Advanced Drainage Systems (WMS) Q2 2027 earnings summary

Executive summary

• Q2 FY27 net sales rose 4.6% to $889.4M; Adjusted EBITDA was $286.8M, down 0.2% YoY, with a 32.2% margin versus 33.8%.

• H1 net sales increased 12.5% to $1.891B, organic sales grew 2.3%, and Adjusted EBITDA rose 14.0% to $645.1M; the 34.1% margin was a record.

• Challenged demand and a larger-than-expected Q1 pull-forward tempered results; innovation, material conversion, partnerships and acquisitions supported growth.

Financial highlights

• Q2 continuing-operations net income fell 14.6% to $133.6M; diluted continuing-operations EPS declined 11.0% to $1.77.

• H1 continuing-operations net income rose 3.2% to $310.2M; diluted continuing-operations EPS increased 5.0% to $4.02.

• Q2 gross profit increased 1.7% to $345.9M; SG&A rose 8.7% to $129.6M, partly reflecting NDS and transaction costs.

• H1 free cash flow was $359.5M versus $398.8M YoY; operating cash flow was $458.2M versus $509.8M, with working-capital changes driving the decline.

Outlook and guidance

• FY27 net sales guidance was reduced to $3.300B–$3.400B; Adjusted EBITDA guidance is $1.000B–$1.030B, implying a ~30.3% margin.

• Softer demand, higher rates, geopolitical uncertainty, lower-than-expected material inflation and reduced need for planned pricing actions informed the lower sales outlook; EBITDA guidance remained largely unchanged.

• Estimated $40M–$50M of revenue shifted into Q1 from Q2, revised up from the prior $30M estimate.

• FY27 capital expenditures are expected to be ~$200M, funded from operating cash flow; favorable price/cost is expected to offset unfavorable volume and transportation costs into H2.