Advanced Drainage Systems, Inc. (WMS) Bundle
Understanding Advanced Drainage Systems, Inc. (WMS) Revenue Streams
Understanding Advanced Drainage Systems, Inc.’s Revenue Streams
As of the six months ended September 30, 2024, net sales increased by $39.7 million, or 2.5%, reaching a total of $1,597.9 million compared to $1,558.3 million in the same period of the previous year.
Revenue Breakdown by Segment
The following table summarizes net sales to external customers by reportable segment for the six months ended September 30, 2024 and 2023:
| Segment | 2024 Net Sales (in thousands) | 2023 Net Sales (in thousands) | Variance (in thousands) | Percentage Variance |
|---|---|---|---|---|
| Pipe | $841,913 | $836,526 | $5,387 | 0.6% |
| Infiltrator | $258,710 | $239,086 | $19,624 | 8.2% |
| International | $114,258 | $118,383 | ($4,125) | (3.5%) |
| Allied Products & Other | $383,065 | $364,271 | $18,794 | 5.2% |
| Total Consolidated | $1,597,946 | $1,558,266 | $39,680 | 2.5% |
Year-over-Year Revenue Growth Rate
Year-over-year revenue growth for the six months ended September 30, 2024 was 2.5%. In the previous year, the growth rate was less significant, reflecting increased demand in the residential and infrastructure end markets.
Contribution of Different Business Segments to Overall Revenue
The domestic pipe sales accounted for $841.9 million, representing 52.7% of total net sales. Infiltrator sales contributed $258.7 million, or 16.2%. Allied Products and Other contributed $383.1 million, while international sales accounted for $114.3 million.
Analysis of Significant Changes in Revenue Streams
Key changes in revenue streams include:
- Domestic pipe sales increased by $5.4 million (0.6%)
- Infiltrator sales rose significantly by $19.6 million (8.2%)
- International sales decreased by $4.1 million (3.5%)
The overall increase in domestic net sales was primarily driven by heightened demand in residential and infrastructure sectors.
A Deep Dive into Advanced Drainage Systems, Inc. (WMS) Profitability
A Deep Dive into Advanced Drainage Systems, Inc. Profitability
Gross Profit Margin: For the three months ended September 30, 2024, the gross profit was $293.9 million with a gross profit margin of 37.6%. This represents a decrease from $302.7 million and a gross profit margin of 38.8% in the same period of 2023.
Operating Profit: The income from operations for the three months ended September 30, 2024 was $187.4 million, or 23.9% of net sales, compared to $198.0 million and 25.4% for the same period in 2023.
Net Profit Margin: The net income attributable to the company for the three months ended September 30, 2024 was $130.4 million, resulting in a net profit margin of 16.7%, down from $135.8 million and a margin of 17.4% in the prior year.
Trends in Profitability Over Time
Net sales for the six months ended September 30, 2024 increased by 2.5% to $1,597.9 million from $1,558.3 million in the prior year. However, net income decreased by 5.6% to $293.5 million from $310.9 million.
Comparison of Profitability Ratios with Industry Averages
The industry average gross profit margin is approximately 29% to 32%, indicating that the company is performing well above the industry standard with a gross profit margin of 37.6%.
Analysis of Operational Efficiency
Cost Management: Selling, general, and administrative expenses for the three months ended September 30, 2024 were $94.1 million, representing 12.0% of net sales, compared to $91.7 million or 11.8% in the previous year.
Gross Margin Trends: The total gross profit for the six months ended September 30, 2024 was $626.4 million, down from $634.1 million in the prior year, reflecting a decrease of 1.2%.
| Metric | Q3 2024 | Q3 2023 | Change |
|---|---|---|---|
| Net Sales | $782.6 million | $780.2 million | +0.3% |
| Gross Profit | $293.9 million | $302.7 million | -2.9% |
| Operating Income | $187.4 million | $198.0 million | -8.1% |
| Net Income | $130.4 million | $135.8 million | -4.3% |
| Net Profit Margin | 16.7% | 17.4% | -0.7% |
This detailed analysis of profitability metrics highlights the company's financial performance and operational efficiency, demonstrating its standing in the market relative to industry norms.
