Advanced Drainage Systems, Inc. · NYSE:WMS
Advanced Drainage Systems — Q1 FY2020 Earnings Presentation
32 slides from Advanced Drainage Systems's earnings presentation, Aug 1, 2019
Slide 1: Q1 Fiscal 2020 Financial Results & Infiltrator Acquisition Announcement
Advanced Drainage Systems Q1 Fiscal 2020 Financial Results & Infiltrator Acquisition Announcement
Slide 2: Management Presenters
Management Presenters Scott Barbour President and Chief Executive Officer Scott Cottrill Executive Vice President, Chief Financial Officer Mike Higgins Vice President, Corporate Strategy & Investor Relations
Slide 3: Call Agenda
Call Agenda Q1 Fiscal 2020 Results Infiltrator Acquisition Q&A
Slide 4: Forward Looking Statements and Non-GAAP Financial Metrics
Forward Looking Statements and Non-GAAP Financial Metrics Certain statements in this presentation may be deemed to be forward-looking statements. Such statements include, but are not limited to, statements regarding the anticipated timing for the issuance of additional historic and future financial
Slide 5: Q1 FY 2020 Highlights
Q1 FY 2020 Highlights Domestic construction market sales grew 6% despite record rainfall in the quarter, in led by non-residential and residential construction. Profitability driven by strong sales growth, favorable material cost and disciplined execution, partially offset by inventory absorption he
Slide 6: Q1 Fiscal 2020 Financial Performance
Q1 Fiscal 2020 Financial Performance flat (USD, in millions) +6.7% Domestic Markets + Construction +9% + Non-Residential +6% + Residential +20% + Infrastructure +4% + Agriculture +15% + Pipe +8% + Allied +12% By Geography + Domestic +9% − International - 13% By Application + Pipe +5% + Allied +10% $
Slide 7: Free Cash Flow and Net Debt
Free Cash Flow % of Sales 2.7% 3.5% Net Debt (³) 1.5x Leverage 1.8x Leverage CapEx Working Capital (²) FY 2020 FY 2019 ∆ Adjusted EBITDA $80 $75 $5 Working Capital(2) ($8) ($58) $50 Cash Tax ($1) ($1) $0 Cash Interest ($3) ($4) $1 Other ($5) ($2) ($3) Cash flow from operating activities $63 $10 $53
Slide 8: Capital Deployment Priorities
Capital Deployment Priorities Investor Day – November 2018 CapEx FY20 Priorities Growth: Capacity for high growth products & regions Productivity & Efficiency: Continuous Improvement, Automation, Recycling Strategic Acquisitions Acquisition of Infiltrator Water Technologies Dividends $1.00 Special D
Slide 9: Previous ADS Fiscal 2020 Financial Outlook
Previous ADS Fiscal 2020 Financial Outlook Key Metric FY 2019 FY 2020 Y-o-Y Change Net Sales (in Millions) $1,385 $1,425 - $1,475 Up 3% to 6% Adj. EBITDA (in Millions) $232 $245 - $265 Up 6% to 14% Adj. EBITDA Margin 16.8% 17.2% - 18.0% +40 to +120 basis points Fiscal 2020 Expectations
Slide 10: Infiltrator Acquisition
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Slide 11: A Compelling Strategic Acquisition
Qualitative Financial Strategic A Compelling Strategic Acquisition Combines leaders in stormwater management and on-site septic wastewater management Shared strategy on gaining share by driving conversion from traditional materials Strong distribution networks Complementary and scaled recycling oper
Slide 12: Infiltrator Accelerates Our Path to Achieving 3-Year Plan
Infiltrator Accelerates Our Path to Achieving 3-Year Plan Organic Sales Growth 4% to 6% CAGR Adj. EBITDA Margin 18% to 19% Free Cash Flow Conversion >50% of Adjusted EBITDA Infiltrator is expected to enhance our growth, margin and cash flow profile 3-Year Plan Combined
Slide 13: Evolution of a Strong, Long-standing Partnership with IWT
Evolution of a Strong, Long-standing Partnership with IWT ADS and IWT have been partners for over 15 years Partnering for Success in Stormwater and On-Site Septic 2003 The companies formed a joint venture called StormTech LLC Infiltrator designed and manufactured the chambers for the Retention/Deten
Slide 14: Transaction Overview
Transaction Overview Non-GAAP financial measure calculated as net income before interest, income taxes, depreciation and amortization, stock-based compensation expense, non-cash charges and certain other expenses. Purchase multiple reflects LTM 6/30/19 EBITDA and includes estimated run-rate synergie
Slide 15: Compelling Financial Rationale that Supports Long-term Value Creation
Compelling Financial Rationale that Supports Long-term, Sustainable Value Creation End Markets Product Mix Net Sales (LTM 3/31/19) $1,385 million $293 million $1,609 million(1) Adjusted EBITDA (LTM 3/31/19) $232 million $96 million $328 million (2) Adjusted EBITDA Margin (LTM 3/31/19) 16.8% 32.7% 20
Slide 16: Infiltrator at a Glance
Infiltrator at a Glance A Proven, High-Margin Growth Platform Historical Financials Company Overview 2018 Business Mix Net Sales by Product Net Sales by End-Market Net Sales Adj. EBITDA and Margin Headquartered in Old Saybrook, CT, Infiltrator is a leading provider of plastic leachfield chambers and
Slide 17: Investment Highlights
