing positive growth in non-res. when you look at geographically for the year we had probably 35+ states that were showing positive growth in non-res Again, there was parts of the Midwest that were really good. again there was parts of the midwest that were really good We still continue to see good non-residential growth in those states that we have a lot of focus on. we still continue to see good non-residential growth in those states that we have a lot of focus on Florida, Virginia, North Carolina, Texas, and California were very positive for the year as well. florida virginia north carolina texas and california were very positive for the year as well Scott touched on this a little bit. scott touched on this a little bit That's our best opportunity to sell the complete package, right? that's our best opportunity to sell the complete package right Two-thirds of our Allied Products go into that non-residential end market. As the year has evolved, I think our sales team and our product management team has done a really nice job of really just increasing our focus on what we call attachment, managing the project funnel, being upfront. Exploiting is a little bit of a strong word, but exploiting our position in the marketplace, our reach in the engineering firms, and the Project Resource Center that we have that aids these engineers and designs and makes things very simple for them with our tools and our other programs. I think it's just a very high level of execution on that. It's not easy. The market's not great. You know what I mean? Where those opportunities are, our sales force is very nimble and flexible and can go find them and can execute on that. Two-thirds of our Allied Products go into that non-residential end market. two-thirds of our allied products go into that non-residential end market As the year has evolved, I think our sales team and our product management team has done a really nice job of really just increasing our focus on what we call attachment, managing the project funnel, being upfront. as the year has evolved i think our sales team and our product management team has done a really nice job of really just increasing our focus on what we call attachment managing the project funnel being upfront Exploiting is a little bit of a strong word, but exploiting our position in the marketplace, our reach in the engineering firms, and the Project Resource Center that we have that aids these engineers and designs and makes things very simple for them with our tools and our other programs. exploiting is a little bit of a strong word but exploiting our position in the marketplace our reach in the engineering firms, and the project resource center that we have that aids these engineers and designs and makes things very simple for them with our tools and our other programs I think it's just a very high level of execution on that. i think it's just a very high level of execution on that It's not easy. it's not easy The market's not great. the market's not great You know what I mean? you know what i mean Where those opportunities are, our sales force is very nimble and flexible and can go find them and can execute on that. where those opportunities are our sales force is very nimble and flexible and can go find them and can execute on that That's what you saw in those results this year. That's what you saw in those results this year. that's what you saw in those results this year

Speaker 7: Got it. Okay. No, that's great color, guys. Thank you. Good luck, and I'll see you all next month. Got it. got it Okay. okay No, that's great color, guys. no that's great color guys Thank you. thank you Good luck, and I'll see you all next month. good luck and i'll see you all next month

Speaker 11: Okay. We look forward to it. Okay. okay We look forward to it. we look forward to it

Speaker 10: Your next question comes from the line of Bryan Blair with Oppenheimer. Your line is open. Please go ahead. Your next question comes from the line of Bryan Blair with Oppenheimer. your next question comes from the line of bryan blair with oppenheimer Your line is open. your line is open Please go ahead. please go ahead

Speaker 1: Thank you. Good morning, everyone. To level set a little bit on the top line outlook, I think you had mentioned $300 million in NDS contribution. With regard to the recast segments, how should we think of organic stormwater and wastewater growth for fiscal 2027? Thank you. thank you Good morning, everyone. good morning everyone To level set a little bit on the top line outlook, I think you had mentioned $300 million in NDS contribution. With regard to the recast segments, how should we think of organic stormwater and wastewater growth for fiscal 2027? to level set a little bit on the top line outlook i think you had mentioned $300 million in nds contribution. with regard to the recast segments how should we think of organic stormwater and wastewater growth for fiscal 2027

Speaker 12: This is Scott. The way I would talk to it or at the midpoint of our guide is roughly a flat end market based on the end market dynamic and what we're seeing out there, basically flat on the volume side of the house. Price cost, we've talked about having the pricing in the market to offset the cost inflation and cost pressures we're seeing. You got the $300 million for the full year for NDS. That's the way to get to that $3,450,000 at the midpoint of our revenue guide. This is Scott. this is scott The way I would talk to it or at the midpoint of our guide is roughly a flat end market based on the end market dynamic and what we're seeing out there, basically flat on the volume side of the house. the way i would talk to it or at the midpoint of our guide is roughly a flat end market based on the end market dynamic and what we're seeing out there basically flat on the volume side of the house Price cost, we've talked about having the pricing in the market to offset the cost inflation and cost pressures we're seeing. price cost we've talked about having the pricing in the market to offset the cost inflation and cost pressures we're seeing You got the $300 million for the full year for NDS. you got the $300 million for the full year for nds That's the way to get to that $3,450,000 at the midpoint of our revenue guide. that's the way to get to that $3,450,000 at the midpoint of our revenue guide

Speaker 1: Okay. Understood. It sounds like NDS integration is tracking well. You reiterated confidence in $25 million in cost synergies by year three. What should we assume for fiscal 2027 synergies? Perhaps more importantly, maybe you can speak to some of the cross-selling opportunities that are starting to be realized. Okay. okay Understood. understood It sounds like NDS integration is tracking well. it sounds like nds integration is tracking well You reiterated confidence in $25 million in cost synergies by year three. you reiterated confidence in $25 million in cost synergies by year three What should we assume for fiscal 2027 synergies? what should we assume for fiscal 2027 synergies Perhaps more importantly, maybe you can speak to some of the cross-selling opportunities that are starting to be realized. perhaps more importantly maybe you can speak to some of the cross-selling opportunities that are starting to be realized

Speaker 11: Well, I'm going to let Scott Cottrill answer the what's in the plan. I'm not allowed to answer those, Bryan. The cross-selling, we are going to talk a lot about that at the Investor Day. We think that's a great topic to talk about in the Investor Day for the longer term plan. What I would just parenthetically add to that is we get more excited about the cross-selling as we go forward in time over these last two months. They're not all easy to get to quickly, but they're there. It's channel, it's product line, it's sales force, it's a lot of good things. It's just not one-dimensional. I'll hand over the other one to Scott. Well, I'm going to let Scott Cottrill answer the what's in the plan. well i'm going to let scott cottrill answer the what's in the plan I'm not allowed to answer those, Bryan. i'm not allowed to answer those bryan The cross-selling, we are going to talk a lot about that at the Investor Day. the cross-selling we are going to talk a lot about that at the investor day We think that's a great topic to talk about in the Investor Day for the longer term plan. we think that's a great topic to talk about in the investor day for the longer term plan What I would just parenthetically add to that is we get more excited about the cross-selling as we go forward in time over these last two months. what i would just parenthetically add to that is we get more excited about the cross-selling as we go forward in time over these last two months They're not all easy to get to quickly, but they're there. they're not all easy to get to quickly but they're there It's channel, it's product line, it's sales force, it's a lot of good things. it's channel it's product line it's sales force it's a lot of good things It's just not one-dimensional. it's just not one-dimensional I'll hand over the other one to Scott. i'll hand over the other one to scott

