Advanced Drainage Systems, Inc. · NYSE:WMS
Advanced Drainage Systems — Baird 2017 Global Industrials Conference
42 slides from Advanced Drainage Systems's conference presentation, Nov 8, 2017
Slide 1: Baird 2017 Global Industrials Conference
Baird 2017 Global Industrials Conference November 8, 2017
Slide 2: Safe Harbor and Non-GAAP Financial Metrics
Safe Harbor and Non-GAAP Financial Metrics Certain statements in this presentation may be deemed to be forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements are not
Slide 3: Agenda
Agenda ADS at a Glance Track Record of Innovation and Growth Competitive Advantages Strategy and “SPP” Overview Appendix
Slide 4: ADS at a Glance
ADS at a Glance
Slide 5: Investment Proposition
Investment Proposition ADS is an Industrial Growth Company Leading player in the stormwater management industry Only complete solutions provider in the industry, with a track record of innovation Material conversion strategy driving market share gains Large addressable market opportunity
Slide 6: ADS at a Glance
ADS at a Glance Founded 1966 Listed 2014 NYSE WMS Products: Pipe High Density Polyethlyene (HDPE) Polypropylene (PP) Allied Products Storm & Septic Chambers Fittings Structures / Catch Basins Water Quality Segments: Domestic and International Manufacturing Plants*: 60 Distribution Facilities*: 30 AD
Slide 7: Financial Outlook
Financial Outlook Net sales growth driven by domestic construction markets. Adjusted EBITDA to increase due to favorable demand, cost reduction initiatives and operational improvements. +3.4% +4.9% ________________________________ * FY 2018 is an estimate. Percentage increases are calculated at the
Slide 8: Track Record of Innovation and Growth
Track Record of Innovation and Growth
Slide 9: A Strong History
Corrugated HDPE pipe proved far superior to materials used at the time A Strong History … Introduced in 1966 Agriculture market converted by late 1970s N-12 HDPE pipe introduced in 1980s
Slide 10: Conversion Driven Growth
… of Conversion Driven Growth HDPE/PP Share of Storm Sewer Market(1) <1% <10% ________________________________ 1) Based on management estimates. We continue to drive market share gains by displacing traditional materials and driving industry conversion to our products
Slide 11: A Track Record of Innovation
A Track Record of Innovation Our growth has accelerated through our history of bringing innovative water management solutions to market 2009 2010 2011 2012 2013 2014 2015 2016 2017 Downspout Adapter Bend-A-Drain StormTech MC4500 HP Pipe & StormTech MC3500 HPXR 75 & Barracuda Water Quality Acquired r
Slide 12: Allied Products Growth
Allied Products Growth Our allied product portfolio differentiate ADS as a complete solutions provider; with higher margin sales driving more profitable growth FY 13 – FY 17 CAGR: + 8.8%
Slide 13: Innovative Water Management Solutions
Our comprehensive portfolio makes us the only complete solutions provider for the water management industry Innovative Water Management Solutions
Slide 14: Our Competitive Advantages
Our Competitive Advantages
Slide 15: Market Leading Position, Superior Product Attributes, Extensive Distribution Network
Market Leading Position Superior Product Attributes Extensive Distribution Network ADS is the clear market leader Comprehensive Product Portfolio Unmatched Footprint
Slide 16: Comprehensive Product Portfolio
Comprehensive Product Portfolio Comprehensive product portfolio with attractive growth opportunities
Slide 17: Superior Product Attributes
Superior Product Attributes High Density Polyethylene (HDPE) and Polypropylene (PP) have superior attributes relative to traditional materials Cost Installation Joint Integrity Sustainability More Cost Effective ~20% less expensive, total installed cost Reduced Labor & Equipment Up to 3x faster to i
Slide 18: Unmatched Scale
Unmatched Scale Extensive network footprint is ~6x larger than our closest HDPE competitor ADS’ Extensive Operating Platform Manufacturing Plant Distribution Center
Slide 19: Extensive Distribution Network
Extensive Distribution Network Our leading sales force, technical expertise and extensive network of distributor relationships position us as the supplier of choice Over 300 Sales & Engineering Professionals Waterworks Retail Recreation Buying
Slide 20: Our Strategy
Our Strategy
Slide 21: Our Strategy
Our Strategy Outpace domestic construction end market growth by 200+ basis points Operate more efficiently and drive margin expansion Generate strong earnings and cash flow Disciplined capital allocation plan
Slide 22: Superior Performance Program (SPP)
Operational Excellence Commercial Excellence Strategic Growth Superior Performance Program (SPP) SPP is aimed at driving growth and competitive advantage in the industry as well as accelerating margin expansion and profitability over time
Slide 23: Strategic Growth
Strategic Growth Strategic Growth Expanding our portfolio of products through new product innovation and M&A, to strengthen our solutions package Invest in high-growth products and highly profitable end markets Storm Water Solutions Sanitary Solutions Potable Water Storm Pipe & Fittings Retention/De
Slide 24: Operational Excellence