Investment Highlights Builds on ADS’ Core Strengths and Enhances Position as a Leader in Water Management Solutions Expands and Diversifies ADS’ Addressable Opportunity into Highly Related and Attractive On-Site Septic business Acquisition Expected to Enhance Growth, Margins and Cash Flow and to Gen
Slide 18: Builds on ADS' Core Strengths and Enhances Position as Leader
Builds on ADS’ Core Strengths and Enhances Position as the Leader in Water Management Solutions Leader in stormwater management Industry leading go-to-market model Expansive distribution network Owned logistics fleet Cost effective and well positioned manufacturing network Leading positions in storm
Slide 19: Expands and Diversifies ADS' Addressable Opportunity into On-Site Septic
Expands and Diversifies ADS’ Addressable Opportunity into Attractive On-Site Septic Business Plastic chambers and tanks have steadily gained share vs. traditional materials with HDPE and PP products now accounting for ~50% of the more than $1.2 billion on-site septic leachfield and tank businesses I
Slide 20: Complementary Cultures, Similar Growth Strategies and Shared Commitment to Innovation
Complementary Cultures, Similar Growth Strategies and a Shared Commitment to Innovation Similar Market Share Models and Cultures… … and a Commitment to Innovation Next Generation chambers and tanks expected to drive increased conversion and profitability during the 2020’s Approvals 1980s World’s fir
Slide 21: Strengthens ADS' Commitment to Sustainability with PP and PE Recycling
Strengthens ADS’ Commitment to Sustainability with Best-in-Class PP and PE Recycling Capabilities Overview Infiltrator Raw Material Purchases Overview IWT Material Input Composition by Product Leachfield Chambers Post-Industrial (54%) Post-Consumer (23%) Septic Tanks ADS Supplied Virgin (23%) StormT
Slide 22: IWT's management team has deep industry experience
1 IWT’s management team has deep industry experience and is well-positioned to drive future growth Joined Infiltrator in 1987 and has served as CEO since 2005 Has led several departments at various times, including manufacturing, sales, marketing, engineering, R&D, and government affairs Has special
Slide 23: Highly Achievable Synergies
Highly Achievable Synergies 1 $20-$25 million in run-rate synergies expected to be realized by Year 3, which would potentially drive an additional ~150bps of margin expansion Estimated Synergies Commentary Integration strategy developed with clear objectives and well-defined integration leadership t
Slide 24: Strong Combined Cash Flow Generation Supports Rapid De-leveraging
Strong Combined Cash Flow Generation Supports Rapid De-leveraging 1 Strong combined free cash flow will allow ADS to rapidly de-lever We have initially funded the deal with a new $1.425 billion credit facility to enable closing of the acquisition and to refinance our existing debt This structure giv
Slide 25: Combined Company Fiscal 2020 Financial Outlook
Combined Company Fiscal 2020 Financial Outlook ADS & 8-months Infiltrator Key Metric FY 2019 (ADS only) FY 2020 (Combined) Y-o-Y Change Net Sales (in Millions) $1,385 $1,575 - $1,625 Up 14% to 17% Adj. EBITDA (in Millions) $232 $310 - $330 Up 34% to 42% Adj. EBITDA Margin 16.8% 19.7% - 20.3% +290 to
Slide 26: Investment Highlights
Investment Highlights Builds on ADS’ Core Strengths and Enhances Position as a Leader in Water Management Solutions Expands and Diversifies ADS’ Addressable Opportunity into Highly Related and Attractive On-Site Septic business Acquisition Expected to Enhance Growth, Margins and Cash Flow and to Gen
Slide 27: Q&A Session
Q&A Session
Slide 28: Closing Remarks
Closing Remarks Domestic construction market sales grew 6% despite record rainfall in the quarter, in led by non-residential and residential construction. Infiltrator acquisition expected to enhance growth, margins, cash flow and generate significant synergies. Positioned for continued above-market
Slide 29: Appendix
Appendix
Slide 30: Adjusted EBITDA Reconciliation
Adjusted EBITDA Reconciliation Three Months Ended Fiscal Year Ended June 30, June 30, (Amounts in thousands) 2019 2018 2019 2018 Net (loss) income $-,227,451 $33,651 $81,466 $64,792 Depreciation and amortization 16,694 17,827 71,900 75,003 Interest expense 5,264 3,802 18,618 15,262 Income tax expens
Slide 31: Adjusted EBITDA Reconciliations - IWT
Adjusted EBITDA Reconciliations - IWT Calendar Year 2016 2017 2018 Net income (loss) $-6,386 $42,804 $9,820 Depreciation and amortization 51,555 52,024 47,198 Interest expense 24,260 23,707 19,580 Income taxes -86 ,-40,142 3,334 EBITDA 69,343 78,393 79,932 Loss on disposal of assets and costs from e
Slide 32: Pro Forma Adjusted EBITDA
Pro Forma Adjusted EBITDA Calendar Year 2016 2017 2018 Net income (loss) $-6,386 $42,804 $9,820 Depreciation and amortization 51,555 52,024 47,198 Interest expense 24,260 23,707 19,580 Income taxes -86 ,-40,142 3,334 EBITDA 69,343 78,393 79,932 Loss on disposal of assets and costs from exit and disp
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