Speaker 12: Yeah. I'll say right now we're, A, really excited, like Scott said on the call, about the opportunities in front of us. B, we're ahead of the acquisition model and where we saw the phasing over those three years. Again, cross-selling is becoming one of those things that's really, as Scott just mentioned, coming out as a even bigger opportunity than what we had thought going into it. I'm not going to give you a dollar amount. All I'll tell you is that in the first year of that three-year plan, it was basically a back end year two, year three kind of ramp, if you will, to get to that run rate synergy by year three. We didn't assume a lot here in the first full year, but I'll tell you that we're well ahead of that. That's the way I would respond to that question. Yeah. yeah I'll say right now we're, A, really excited, like Scott said on the call, about the opportunities in front of us. i'll say right now we're a really excited like scott said on the call about the opportunities in front of us B, we're ahead of the acquisition model and where we saw the phasing over those three years. b we're ahead of the acquisition model and where we saw the phasing over those three years Again, cross-selling is becoming one of those things that's really, as Scott just mentioned, coming out as a even bigger opportunity than what we had thought going into it. again cross-selling is becoming one of those things that's really as scott just mentioned coming out as a even bigger opportunity than what we had thought going into it I'm not going to give you a dollar amount. i'm not going to give you a dollar amount All I'll tell you is that in the first year of that three-year plan, it was basically a back end year two, year three kind of ramp, if you will, to get to that run rate synergy by year three. all i'll tell you is that in the first year of that three-year plan it was basically a back end year two year three kind of ramp if you will to get to that run rate synergy by year three We didn't assume a lot here in the first full year, but I'll tell you that we're well ahead of that. we didn't assume a lot here in the first full year but i'll tell you that we're well ahead of that That's the way I would respond to that question. that's the way i would respond to that question

Speaker 1: Yeah. Appreciate the color. Thanks, guys. Yeah. yeah Appreciate the color. appreciate the color Thanks, guys. thanks guys

Speaker 10: Your next question comes from the line of Jeffrey Hammond with KeyBanc Capital Markets. Your line is open. Please go ahead. Your next question comes from the line of Jeffrey Hammond with KeyBanc Capital Markets. your next question comes from the line of jeffrey hammond with keybanc capital markets Your line is open. your line is open Please go ahead. please go ahead

Speaker 5: Yeah. Hi. Good morning, everyone. Yeah. yeah Hi. hi Good morning, everyone. good morning everyone

Speaker 11: Good morning. Good morning. good morning

Speaker 5: I think you said wastewater and stormwater, you think flat volumes and I guess wastewater being heavily res and at down to mid to high single market, pretty impressive. Can you just talk about, again, what's driving the outgrowth there? I think you mentioned in the prepared remarks about an air pocket potentially in that res end market. Maybe just expand on that. I think you said wastewater and stormwater, you think flat volumes and I guess wastewater being heavily res and at down to mid to high single market, pretty impressive. i think you said wastewater and stormwater you think flat volumes and i guess wastewater being heavily res and at down to mid to high single market pretty impressive Can you just talk about, again, what's driving the outgrowth there? can you just talk about again what's driving the outgrowth there I think you mentioned in the prepared remarks about an air pocket potentially in that res end market. i think you mentioned in the prepared remarks about an air pocket potentially in that res end market Maybe just expand on that. maybe just expand on that

Speaker 11: Let me take the air pocket first, and then I'm going to hand it over to Craig Taylor, who runs the Infiltrator business in that wastewater segment for us to answer what that outgrowth is. The air pocket, Jeff, is simply people buying ahead of these announced price increases. We're limiting that. We're managing that. That's not an open-ended thing, but it's not unfamiliar behavior of our customers in inflationary times or ahead of price increases. What we expect is Q1 to be a little heavy and bountiful from a volume standpoint, but we expect that to correct itself in the second quarter. This guidance, this plan, our discussion really says that it's all normalized within the first half of the year versus the second half of the year, which is usually how we guide is first half, second half revenue. Let me take the air pocket first, and then I'm going to hand it over to Craig Taylor, who runs the Infiltrator business in that wastewater segment for us to answer what that outgrowth is. let me take the air pocket first and then i'm going to hand it over to craig taylor who runs the infiltrator business in that wastewater segment for us to answer what that outgrowth is The air pocket, Jeff, is simply people buying ahead of these announced price increases. the air pocket jeff is simply people buying ahead of these announced price increases We're limiting that. we're limiting that We're managing that. we're managing that That's not an open-ended thing, but it's not unfamiliar behavior of our customers in inflationary times or ahead of price increases. that's not an open-ended thing but it's not unfamiliar behavior of our customers in inflationary times or ahead of price increases What we expect is Q1 to be a little heavy and bountiful from a volume standpoint, but we expect that to correct itself in the second quarter. what we expect is q1 to be a little heavy and bountiful from a volume standpoint but we expect that to correct itself in the second quarter This guidance, this plan, our discussion really says that it's all normalized within the first half of the year versus the second half of the year, which is usually how we guide is first half, second half revenue. this guidance this plan our discussion really says that it's all normalized within the first half of the year versus the second half of the year which is usually how we guide is first half second half revenue I'm just trying to get the marker out there with you guys that if the volume and the sales are big or above expectations in Q1, there's an air pocket out there for sure. I've been telling the board and in preparing for today, I made it pretty clear I wanted to get this out there with you all so you're not surprised. That's really the wrap on that part of the remarks, Jeff. Craig can tell you how we're outperforming the market and the residential really driven by his business. I'm just trying to get the marker out there with you guys that if the volume and the sales are big or above expectations in Q1, there's an air pocket out there for sure. i'm just trying to get the marker out there with you guys that if the volume and the sales are big or above expectations in q1 there's an air pocket out there for sure I've been telling the board and in preparing for today, I made it pretty clear I wanted to get this out there with you all so you're not surprised. i've been telling the board and in preparing for today i made it pretty clear i wanted to get this out there with you all so you're not surprised That's really the wrap on that part of the remarks, Jeff. that's really the wrap on that part of the remarks jeff Craig can tell you how we're outperforming the market and the residential really driven by his business. craig can tell you how we're outperforming the market and the residential really driven by his business