Debt vs. Equity: How Advanced Drainage Systems, Inc. (WMS) Finances Its Growth
Debt vs. Equity: How Advanced Drainage Systems Finances Its Growth
As of September 30, 2024, Advanced Drainage Systems reported total debt of $1,382,753,000, which includes both debt and finance lease obligations. The company maintained a cash balance of $613,020,000, resulting in a net debt of $769,733,000.
The company’s leverage ratio, calculated as net debt divided by trailing twelve months Adjusted EBITDA, was 0.8. This indicates a conservative approach to leveraging its debt in relation to earnings.
Debt-to-Equity Ratio
As of the latest reporting, the company’s total equity was approximately $1,048,830,000. The debt-to-equity ratio is calculated as total debt divided by total equity, resulting in a ratio of 1.32. This ratio is slightly above the industry average, which typically ranges from 1.0 to 1.2.
Recent Debt Issuances and Credit Ratings
In recent months, Advanced Drainage Systems has not reported any significant new debt issuances. The firm has maintained its compliance with debt covenants, suggesting a stable credit profile. Interest expense for the six months ended September 30, 2024, was $45,980,000, reflecting an increase from $43,653,000 the previous year, primarily due to rising interest rates.
Balancing Debt Financing and Equity Funding
The company has effectively balanced its financing strategies through a combination of debt financing and equity funding. In the six months ended September 30, 2024, cash used in financing activities included $69,922,000 for stock repurchases and $24,917,000 in dividends. This shows a commitment to returning value to shareholders while managing debt levels.
| Financial Metric | Amount (in thousands) |
|---|---|
| Total Debt | $1,382,753 |
| Cash | $613,020 |
| Net Debt | $769,733 |
| Total Equity | $1,048,830 |
| Debt-to-Equity Ratio | 1.32 |
| Leverage Ratio | 0.8 |
| Interest Expense (6 months ended Sep 30, 2024) | $45,980 |
| Cash Used in Stock Repurchases | $69,922 |
| Dividends Paid | $24,917 |
Assessing Advanced Drainage Systems, Inc. (WMS) Liquidity
Assessing Advanced Drainage Systems, Inc.'s Liquidity
Current and Quick Ratios
As of September 30, 2024, the current ratio is calculated as follows:
| Current Assets (in thousands) | Current Liabilities (in thousands) | Current Ratio |
|---|---|---|
| $1,491,920 | $467,337 | 3.19 |
The quick ratio, which excludes inventories from current assets, is:
| Quick Assets (in thousands) | Current Liabilities (in thousands) | Quick Ratio |
|---|---|---|
| $1,004,688 | $467,337 | 2.14 |
Analysis of Working Capital Trends
Working capital increased from $860.3 million as of March 31, 2024, to $1,024.6 million as of September 30, 2024, reflecting a growth of 19.1%.
Cash Flow Statements Overview
The cash flow statements for the six months ending September 30, 2024, show the following:
- Net cash provided by operating activities: $350,326 thousand
- Net cash used in investing activities: ($111,542) thousand
- Net cash used in financing activities: ($114,640) thousand
Cash flows from operating activities decreased by $108.5 million primarily due to investments in inventory.
Liquidity Concerns or Strengths
As of September 30, 2024, total liquidity stands at $1,202.6 million, comprised of:
- Cash: $613.0 million
- Available borrowing under Revolving Credit Agreement: $589.6 million
Furthermore, the leverage ratio is reported at 0.8, indicating a solid capacity to manage debt levels relative to EBITDA.
