Exchange: NYSE | Sector: Industrials | Industry: Construction
Q4 2025
Published: May 15, 2025
Earnings Highlights
Revenue of $615.76M down 21.3% year-over-year
EPS of $0.99 decreased by 40.5% from previous year
Gross margin of 38.7%
Net income of 77.16M
""We saw strong growth in places like Florida with double-digit growth in pipe, Allied products and Infiltrator products." - Scott Barbour" - Scott Barbour
Advanced Drainage Systems Inc (WMS) Q4 2025 Results: Resilient Performance Amid Industry Challenges
Executive Summary
In the fourth quarter of fiscal year 2025, Advanced Drainage Systems Inc (WMS) reported net sales of $615.76 million, reflecting a slight decline from the previous quarter. Despite this, the company showcased a strong performance in specific markets, particularly in Florida and Texas, where growth in pipe and Allied products was significant. The adjusted EBITDA margin, although declining slightly, stood at 30.6%, marking the second most profitable year in the company's history amidst challenges such as higher material costs and pricing pressures. Management remains optimistic, attributing their resilience to ongoing strategic initiatives and a diversified product mix, hinting at substantial growth opportunities in the near future.
Key Performance Indicators
Revenue
615.76M
QoQ: -10.83% | YoY:-21.32%
Gross Profit
238.15M
38.68% margin
QoQ: -1.43% | YoY:-18.98%
Operating Income
116.69M
QoQ: -8.02% | YoY:-37.72%
Net Income
77.16M
QoQ: -5.02% | YoY:-40.82%
EPS
1.00
QoQ: -4.76% | YoY:-40.48%
Revenue Trend
Margin Analysis
Key Insights
Q4 2025 Revenue: $615.76 million (YoY: -21.32%, QoQ: -10.83%)
Adjusted EBITDA Margin: 30.6%
Net Income: $77.16 million (Net Income Margin: 12.55%, YoY: -40.82%)
Total Assets: $3.69 billion
Total Liabilities: $2.05 billion
Financial Highlights
Revenue Performance:
- Q4 2025 Revenue: $615.76 million (YoY: -21.32%, QoQ: -10.83%)
- Adjusted EBITDA Margin: 30.6%
- Net Income: $77.16 million (Net Income Margin: 12.55%, YoY: -40.82%)
Balance Sheet Health:
- Total Assets: $3.69 billion
- Total Liabilities: $2.05 billion
- Net Debt: $962.35 million
Cash Flow Metrics:
- Free Cash Flow: -$5.31 million in Q4 2025
- Operating Cash Flow: $41.23 million
Ratios:
- Current Ratio: 3.33
- Quick Ratio: 2.10
- Return on Equity: 83.3%
- P/E Ratio: 27.30 (vs. industry average)
- Dividend Yield: 0.147% (dividend increased by 13% to $0.72 per share)
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
615.76M
-21.32%
-10.83%
Gross Profit
238.15M
-18.98%
-1.43%
Operating Income
116.69M
-37.72%
-8.02%
Net Income
77.16M
-40.82%
-5.02%
EPS
1.00
-40.48%
-4.76%
Key Financial Ratios
currentRatio
3.33
grossProfitMargin
38.7%
operatingProfitMargin
19%
netProfitMargin
12.5%
returnOnAssets
2.09%
returnOnEquity
83.3%
debtEquityRatio
15.39
operatingCashFlowPerShare
$0.53
freeCashFlowPerShare
$-0.07
dividendPayoutRatio
16.1%
priceToBookRatio
90.94
priceEarningsRatio
27.3
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Market Conditions and Strategic Focus:
- "We continue to drive above-market performance through our material conversion strategy in the stormwater and on-site wastewater market," stated Scott Barbour, President & CEO, highlighting specific growth in states like Florida and Texas, with double-digit growth in pipes and Allied products.
Profitability Insights:
- Barbour noted, "The resiliency demonstrated by this year's profitability is partially due to our strategy to grow the more profitable segments, Infiltrator and Allied products which now represent 44% of revenue."
- The adjusted EBITDA margin of 30.6% demonstrates solid operational performance during economic headwinds, suggesting operational efficiency.
Investor Day Postponement:
- Management decided to postpone the Investor Day, stating that current economic uncertainties do not allow for reliable long-term guidance. This reflects cautious optimism in volatile market conditions.
"We saw strong growth in places like Florida with double-digit growth in pipe, Allied products and Infiltrator products." - Scott Barbour
— Scott Barbour
"This year's 30.6% adjusted EBITDA margin marks the second most profitable year in the company's history." - Scott Barbour
— Scott Barbour
Forward Guidance
Management has provided guidance for fiscal year 2026, estimating revenues to range between $2.825 billion and $2.975 billion, with adjusted EBITDA ranging from $850 million to $910 million. Key assumptions include stabilization in price/cost delivery despite lower expected production volumes due to winter seasonality impacts. They anticipate continued growth in stormwater and on-site wastewater markets driven by secular tailwinds including underbuilt infrastructure and increasing storm events. Investors should watch the integration outcomes from recent acquisitions (Orenco and River Valley Pipe) and their impact on long-term profitability and market share.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
WMS Focus
38.68%
19.00%
83.30%
27.30%
APOG
21.60%
1.77%
0.51%
103.84%
AZEK
37.30%
1.07%
2.09%
60.07%
LII
33.90%
18.20%
23.30%
27.60%
ROCK
25.80%
8.22%
4.40%
9.74%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
With a current market position bolstered by strong liquidity, substantial growth potential, and a robust product mix, Advanced Drainage Systems, Inc. presents a moderately optimistic investment outlook. The company is well-positioned to capitalize on expanding market needs in water management while managing economic volatility through strategic growth and cost control measures. Any investor should pay close attention to the integration of recent acquisitions and management’s operational execution given current market uncertainties.
Key Investment Factors
Growth Potential
The company has identified substantial growth opportunities in stormwater and wastewater management markets, particularly in the Southeast U.S. where increased housing development is prevalent.
Profitability Risk
Potential risks include economic uncertainty impacting demand, adverse weather disrupting construction schedules, and pricing pressures amid rising material costs.
Financial Position
Advanced Drainage Systems has a strong balance sheet with a current ratio of 3.33, but carries significant debt (net debt of $962 million), indicating reliance on leveraged financing for growth.
SWOT Analysis
Strengths
Strong market share in stormwater and wastewater management
Diverse product range across residential and non-residential sectors