Speaker 3: Morning, Jeff. Yeah, the wastewater business is going to be challenged on the residential side, but we've had a really good run here with our new products that we've introduced into the market, specifically around our tanks business, and then also around our advanced treatment systems, too. The tanks, we've expanded the product category. We've been able to take market share there. On the advanced treatment systems, again, with the Orenco acquisition and the Infiltrator, we've put that together and we're attacking the advanced treatment markets and picking up some pretty good share there. Also, we've been able to get more distribution points for our tanks out in the market, and this has really helped offset that slowdown in the residential market for our business right now. We see the new products continue to provide some growth moving forward. Morning, Jeff. morning jeff Yeah, the wastewater business is going to be challenged on the residential side, but we've had a really good run here with our new products that we've introduced into the market, specifically around our tanks business, and then also around our advanced treatment systems, too. yeah the wastewater business is going to be challenged on the residential side but we've had a really good run here with our new products that we've introduced into the market specifically around our tanks business and then also around our advanced treatment systems too The tanks, we've expanded the product category. the tanks we've expanded the product category We've been able to take market share there. we've been able to take market share there On the advanced treatment systems, again, with the Orenco acquisition and the Infiltrator, we've put that together and we're attacking the advanced treatment markets and picking up some pretty good share there. on the advanced treatment systems again with the orenco acquisition and the infiltrator we've put that together and we're attacking the advanced treatment markets and picking up some pretty good share there Also, we've been able to get more distribution points for our tanks out in the market, and this has really helped offset that slowdown in the residential market for our business right now. also we've been able to get more distribution points for our tanks out in the market and this has really helped offset that slowdown in the residential market for our business right now We see the new products continue to provide some growth moving forward. we see the new products continue to provide some growth moving forward

Speaker 11: If I would just add one thing, a couple of things to that. Infiltrator had very great spread or distribution points in leach field products. They're traditional. As they've introduced the tanks and expanded the number of displacements or SKUs in that offering, it's really been able to get into the additional distribution points. Think about wherever we sell a leach field, we want to be selling a tank, and we're still relatively under-penetrated on that. That, along with these advanced treatment products and an intense focus on getting the regulatory side of that lined up, which they do very well, I think that's why you're seeing the beat versus the market there. It's the scale, it's their obvious technology prowess and those new products kind of just driving through that market left and right. If I would just add one thing, a couple of things to that. if i would just add one thing a couple of things to that Infiltrator had very great spread or distribution points in leach field products. infiltrator had very great spread or distribution points in leach field products They're traditional. they're traditional As they've introduced the tanks and expanded the number of displacements or SKUs in that offering, it's really been able to get into the additional distribution points. as they've introduced the tanks and expanded the number of displacements or skus in that offering it's really been able to get into the additional distribution points Think about wherever we sell a leach field, we want to be selling a tank, and we're still relatively under-penetrated on that. think about wherever we sell a leach field we want to be selling a tank and we're still relatively under-penetrated on that That, along with these advanced treatment products and an intense focus on getting the regulatory side of that lined up, which they do very well, I think that's why you're seeing the beat versus the market there. that along with these advanced treatment products and an intense focus on getting the regulatory side of that lined up which they do very well i think that's why you're seeing the beat versus the market there It's the scale, it's their obvious technology prowess and those new products kind of just driving through that market left and right. it's the scale it's their obvious technology prowess and those new products kind of just driving through that market left and right

Speaker 5: Okay, great. The balance sheet's in pretty good shape despite the acquisition. I know you were kind of protecting the balance sheet ahead of that NDS deal, stock's really taken a hit around this inflation concern. Just how are you thinking about the lean on buybacks versus maybe what the pipeline looks like here in the near term? Okay, great. okay great The balance sheet's in pretty good shape despite the acquisition. the balance sheet's in pretty good shape despite the acquisition I know you were kind of protecting the balance sheet ahead of that NDS deal, stock's really taken a hit around this inflation concern. i know you were kind of protecting the balance sheet ahead of that nds deal stock's really taken a hit around this inflation concern Just how are you thinking about the lean on buybacks versus maybe what the pipeline looks like here in the near term? just how are you thinking about the lean on buybacks versus maybe what the pipeline looks like here in the near term

Speaker 11: I'll say a few words. I think Cottrill will want to chime in on this as well, Jeff. You were right. We conserved cash ahead of that deal, practically paid all cash for it. I knew that would give high level of certainty to get the deal done. We got a buyback authorized with the board shortly after that. We weren't immediately exercising on that, but in February, when this conflict began and our stock went down, with the board, we went and authorized that, and we exhausted that $200 billion here recently. We'll go back in and try to use our balance sheet to do that prudently while maintaining the right level of liquidity to run our business. We're going to consume some working capital this year as our receivables go up, as our inventory costs go up. We know that. Don't let that alarm anyone. I'll say a few words. i'll say a few words I think Cottrill will want to chime in on this as well, Jeff. i think cottrill will want to chime in on this as well jeff You were right. you were right We conserved cash ahead of that deal, practically paid all cash for it. we conserved cash ahead of that deal practically paid all cash for it I knew that would give high level of certainty to get the deal done. i knew that would give high level of certainty to get the deal done We got a buyback authorized with the board shortly after that. we got a buyback authorized with the board shortly after that We weren't immediately exercising on that, but in February, when this conflict began and our stock went down, with the board, we went and authorized that, and we exhausted that $200 billion here recently. we weren't immediately exercising on that but in february when this conflict began and our stock went down with the board we went and authorized that and we exhausted that $200 billion here recently We'll go back in and try to use our balance sheet to do that prudently while maintaining the right level of liquidity to run our business. we'll go back in and try to use our balance sheet to do that prudently while maintaining the right level of liquidity to run our business We're going to consume some working capital this year as our receivables go up, as our inventory costs go up. we're going to consume some working capital this year as our receivables go up as our inventory costs go up We know that. we know that Don't let that alarm anyone. don't let that alarm anyone We're kind of planning and budgeting for that. Even with that, some repurchase and doing that, we really got room to go do something if we really wanted, if the right one came up. You add to that, Scott? We're kind of planning and budgeting for that. we're kind of planning and budgeting for that Even with that, some repurchase and doing that, we really got room to go do something if we really wanted, if the right one came up. even with that some repurchase and doing that we really got room to go do something if we really wanted if the right one came up You add to that, Scott? you add to that scott

