Advanced Drainage Systems(WMS) - 2021 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Fiscal 2022 ended with record revenue of $2.8 billion, a 40$676 million, up 90% [7] - Adjusted EBITDA margin reached 24.4%, at the high end of guidance [7][21] - Free cash flow for fiscal 2022 was $126 million, with working capital being a significant use of cash [23] Business Line Data and Key Metrics Changes - Domestic revenue increased significantly, driven by favorable pricing and double-digit volume growth in construction markets [9] - Infiltrator sales rose 43$150 million to $180 million in capital expenditures in fiscal 2023 to expand production capacity and reduce backlog [14] - Recent acquisitions, including Jet Polymers and Caltech Inc., are aimed at enhancing product offerings and market presence [8][16] - The company remains focused on converting markets to environmentally friendly materials and maintaining pricing power [9][20] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in continued demand and pricing power despite inflationary pressures and labor shortages [15][31] - The company anticipates strong performance in fiscal 2023, with guidance indicating net sales growth of 12% to 16% and adjusted EBITDA growth of 18% to 21% [25] - Management remains optimistic about the construction and agriculture markets, despite some seasonal challenges [34][54] Other Important Information - The company repaid the remaining balance on its ESOP loan, converting shares to common stock [24] - Bob Kidder, the Board Chair, will retire at the end of his term, with Bob Eversole set to take over [17][18] Q&A Session Summary Question: Volume comments and backlog - Management clarified that agriculture volumes were impacted by a slow start to the selling season, but good orders are in place for the future [29] Question: 2023 guidance and pricing - Management confirmed that pricing actions are built into guidance, considering ongoing inflationary pressures [31] Question: Demand patterns and sustainability - Management expects continued growth in orders, particularly in the first half of the year, with no significant decline anticipated [34] Question: Free cash flow and working capital - Management indicated that working capital is expected to normalize, targeting 20% as a percent of sales [37] Question: Cost side and raw materials - Management noted that raw material costs have stabilized, but transportation costs remain elevated due to driver shortages [42] Question: Long-term EBITDA margin guidance - Management reaffirmed their long-term EBITDA margin expansion goals, despite recent market volatility [46][47] Question: Price elasticity and customer pushback - Management acknowledged concerns about price elasticity in the agriculture market but remains disciplined in pricing strategies [49] Question: Residential market insights - Management reported strong demand in the residential segment, particularly in rural areas, despite longer construction timelines [52][55] Question: Warehouse and e-commerce market changes - Management has not seen a degradation in order books for warehouse projects, despite some delays in smaller facilities [60]