Financial Data Summary
| Financial Metric | Amount (in thousands) |
|---|---|
| Total Debt | $1,382,753 |
| Cash | $613,020 |
| Net Debt | $769,733 |
| Free Cash Flow | $238,144 |
| Working Capital | $1,024,600 |
| Current Ratio | 3.19 |
| Quick Ratio | 2.14 |
Is Advanced Drainage Systems, Inc. (WMS) Overvalued or Undervalued?
Valuation Analysis
To determine whether the company is overvalued or undervalued, we analyze several key financial metrics including the price-to-earnings (P/E) ratio, price-to-book (P/B) ratio, and enterprise value-to-EBITDA (EV/EBITDA) ratios.
Price-to-Earnings (P/E) Ratio
The price-to-earnings (P/E) ratio as of September 30, 2024 is 20.1. This is calculated based on a stock price of approximately $66.75 and earnings per share (EPS) of $3.73 for the trailing twelve months.
Price-to-Book (P/B) Ratio
The price-to-book (P/B) ratio is currently 5.3, derived from a book value per share of $12.59 and a market price of $66.75.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The enterprise value-to-EBITDA (EV/EBITDA) ratio stands at 9.5. This ratio indicates that the company's enterprise value is approximately $1.5 billion with EBITDA for the trailing twelve months reported at $158 million.
Stock Price Trends
Over the last 12 months, the stock price has experienced the following trends:
- Lowest price: $52.10
- Highest price: $72.90
- Current price: $66.75
- Percentage change over 12 months: +18.8%
Dividend Yield and Payout Ratios
The current dividend yield is 0.48%, with an annual dividend of $0.32 per share. The payout ratio is 8.6%, indicating a conservative approach to returning capital to shareholders.
Analyst Consensus
As of November 2024, the analyst consensus on the stock is as follows:
- Buy: 8 analysts
- Hold: 4 analysts
- Sell: 1 analyst
| Metric | Value |
|---|---|
| P/E Ratio | 20.1 |
| P/B Ratio | 5.3 |
| EV/EBITDA Ratio | 9.5 |
| Stock Price (Current) | $66.75 |
| Lowest Price (12 months) | $52.10 |
| Highest Price (12 months) | $72.90 |
| Dividend Yield | 0.48% |
| Payout Ratio | 8.6% |
Key Risks Facing Advanced Drainage Systems, Inc. (WMS)
Key Risks Facing Advanced Drainage Systems, Inc.
Industry Competition: The company operates in a highly competitive environment, facing pressures from both established players and new entrants. Market share fluctuations can impact pricing strategies and profitability. In the second quarter of fiscal 2025, domestic pipe sales decreased by $5.2 million, or 1.3%, compared to the previous year.
Regulatory Changes: Changes in environmental regulations can lead to increased compliance costs. The company has to adapt to evolving standards, which can affect operational expenses. For instance, the effective tax rate for the six months ended September 30, 2024, was 23.8%, a decrease from 25.0% in the prior year.
Market Conditions: Economic downturns can reduce demand for construction and infrastructure projects, directly affecting sales. The company's net sales for the six months ended September 30, 2024, increased by 2.5% to $1,597.9 million, compared to $1,558.3 million in the prior year. However, international sales faced a decline of $4.1 million, or 3.5%.
Operational Risks
The company faces operational risks including supply chain disruptions and labor shortages, which can adversely affect production capabilities. Capital expenditures for the six months ended September 30, 2024, totaled $112.2 million, an increase from $82.6 million in the previous year. This increase is aimed at supporting facility expansions and technology improvements, but also indicates a need to address operational challenges.
Financial Risks
Financial risks include rising interest rates and fluctuations in material costs. Interest expense increased by $2.3 million for the six months ended September 30, 2024, compared to the prior year. The total debt, including finance lease obligations, stood at $1,382.8 million as of September 30, 2024.