Speaker 12: I think you did a great job summarizing. I think the only thing I'd say is right now we got to digest NDS, which we're focused on. To Scott's point, if one of those strategic assets becomes available, we've got the financial flexibility to do more than consider that. I think you did a great job summarizing. i think you did a great job summarizing I think the only thing I'd say is right now we got to digest NDS, which we're focused on. i think the only thing i'd say is right now we got to digest nds which we're focused on To Scott's point, if one of those strategic assets becomes available, we've got the financial flexibility to do more than consider that. to scott's point if one of those strategic assets becomes available we've got the financial flexibility to do more than consider that

Speaker 11: It would be more management bandwidth. It would be more management bandwidth. it would be more management bandwidth

Speaker 12: That would be what we'd have to work on. We've got the balance sheet, to your point, where it needs to be. Working capital as a percent of sales came in slightly below the 20% target that we have at the end of 2026. We've got that going up to about 21% at the end of fiscal 2027, just based on the inflationary cost pressures. We saw this same activity in 2021, 2022, we kind of know what happens to the balance sheet. We know how to manage the balance sheet. We have a great S&OP process. NDS has a very active working capital management program underway right now. Significant opportunity to bring that down as part of our synergy program. Our synergy programs for NDS aren't all on the revenue and EBITDA side. Mostly they are, for sure. That would be what we'd have to work on. that would be what we'd have to work on We've got the balance sheet, to your point, where it needs to be. we've got the balance sheet to your point where it needs to be Working capital as a percent of sales came in slightly below the 20% target that we have at the end of 2026. working capital as a percent of sales came in slightly below the 20% target that we have at the end of 2026 We've got that going up to about 21% at the end of fiscal 2027, just based on the inflationary cost pressures. we've got that going up to about 21% at the end of fiscal 2027 just based on the inflationary cost pressures We saw this same activity in 2021, 2022, we kind of know what happens to the balance sheet. we saw this same activity in 2021 2022 we kind of know what happens to the balance sheet We know how to manage the balance sheet. we know how to manage the balance sheet We have a great S&OP process. we have a great s&op process NDS has a very active working capital management program underway right now. nds has a very active working capital management program underway right now Significant opportunity to bring that down as part of our synergy program. significant opportunity to bring that down as part of our synergy program Our synergy programs for NDS aren't all on the revenue and EBITDA side. our synergy programs for nds aren't all on the revenue and ebitda side Mostly they are, for sure. mostly they are for sure We've got a bunch going on on the working capital side as well, and the cash flow generation. You'll see us bring that down as well and manage it. To Scott's point, we target two times levered in uncertain times. With the macroeconomic uncertainty, the end markets where they are, we'll be prudent. We'll target staying below the two right now. We're at 1.6x, as we mentioned. We'll manage that actively, and we see it as a really advantage of the company and where we can deploy that capital. We'll keep managing that as we go forward. We've got a bunch going on on the working capital side as well, and the cash flow generation. we've got a bunch going on on the working capital side as well and the cash flow generation You'll see us bring that down as well and manage it. you'll see us bring that down as well and manage it To Scott's point, we target two times levered in uncertain times. to scott's point we target two times levered in uncertain times With the macroeconomic uncertainty, the end markets where they are, we'll be prudent. with the macroeconomic uncertainty the end markets where they are we'll be prudent We'll target staying below the two right now. we'll target staying below the two right now We're at 1.6x , as we mentioned. we're at 1.6x as we mentioned We'll manage that actively, and we see it as a really advantage of the company and where we can deploy that capital. we'll manage that actively and we see it as a really advantage of the company and where we can deploy that capital We'll keep managing that as we go forward. we'll keep managing that as we go forward

Speaker 5: Okay, perfect. Thanks. Okay, perfect. okay perfect Thanks. thanks

Speaker 10: Your next question comes from the line of John Lovallo with UBS. Your next question comes from the line of John Lovallo with UBS. your next question comes from the line of john lovallo with ubs

Speaker 6: Hey, good morning, guys. You've Matt Johnson here on for John. Appreciate the time. I guess, could you guys just talk a little bit about your ability to flex up recycled resin right now? I guess kind of where does your recycled usage sit today? How quickly can you ramp that up? Then also, just any color you guys could give on what the cost spread between virgin and recycled looks like today. Hey, good morning, guys. hey good morning guys You've Matt Johnson here on for John. you've matt johnson here on for john Appreciate the time. appreciate the time I guess, could you guys just talk a little bit about your ability to flex up recycled resin right now? i guess could you guys just talk a little bit about your ability to flex up recycled resin right now I guess kind of where does your recycled usage sit today? i guess kind of where does your recycled usage sit today How quickly can you ramp that up? how quickly can you ramp that up Then also, just any color you guys could give on what the cost spread between virgin and recycled looks like today. then also just any color you guys could give on what the cost spread between virgin and recycled looks like today

Speaker 11: I'm going to let Scott Cottrill answer the virgin versus what he's got in there. Like I said, I'm not allowed to answer those questions anymore. I'm going to let Scott Cottrill answer the virgin versus what he's got in there. i'm going to let scott cottrill answer the virgin versus what he's got in there Like I said, I'm not allowed to answer those questions anymore. like i said i'm not allowed to answer those questions anymore

