Earnings Watch: Advanced Drainage Systems, Inc (WMS)

Advanced Drainage Systems, Inc. (NYSE:WMS) reported earnings for the three months ended March 2016 on June 07, 2016. The company earned $0.31 per share on revenue of $244.2M. Analysts had been modeling earning per share of $0.3 with $233.3M in revenue.

Advanced Drainage Systems, Inc. (NYSE:WMS) announced financial results on an unaudited basis for the fiscal year ended March 31, 2016.

Fiscal Year Ended March 31, 2016 Highlights

  • Net sales increased 9.3% to $1.289 billion
  • Net income of $26.1 million compared to $12.8 million in fiscal year 2015
  • Adjusted EBITDA (Non-GAAP) of $185.9 million compared to $143.8 million in fiscal year 2015
  • Cash flow from operating activities of $134.8 million compared to $74.4 million in fiscal year 2015
  • Free cash flow (Non-GAAP) of $89.9 million compared to $42.3 million in fiscal year 2015

Joe Chlapaty, Chairman and Chief Executive Officer of ADS commented, “In fiscal year 2016, we experienced net sales growth of 9.3% compared to fiscal year 2015, driven primarily by healthy conversion and favorable weather conditions in the majority of our end markets, as well as contributions from the Ideal Pipe acquisition. Our sales were particularly strong in the second half of the fiscal year, as we generated net sales growth of 11.8% in the third quarter and 17.9% in the fourth quarter, more than offsetting a slower-than-expected start to the year. Our strong second half performance reflected significant growth in our Allied Products and healthy Pipe sales, as we continued to gain market share by capitalizing on conversion opportunities. Our performance in the domestic construction markets was also strong, as we grew 10.6% for the year compared to the estimated market growth of only 5%.”

Fiscal Year 2016 Results

Gross profit increased $74.5 million, or 36.2 %, to $280.7 million for fiscal year 2016, compared to $206.1 million for the prior fiscal year. As a percentage of net sales, gross profit was 21.8%, compared to 17.5%, for the prior fiscal year. The increase in gross profit was largely attributed to increased revenues combined with lower raw material and transportation costs.

The Company reported Adjusted EBITDA (Non-GAAP) of $185.9 million in the full fiscal year 2016 compared to Adjusted EBITDA of $143.8 million in the prior fiscal year, an increase of 29.3%. As a percentage of net sales, Adjusted EBITDA was 14.4% for the fiscal year 2016 compared to 12.2% in the prior fiscal year. The increase in Adjusted EBITDA was largely attributed to the factors mentioned above offset by settlement losses on hedge positions primarily related to polypropylene resins.

Adjusted Earnings per fully converted share (Non-GAAP) for the fiscal year 2016 was $0.42 per share based on weighted average fully converted shares of 73.5 million, improved from an adjusted earnings per fully converted share of $0.29 per share for the prior year.

A reconciliation of GAAP to Non-GAAP financial measures for Adjusted EBITDA, Free Cash Flow and Adjusted Earnings per fully converted share has been provided in the financial statement tables included in this press release. An explanation of these measures is also included below under the heading “Non-GAAP Financial Measures.”

For fiscal year 2016, the Company recorded net cash provided by operating activities of $134.8 million compared to $74.4 million for the same period last year. Long Term Debt was $350.2 million as of March 31, 2016, a reduction of $49.7 million from March 31, 2015.

Fiscal Year 2017 Outlook

Based on current visibility, backlog of existing orders and business trends, the Company provided its financial targets for fiscal year 2017. Net sales for fiscal year 2017 are forecasted to be in the range of $1.330 billion to $1.380 billion, while the outlook for Adjusted EBITDA (Non-GAAP) is expected to be in the range of $205 million to $230 million. Capital expenditures are expected to be approximately $50-55 million.

Scott Cottrill, Executive Vice President and Chief Financial Officer of ADS, commented, “Our guidance for fiscal year 2017 reflects anticipated overall domestic end market growth of 4% to 7% in our construction related end markets and a decline of 5% to 12% in the agriculture market. In addition, international net sales are expected to be relatively soft, driven by weakness in the Mexican economy and flat sales in Canada due to a weaker agriculture market that we believe will offset growth in our construction markets. Adjusted EBITDA is forecasted to improve by 10% to 24% driven by higher sales volumes, as well as a favorable cost environment due to lower raw material costs, partially offset by anticipated lower selling prices and higher SG&A expenses.”

Advanced Drainage Systems, Inc. earnings per share showed an increasing trend of 570% for the current fiscal year. The company’s expected EPS growth rate for next fiscal year is 109%.Analysts project EPS growth over the next 5 years at 20.1%. It has EPS annual growth over the past 5 fiscal years of 58.3% when sales grew 8.4. It reported 17.9% sales growth, and 36.2% EPS growth in the last quarter.

The stock is trading at $27.39, up 55.34% from 52-week low of $17.72. The stock trades down -16.59% from its peak of $33.06 and % below the consensus price target of $24.29. Its volume clocked up at 0.3 million shares which is lower than the average volume of 0.48 million shares. Its market capitalization currently stands at $1.47B.

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