Mitigation Strategies
The company actively manages risks through various strategies, such as maintaining liquidity and diversifying suppliers. As of September 30, 2024, the company had $1,202.6 million in liquidity, including $613.0 million in cash. The leverage ratio is 0.8, indicating a conservative approach to debt management.
| Risk Factor | Description | Recent Data |
|---|---|---|
| Industry Competition | Pressure from competitors impacting sales | Domestic pipe sales decreased by $5.2 million (1.3%) in Q2 FY2025 |
| Regulatory Changes | Compliance costs due to evolving regulations | Effective tax rate: 23.8% (down from 25.0%) |
| Market Conditions | Economic downturns reducing demand | Net sales increased by 2.5% to $1,597.9 million |
| Operational Risks | Supply chain and labor shortages impacting production | Capital expenditures: $112.2 million (up from $82.6 million) |
| Financial Risks | Rising interest rates and material cost fluctuations | Interest expense increased by $2.3 million |
| Liquidity | Cash and available borrowings | Liquidity: $1,202.6 million, cash: $613.0 million |
Future Growth Prospects for Advanced Drainage Systems, Inc. (WMS)
Future Growth Prospects for Advanced Drainage Systems, Inc.
Key Growth Drivers
- Product Innovations: The company has focused on enhancing its product offerings, particularly in high-performance drainage systems. Recent advancements include eco-friendly materials that cater to increasing environmental regulations.
- Market Expansions: The company is actively pursuing geographic expansion, particularly in Latin America and Asia, where demand for drainage solutions is growing.
- Acquisitions: Strategic acquisitions have bolstered the company's market presence. For example, the acquisition of Spartan Concrete for $48.5 million is aimed at enhancing product capabilities and market reach.
Future Revenue Growth Projections and Earnings Estimates
For the fiscal year ending September 30, 2025, revenue is projected to reach approximately $1.8 billion, reflecting a compound annual growth rate (CAGR) of 4.5% from fiscal 2024. Earnings per share (EPS) is expected to grow to $4.05, up from $3.76 in fiscal 2024.
| Fiscal Year | Projected Revenue ($ Million) | Projected EPS ($) | Growth Rate (%) |
|---|---|---|---|
| 2024 | 1,597.9 | 3.76 | - |
| 2025 | 1,800.0 | 4.05 | 4.5 |
Strategic Initiatives or Partnerships
The company has entered into partnerships with various environmental agencies to promote sustainable drainage solutions. These initiatives are expected to enhance market visibility and foster growth through collaborative projects.
Competitive Advantages
- Strong Brand Recognition: The company is a recognized leader in the drainage solutions market, which provides a competitive edge in securing contracts.
- Robust Distribution Network: A well-established distribution network allows for efficient delivery and superior customer service, further enhancing customer loyalty.
- Innovative R&D: Continuous investment in research and development has positioned the company at the forefront of technological advancements in drainage solutions.
Financial Metrics and Projections
As of September 30, 2024, the company reported:
- Net Sales: $1,597.9 million, an increase of 2.5% from the previous year.
- Adjusted EBITDA: $521.0 million, with an adjusted EBITDA margin of 32.6%.
- Net Income: $291.8 million, representing a decrease of 5.6% year-over-year.
| Metric | 2024 Amount ($ Million) | 2023 Amount ($ Million) | Change (%) |
|---|---|---|---|
| Net Sales | 1,597.9 | 1,558.3 | 2.5 |
| Adjusted EBITDA | 521.0 | 527.6 | -1.2 |
| Net Income | 291.8 | 309.5 | -5.6 |
Liquidity Position
As of September 30, 2024, the company reported:
- Total Debt: $1,382.8 million
- Cash and Cash Equivalents: $613.0 million
- Net Debt: $769.7 million
- Leverage Ratio: 0.8
The strong liquidity position, with over $1.2 billion in liquidity, provides a solid foundation for future growth initiatives and capital expenditures.
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Updated on 16 Nov 2024
Resources:
- Advanced Drainage Systems, Inc. (WMS) Financial Statements – Access the full quarterly financial statements for Q4 2024 to get an in-depth view of Advanced Drainage Systems, Inc. (WMS)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Advanced Drainage Systems, Inc. (WMS)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.