Speaker 12: What you saw in 2026 is we love our recycling program. We see a lot of advantages. It's usually that 15%-20% benefit, but that can invert at times. What we saw in 2026 is it was a much more friendly virgin resin market for us. You saw us toggle a little bit more toward the virgin than the recycled side of the house. What you see us now doing is toggling back to the recycled resin. The other thing I'll say is we're also putting the cash flow and the balance sheet to work. We have a significant expansion in our recycling capacity and capability going on in the Southeast U.S. right now. Putting that closer to our facilities in that region, which makes a lot of sense on the transportation side and conversion side of the house. What you saw in 2026 is we love our recycling program. what you saw in 2026 is we love our recycling program We see a lot of advantages. we see a lot of advantages It's usually that 15%-20% benefit, but that can invert at times. it's usually that 15%-20% benefit but that can invert at times What we saw in 2026 is it was a much more friendly virgin resin market for us. what we saw in 2026 is it was a much more friendly virgin resin market for us You saw us toggle a little bit more toward the virgin than the recycled side of the house. you saw us toggle a little bit more toward the virgin than the recycled side of the house What you see us now doing is toggling back to the recycled resin. what you see us now doing is toggling back to the recycled resin The other thing I'll say is we're also putting the cash flow and the balance sheet to work. the other thing i'll say is we're also putting the cash flow and the balance sheet to work We have a significant expansion in our recycling capacity and capability going on in the Southeast U.S. right now. Putting that closer to our facilities in that region, which makes a lot of sense on the transportation side and conversion side of the house. we have a significant expansion in our recycling capacity and capability going on in the southeast u.s right now. putting that closer to our facilities in that region which makes a lot of sense on the transportation side and conversion side of the house Again, we have a lot of capability, capacity and ability and agility to toggle back to recycling pretty quick, and we're already in the middle of doing that right now. Again, we have a lot of capability, capacity and ability and agility to toggle back to recycling pretty quick, and we're already in the middle of doing that right now. again we have a lot of capability capacity and ability and agility to toggle back to recycling pretty quick and we're already in the middle of doing that right now

Speaker 11: Yeah. We won't disclose the % recycled that we're going to. We will acknowledge that the prior year that we just closed was much lower than normal because of the pricing dynamics in the market at the time. That said, this recycling activity for us is a long-term operational component of the company. It really bears a lot of fruit in these inflationary times like this, and it mitigates a lot of cost. We're flexing that pretty hard. In fact, as I said earlier, we're flexing it hard. The team's going faster than I thought we would be able to do. We're also able to get the material into our recycling facilities. In other words, there's enough material out there to get. You got to work that end very hard. Yeah. yeah We won't disclose the % recycled that we're going to. we won't disclose the % recycled that we're going to We will acknowledge that the prior year that we just closed was much lower than normal because of the pricing dynamics in the market at the time. we will acknowledge that the prior year that we just closed was much lower than normal because of the pricing dynamics in the market at the time That said, this recycling activity for us is a long-term operational component of the company. that said this recycling activity for us is a long-term operational component of the company It really bears a lot of fruit in these inflationary times like this, and it mitigates a lot of cost. it really bears a lot of fruit in these inflationary times like this and it mitigates a lot of cost We're flexing that pretty hard. we're flexing that pretty hard In fact, as I said earlier, we're flexing it hard. in fact as i said earlier we're flexing it hard The team's going faster than I thought we would be able to do. the team's going faster than i thought we would be able to do We're also able to get the material into our recycling facilities. we're also able to get the material into our recycling facilities In other words, there's enough material out there to get. in other words there's enough material out there to get You got to work that end very hard. you got to work that end very hard I think it's a unique competitive advantage of the company that we're going to press the floor on right now. I think it's a unique competitive advantage of the company that we're going to press the floor on right now. i think it's a unique competitive advantage of the company that we're going to press the floor on right now

Speaker 6: Appreciate that, guys. I guess just kind of bigger picture here. I know you guys have, I would say, a pretty long history of navigating through different inflationary environments. I think the way you guys typically talk about it is you put through price, and then you hold on to the majority of that, even as costs kind of normalize. I guess, do you guys see that playing out any differently this time around? I guess, asked differently, does the softer demand environment right now make that more challenging to do? Appreciate that, guys. appreciate that guys I guess just kind of bigger picture here. i guess just kind of bigger picture here I know you guys have, I would say, a pretty long history of navigating through different inflationary environments. i know you guys have i would say a pretty long history of navigating through different inflationary environments I think the way you guys typically talk about it is you put through price, and then you hold on to the majority of that, even as costs kind of normalize. i think the way you guys typically talk about it is you put through price and then you hold on to the majority of that even as costs kind of normalize I guess, do you guys see that playing out any differently this time around? i guess do you guys see that playing out any differently this time around I guess, asked differently, does the softer demand environment right now make that more challenging to do? i guess asked differently does the softer demand environment right now make that more challenging to do

Speaker 11: That's a good question, and certainly, that is a factor. I think the way you overcome some of that softer demand is selling the package of products that we have, making sure we're using the scale of the distribution that we have across both the wastewater and the stormwater businesses. Will the dynamics on the other end, as you suggest, play out perhaps a little differently than the past because of competitive intensity? Maybe, maybe not. It'll be really regional and local. If it does, it won't be a nationwide outbreak type thing. I feel pretty good about our tools to go and work that on the other side. I feel pretty confident about the value proposition we have versus our competitors on the other side of this. We'll see how it plays out. I appreciate the question. That's a good question, and certainly, that is a factor. that's a good question and certainly that is a factor I think the way you overcome some of that softer demand is selling the package of products that we have, making sure we're using the scale of the distribution that we have across both the wastewater and the stormwater businesses. i think the way you overcome some of that softer demand is selling the package of products that we have making sure we're using the scale of the distribution that we have across both the wastewater and the stormwater businesses Will the dynamics on the other end, as you suggest, play out perhaps a little differently than the past because of competitive intensity? will the dynamics on the other end as you suggest play out perhaps a little differently than the past because of competitive intensity Maybe, maybe not. maybe maybe not It'll be really regional and local. it'll be really regional and local If it does, it won't be a nationwide outbreak type thing. if it does it won't be a nationwide outbreak type thing I feel pretty good about our tools to go and work that on the other side. i feel pretty good about our tools to go and work that on the other side I feel pretty confident about the value proposition we have versus our competitors on the other side of this. i feel pretty confident about the value proposition we have versus our competitors on the other side of this We'll see how it plays out. we'll see how it plays out I appreciate the question. i appreciate the question I understand where you're going, but it's not just enough to say we've done this before, we know how to do it. I think it is more, we've done it before. We have a playbook. We have tools. We have experience. We acknowledge that it could be a little different on the other side, but I would never bet against us to be able to understand and adjust to that accordingly in a very profitable manner. I understand where you're going, but it's not just enough to say we've done this before, we know how to do it. i understand where you're going but it's not just enough to say we've done this before we know how to do it I think it is more, we've done it before. i think it is more we've done it before We have a playbook. we have a playbook We have tools. we have tools We have experience. we have experience We acknowledge that it could be a little different on the other side, but I would never bet against us to be able to understand and adjust to that accordingly in a very profitable manner. we acknowledge that it could be a little different on the other side but i would never bet against us to be able to understand and adjust to that accordingly in a very profitable manner