Operational Excellence Network Optimization Optimizing the network to ensure we have the right product, at the right plant, at the right time Drive Supply Chain Efficiency Add Key Tooling Setups Increase Capacity in High Growth Products Optimize our manufacturing footprint, lower transportation cost
Slide 25: Commercial Excellence
Commercial Excellence Sales Force Effectiveness Enabling our sales force to drive incremental growth in our storm sewer product revenue Maximize field selling activities while improving efficiency and effectiveness in the way we sell, design, price and quote Pricing Optimization Tool CRM Platform En
Slide 26: Raw Material Cost Management
Raw Material Cost Management ________________________________ Based on management estimates and other qualitative and quantitative factors. Amounts in billions of pounds. HDPE blending technique. Other defined as resin which could be allocated to either “Virgin” or “Recycled”. Well positioned to man
Slide 27: Sustainability
Sustainability Our broad portfolio of innovative products help efficiently and safely manage storm and waste water
Slide 28: ADS: An Industrial Growth Company
ADS: An Industrial Growth Company Leading player in the stormwater management industry Only complete solutions provider in the industry, with a track record of innovation Material conversion strategy driving market share gains Large addressable market opportunity
Slide 29: Appendix
Appendix
Slide 30: End Markets
End Markets
Slide 31: Non-Residential End Market
Non-Residential End Market Focus on civil engineering design firms to increase specifications and contractors for product acceptance Highest concentration of Allied Products sales Solid demand driven by construction activity and increased regulations around the management of storm water quantity and
Slide 32: Residential End Market
Market Growth(1) FY13 – FY17 CAGR Residential End Market ~53% is sold to the retail channel (i.e., Home Depot, Lowe’s) ~47% is related to new residential construction development (single-family, multi-family) Strong housing market growth is forecasted; new subdivision development should benefit stor
Slide 33: Infrastructure End Market
Market Growth(1) FY13 – FY17 CAGR Infrastructure End Market Focus on gaining key approvals with state and local agencies Market is heavily reliant on public funding New product offering (HPXR-75) should help grow our market share in this end market Market vs. ADS Growth Highlights Domestic Revenue C
Slide 34: Agriculture End Market
Market Growth(1) FY13 – FY17 CAGR Agriculture End Market Systematic drainage has been proven to increase crop yields Key economic drivers are farm income and crop prices; specifically corn and soybeans Sales are concentrated in the Midwest Market vs. ADS Growth Highlights Domestic Revenue Concentrat
Slide 35: Financials
Financials
Slide 36: FY 2018 Financial Outlook
FY 2018 Financial Outlook Key Metric FY 2017 FY 2018 Y-o-Y Change Net Sales (in Billions) $1,257 $1,275 - $1,325 Up 1% to 5% Adj. EBITDA (in Millions) $193 $195 - $210 Up 1% to 9% Adj. EBITDA Margin 15.4% 15.3% - 15.8% (10) to +40 basis points Fiscal Year 2018 Expectations
Slide 37: FY2018 Market Outlook
Market FY2018 Outlook Comments Domestic Construction End Markets End market growth intact Agriculture End Market Strong Q2 performance, 2H performance contingent on weather International End Market Modest improvement expected in Mexico; Canada expected to be flat due to weaker Ag market, offsetting
Slide 38: Q2 FY 2018 Financial Performance
Q2 FY 2018 Financial Performance Favorable demand in the period offset by higher raw material and operational costs - 150 bps (USD, in millions) Adjusted EBITDA + 11.2% Domestic Markets + Construction +14% + Non-Residential +13% + Residential +17% + Infrastructure +9% + Agriculture +8% + Pipe +14% +
Slide 39: Fiscal Year-to-Date Financial Performance
Fiscal Year-to-Date Financial Performance Domestic demand driving strong revenue growth, offset by weakness in International markets - 230 bps (USD, in millions) Adjusted EBITDA + 5.7% Domestic Markets + Construction +9% + Non-Residential +9% + Residential +12% + Infrastructure +3% − Agriculture - 2
Slide 40: Capital Structure and Deployment Priorities
Capital Structure and Deployment Priorities Cash and Leverage Cash Flow from Operations Sources Uses Top priorities for FY2018 include: supporting growth in certain diameters and geographies, productivity and efficiency initiatives (SPP) Focus on M&A to leverage our national footprint and sales and
Slide 41: Adjusted EBITDA Reconciliation
Adjusted EBITDA Reconciliation ___________________________ EBITDA as net income before interest, taxes, depreciation and amortization Adjusted EBITDA as EBITDA before stock based compensation expense, non-cash charges and certain other expenses Fiscal Year Ended March 31, (Amounts in thousands) 2017
Slide 42: Adjusted EBITDA Reconciliation
Adjusted EBITDA Reconciliation ___________________________ EBITDA as net income before interest, taxes, depreciation and amortization Adjusted EBITDA as EBITDA before stock based compensation expense, non-cash charges and certain other expenses Three Months Ended Six Months Ended September 30, Septe
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