Speaker 6: Thanks, guys. Appreciate it. Thanks, guys. thanks guys Appreciate it. appreciate it

Speaker 10: Your next question comes from the line of Colin Verron with Deutsche Bank. Your line is open. Please go ahead. Your next question comes from the line of Colin Verron with Deutsche Bank. your next question comes from the line of colin verron with deutsche bank Your line is open. your line is open Please go ahead. please go ahead

Speaker 2: Good morning. Thanks for taking my questions. I guess I just wanted to start on one of the other levers that you talked about, other than recycling, was on the transportation side. You made a comment about internal fleet versus common carrier exposure. Can you just sort of help us understand sort of your ability to flex that and kind of what the benefit of that could be from a dollar standpoint? Good morning. good morning Thanks for taking my questions. thanks for taking my questions I guess I just wanted to start on one of the other levers that you talked about, other than recycling, was on the transportation side. i guess i just wanted to start on one of the other levers that you talked about other than recycling was on the transportation side You made a comment about internal fleet versus common carrier exposure. you made a comment about internal fleet versus common carrier exposure Can you just sort of help us understand sort of your ability to flex that and kind of what the benefit of that could be from a dollar standpoint? can you just sort of help us understand sort of your ability to flex that and kind of what the benefit of that could be from a dollar standpoint

Speaker 11: Good. Again, Scott Barbour, good question on our logistics. We are an ultimate last mile carrier with our fleet to our trade deliveries. Anything within a certain mileage of our factories and distribution centers, we deliver on that fleet. It's roughly 70% of our revenue for the legacy business, the ADS business. Here's what I think, and why this is the right long-term investment. In high inflationary transportation times, where both diesel and the rate, in other words, there's two components on common carriers. It's the rate they charge you to carry, and that's a supply and demand, and then it's the cost of diesel to operate that. It also can be their wages of drivers, but it's mainly the diesel. Right now, both rate and diesel are accelerating quickly. Good. good Again, Scott Barbour, good question on our logistics. again scott barbour good question on our logistics We are an ultimate last mile carrier with our fleet to our trade deliveries. we are an ultimate last mile carrier with our fleet to our trade deliveries Anything within a certain mileage of our factories and distribution centers, we deliver on that fleet. anything within a certain mileage of our factories and distribution centers we deliver on that fleet It's roughly 70% of our revenue for the legacy business, the ADS business. it's roughly 70% of our revenue for the legacy business the ads business Here's what I think, and why this is the right long-term investment. here's what i think and why this is the right long-term investment In high inflationary transportation times, where both diesel and the rate, in other words, there's two components on common carriers. in high inflationary transportation times where both diesel and the rate in other words there's two components on common carriers It's the rate they charge you to carry, and that's a supply and demand, and then it's the cost of diesel to operate that. it's the rate they charge you to carry and that's a supply and demand and then it's the cost of diesel to operate that It also can be their wages of drivers, but it's mainly the diesel. it also can be their wages of drivers but it's mainly the diesel Right now, both rate and diesel are accelerating quickly. right now both rate and diesel are accelerating quickly On my private fleet, I really only have diesel accelerating, so I've become much more competitive versus common carriers in my fleet. What does that mean? That means I can probably expand my radius of delivery from my points to make myself more competitive against competitors that are largely on common carrier, not last mile delivery like we have. Again, part of our scale, our balance sheet, all those things that we've done over a long period of time to create that kind of thing. This is the time, in these inflationary times, on the logistics, it's our fleet inflates at a lower rate, basically just on the diesel, and on the recycling, where we have an additional tool versus the virgin material buy to mitigate cost. On my private fleet, I really only have diesel accelerating, so I've become much more competitive versus common carriers in my fleet. on my private fleet i really only have diesel accelerating so i've become much more competitive versus common carriers in my fleet What does that mean? what does that mean That means I can probably expand my radius of delivery from my points to make myself more competitive against competitors that are largely on common carrier, not last mile delivery like we have. that means i can probably expand my radius of delivery from my points to make myself more competitive against competitors that are largely on common carrier not last mile delivery like we have Again, part of our scale, our balance sheet, all those things that we've done over a long period of time to create that kind of thing. again part of our scale our balance sheet all those things that we've done over a long period of time to create that kind of thing This is the time, in these inflationary times, on the logistics, it's our fleet inflates at a lower rate, basically just on the diesel, and on the recycling, where we have an additional tool versus the virgin material buy to mitigate cost. this is the time in these inflationary times on the logistics it's our fleet inflates at a lower rate basically just on the diesel and on the recycling where we have an additional tool versus the virgin material buy to mitigate cost These kinds of times really show the benefit of the long-term investments the company has made and how it positions us in these more difficult periods. That's why I'm so confident we win on the other side, based on that other question. We have these tools and insights that I think are really unique in this industry. These kinds of times really show the benefit of the long-term investments the company has made and how it positions us in these more difficult periods. these kinds of times really show the benefit of the long-term investments the company has made and how it positions us in these more difficult periods That's why I'm so confident we win on the other side, based on that other question. that's why i'm so confident we win on the other side based on that other question We have these tools and insights that I think are really unique in this industry. we have these tools and insights that i think are really unique in this industry

Speaker 2: Great. That's really helpful color. I guess, after the NDS acquisition, in sort of your portfolio with Infiltrator, I guess is there any way to think about how you guys look at the end markets and your ability to outperform? Is there a category or an end market that you guys expect to see the biggest share gains? I'm looking at that residential assumption being down the most here, but given your expanded portfolio, is the opportunity for share gains really in that resi market? Is it really across the board? I'd just be curious as to how you guys think about the puts and takes on the outperformance within the different end markets. Great. great That's really helpful color. that's really helpful color I guess, after the NDS acquisition, in sort of your portfolio with Infiltrator, I guess is there any way to think about how you guys look at the end markets and your ability to outperform? i guess after the nds acquisition in sort of your portfolio with infiltrator i guess is there any way to think about how you guys look at the end markets and your ability to outperform Is there a category or an end market that you guys expect to see the biggest share gains? is there a category or an end market that you guys expect to see the biggest share gains I'm looking at that residential assumption being down the most here, but given your expanded portfolio, is the opportunity for share gains really in that resi market? i'm looking at that residential assumption being down the most here but given your expanded portfolio is the opportunity for share gains really in that resi market Is it really across the board? is it really across the board I'd just be curious as to how you guys think about the puts and takes on the outperformance within the different end markets. i'd just be curious as to how you guys think about the puts and takes on the outperformance within the different end markets

Speaker 11: I think we probably have more opportunity in residential, because that's really where NDS is stronger. We have our strength in Infiltrator, in residential kind of participation, and their growth. You guys see where they're growing in residential. The natures of the two are a little different. Infiltrator is more new construction, a third R&R. NDS kind of flips that. There's no doubt we've gotten bigger in residential. Our legacy business is relatively under-penetrated in residential. We think this might give us a few more insights there, that cross-selling comes in play more on the residential. On the non-residential side, there are some great products NDS has that we do not have for our solutions package that we sell basically into these projects. Thinking of these channel drains in particular, those will be a very nice addition to our product lines. I think we probably have more opportunity in residential, because that's really where NDS is stronger. i think we probably have more opportunity in residential because that's really where nds is stronger We have our strength in Infiltrator, in residential kind of participation, and their growth. we have our strength in infiltrator in residential kind of participation and their growth You guys see where they're growing in residential. you guys see where they're growing in residential The natures of the two are a little different. the natures of the two are a little different Infiltrator is more new construction, a third R&R. infiltrator is more new construction a third r&r NDS kind of flips that. nds kind of flips that There's no doubt we've gotten bigger in residential. there's no doubt we've gotten bigger in residential Our legacy business is relatively under-penetrated in residential. our legacy business is relatively under-penetrated in residential We think this might give us a few more insights there, that cross-selling comes in play more on the residential. we think this might give us a few more insights there that cross-selling comes in play more on the residential On the non-residential side, there are some great products NDS has that we do not have for our solutions package that we sell basically into these projects. on the non-residential side there are some great products nds has that we do not have for our solutions package that we sell basically into these projects Thinking of these channel drains in particular, those will be a very nice addition to our product lines. thinking of these channel drains in particular those will be a very nice addition to our product lines I think to answer your question, maybe more on the residential than the non-residential, but both have runway. I think to answer your question, maybe more on the residential than the non-residential, but both have runway. i think to answer your question maybe more on the residential than the non-residential but both have runway

Speaker 2: Great. I appreciate all the commentary and good luck. Great. great I appreciate all the commentary and good luck. i appreciate all the commentary and good luck

Speaker 10: Your next question comes from the line of Trey Grooms with Stephens. Your line is open. Please go ahead. Your next question comes from the line of Trey Grooms with Stephens. your next question comes from the line of trey grooms with stephens Your line is open. your line is open Please go ahead. please go ahead

Speaker 4: Hey, good morning, guys. This is Ethan on for Trey. Thanks for taking the question. You briefly touched on the prepared remarks on maybe leveraging SG&A a little bit to mitigate some of that COGS inflation. Any more color on the initiatives here? I know you've previously guided to SG&A as a % of sales in the past, so if you can provide any color on what guide assumes from an SG&A standpoint would be great. Thanks. Hey, good morning, guys. hey good morning guys This is Ethan on for Trey. this is ethan on for trey Thanks for taking the question. thanks for taking the question You briefly touched on the prepared remarks on maybe leveraging SG&A a little bit to mitigate some of that COGS inflation. you briefly touched on the prepared remarks on maybe leveraging sg&a a little bit to mitigate some of that cogs inflation Any more color on the initiatives here? any more color on the initiatives here I know you've previously guided to SG&A as a % of sales in the past, so if you can provide any color on what guide assumes from an SG&A standpoint would be great. i know you've previously guided to sg&a as a % of sales in the past so if you can provide any color on what guide assumes from an sg&a standpoint would be great Thanks. thanks

Speaker 12: Yeah. Again, the SG&A for this past year has a lot of moving pieces to it. As you think through next year, I would guide you to use kind of a 14% SG&A as a % of revenue, kind of a number. We're getting back to kind of a normalized number for us as to where we go. Again, you've got NDS coming in on a full year, so obviously that's incremental increase that you've got going on there. You've got the initiatives that we all have here, that we have every year, on managing our costs, all the way from T&E and everything else that we've put into place. We do a really good job, I think, of shining a light on it in the different cost centers in managing that cost bucket really well. Yeah. yeah Again, the SG&A for this past year has a lot of moving pieces to it. again the sg&a for this past year has a lot of moving pieces to it As you think through next year, I would guide you to use kind of a 14% SG&A as a % of revenue, kind of a number. as you think through next year i would guide you to use kind of a 14% sg&a as a % of revenue kind of a number We're getting back to kind of a normalized number for us as to where we go. we're getting back to kind of a normalized number for us as to where we go Again, you've got NDS coming in on a full year, so obviously that's incremental increase that you've got going on there. again you've got nds coming in on a full year so obviously that's incremental increase that you've got going on there You've got the initiatives that we all have here, that we have every year, on managing our costs, all the way from T&E and everything else that we've put into place. you've got the initiatives that we all have here that we have every year on managing our costs all the way from t&e and everything else that we've put into place We do a really good job, I think, of shining a light on it in the different cost centers in managing that cost bucket really well. we do a really good job i think of shining a light on it in the different cost centers in managing that cost bucket really well

Speaker 11: We also know that we have to invest for the future. We do that to make sure that we're supporting the long-term growth and strategic initiatives of the company. There's always gonna be some dollar increase there, but in a year like this year coming up, and we look at that revenue growth, due to this price cost dynamic that's happening, we should expect to get some real nice leverage on that SG&A fixed cost line. Going down to about 14% from the 15% + we were this past year is the way I'd think about it. We also know that we have to invest for the future. we also know that we have to invest for the future We do that to make sure that we're supporting the long-term growth and strategic initiatives of the company. we do that to make sure that we're supporting the long-term growth and strategic initiatives of the company There's always gonna be some dollar increase there, but in a year like this year coming up, and we look at that revenue growth, due to this price cost dynamic that's happening, we should expect to get some real nice leverage on that SG&A fixed cost line. there's always gonna be some dollar increase there but in a year like this year coming up and we look at that revenue growth due to this price cost dynamic that's happening we should expect to get some real nice leverage on that sg&a fixed cost line Going down to about 14% from the 15% + we were this past year is the way I'd think about it. going down to about 14% from the 15% + we were this past year is the way i'd think about it

Speaker 4: Right. Got it. That's all very clear. Maybe switching gears to just making sure we understand the assumptions around the volume guide. The guide assumes volume flat. Obviously, your performance has been trending above this rate and you still expect to outperform the market, but there's a lot of moving pieces, right? Because of the customer buying ahead of the price increases. You also made comments around some potential regional compression of your value prop relative to concrete pipe. I guess my question is this implied deceleration in volume more a reflection of what you're seeing on the ground in terms of underlying demand, perhaps in response to these price increases? Or just some understandable conservatism on the volume outlook? Right. right Got it. got it That's all very clear. that's all very clear Maybe switching gears to just making sure we understand the assumptions around the volume guide. maybe switching gears to just making sure we understand the assumptions around the volume guide The guide assumes volume flat. the guide assumes volume flat Obviously, your performance has been trending above this rate and you still expect to outperform the market, but there's a lot of moving pieces, right? obviously your performance has been trending above this rate and you still expect to outperform the market but there's a lot of moving pieces right Because of the customer buying ahead of the price increases. because of the customer buying ahead of the price increases You also made comments around some potential regional compression of your value prop relative to concrete pipe. you also made comments around some potential regional compression of your value prop relative to concrete pipe I guess my question is this implied deceleration in volume more a reflection of what you're seeing on the ground in terms of underlying demand, perhaps in response to these price increases? i guess my question is this implied deceleration in volume more a reflection of what you're seeing on the ground in terms of underlying demand perhaps in response to these price increases Or just some understandable conservatism on the volume outlook? or just some understandable conservatism on the volume outlook

Speaker 11: This is Scott Barbour. I think our conservatism on the volume is really related to the market and the end market and demand. If you recall, I said non-res, that we think it'll be more of the same. Agriculture will be a little compressed year-over-year. The residential, particularly on the pipe side, will be compressed year-over-year because land development projects are slowing down. There's no volume compression due to competitive activity. You're correct, we do think these dynamics will happen in the market, and we will meet what we got to go do to get the business that we want on a local basis. It's more the end market behavior. This is Scott Barbour. this is scott barbour I think our conservatism on the volume is really related to the market and the end market and demand. i think our conservatism on the volume is really related to the market and the end market and demand If you recall, I said non-res, that we think it'll be more of the same. if you recall i said non-res that we think it'll be more of the same Agriculture will be a little compressed year-over-year. agriculture will be a little compressed year-over-year The residential, particularly on the pipe side, will be compressed year-over-year because land development projects are slowing down. the residential particularly on the pipe side will be compressed year-over-year because land development projects are slowing down There's no volume compression due to competitive activity. there's no volume compression due to competitive activity You're correct, we do think these dynamics will happen in the market, and we will meet what we got to go do to get the business that we want on a local basis. you're correct we do think these dynamics will happen in the market and we will meet what we got to go do to get the business that we want on a local basis It's more the end market behavior. it's more the end market behavior

Speaker 4: Got it. That's all very clear. Yeah, your ability to outperform the market in this environment is definitely encouraging. Yep, thanks for taking the questions. Got it. got it That's all very clear. that's all very clear Yeah, your ability to outperform the market in this environment is definitely encouraging. yeah your ability to outperform the market in this environment is definitely encouraging Yep, thanks for taking the questions. yep thanks for taking the questions

Speaker 11: You're welcome. Thank you. You're welcome. you're welcome Thank you. thank you

Speaker 10: There are no further questions at this time. There are no further questions at this time. there are no further questions at this time Go ahead and hand it back to Bianca. Go ahead and hand it back to Bianca. go ahead and hand it back to bianca I will turn the call back to Scott Barbour for closing remarks. I will turn the call back to Scott Barbour for closing remarks. i will turn the call back to scott barbour for closing remarks

Speaker 11: Thanks. I appreciate it, and I appreciate the questions and the quality of the questions. We probably went a little deeper than we normally do on some of those. As many of you said, there are a lot of moving pieces right now, and I just don't want to have any surprises as we go through the year, as different things are kind of emerging. That's kind of why we went a little deeper than we normally would. Alison prepared us with like three pages of Q&A for this, but we're just trying to let you know what's going on. We feel good about this plan. We feel good about the year we closed. We feel good about this plan. Thanks. thanks I appreciate it, and I appreciate the questions and the quality of the questions. i appreciate it and i appreciate the questions and the quality of the questions We probably went a little deeper than we normally do on some of those. we probably went a little deeper than we normally do on some of those As many of you said, there are a lot of moving pieces right now, and I just don't want to have any surprises as we go through the year, as different things are kind of emerging. as many of you said there are a lot of moving pieces right now and i just don't want to have any surprises as we go through the year as different things are kind of emerging That's kind of why we went a little deeper than we normally would. that's kind of why we went a little deeper than we normally would Alison prepared us with like three pages of Q&A for this, but we're just trying to let you know what's going on. alison prepared us with like three pages of q&a for this but we're just trying to let you know what's going on We feel good about this plan. we feel good about this plan We feel good about the year we closed. we feel good about the year we closed We feel good about this plan. we feel good about this plan We know it's not gonna be easy, like I said earlier, the tools that we have, the experience, the footing of the company in the broadest possible way, are, I think, a lot better today than they were when we encountered other environments like this. We're very confident of that. We appreciate you all coming in today into the call. Look forward to some discussions later on. Let's have a nice Memorial today, a safe and enjoyable Memorial Day weekend. Thanks. We know it's not gonna be easy, like I said earlier, the tools that we have, the experience, the footing of the company in the broadest possible way, are, I think, a lot better today than they were when we encountered other environments like this. we know it's not gonna be easy like i said earlier the tools that we have the experience the footing of the company in the broadest possible way are i think a lot better today than they were when we encountered other environments like this We're very confident of that. we're very confident of that We appreciate you all coming in today into the call. we appreciate you all coming in today into the call Look forward to some discussions later on. look forward to some discussions later on Let's have a nice Memorial today, a safe and enjoyable Memorial Day weekend. let's have a nice memorial today a safe and enjoyable memorial day weekend Thanks. thanks

Speaker 10: This concludes today's call. Thank you for attending. You may now disconnect. This concludes today's call. this concludes today's call Thank you for attending. thank you for attending You may now disconnect. you may now disconnect