advanced drainage systems...such statements include, but are not lim ited to, statements regarding...

Advanced Drainage SystemsQ3 Fiscal 2019 Financial Results

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Management Presenters

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Scott BarbourPresident and Chief Executive Officer

Scott CottrillExecutive Vice President, Chief Financial Officer

Mike HigginsVice President, Corporate Strategy & Investor Relations



Forward Looking Statements and Non-GAAP Financial MetricsCertain 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 information and related filings. These statements are not historical facts but rather are based on the Company’s current expectations, estimates and projections regarding the Company’s business, operations and other factors relating thereto. Words such as “may,” “will,” “could,” “would,” “should,” “anticipate,” “predict,” “potential,” “continue,” “expects,” “intends,” “plans,” “projects,” “believes,” “estimates,” “confident” and similar expressions are used to identify these forward-looking statements. Factors that could cause actual results to differ from those reflected in forward-looking statements relating to our operations and business include: fluctuations in the price and availability of resins and other raw materials and our ability to pass any increased costs of raw materials on to our customers in a timely manner; volatility in general business and economic conditions in the markets in which we operate, including, without limitation, factors relating to availability of credit, interest rates, fluctuations in capital and business and consumer confidence; cyclicality and seasonality of the non-residential and residential construction markets and infrastructure spending; the risks of increasing competition in our existing and future markets, including competition from both manufacturers of high performance thermoplastic corrugated pipe and manufacturers of products using alternative materials; our ability to continue to convert current demand for concrete, steel and PVC pipe products into demand for our high performance thermoplastic corrugated pipe and Allied Products; the effect of weather or seasonality; the loss of any of our significant customers; the risks of doing business internationally; the risks of conducting a portion of our operations through joint ventures; our ability to expand into new geographic or product markets; our ability to achieve the acquisition component of our growth strategy; the risk associated with manufacturing processes; our ability to manage our assets; the risks associated with our product warranties; our ability to manage our supply purchasing and customer credit policies; the risks associated with our self-insured programs; our ability to control labor costs and to attract, train and retain highly-qualified employees and key personnel; our ability to protect our intellectual property rights; changes in laws and regulations, including environmental laws and regulations; our ability to project product mix; the risks associated with our current levels of indebtedness; fluctuations in our effective tax rate, including from the recently enacted Tax Cuts and Jobs Act; changes to our operating results, cash flows and financial condition attributable to the recently enacted Tax Cuts and Jobs Act; our ability to meet future capital requirements and fund our liquidity needs; the risk that additional information may arise during the course of the Company’s ongoing accounting review that would require the Company to make additional adjustments or revisions or to restate the financial statements and other financial data for certain prior periods and any future periods; a conclusion that the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) were ineffective; the review of potential weaknesses or deficiencies in the Company’s disclosure controls and procedures, and discovering further weaknesses of which we are not currently aware or which have not been detected; additional uncertainties related to accounting issues generally and other risks and uncertainties described in the Company’s filings with the Securities and Exchange Commission. New risks and uncertainties emerge from time to time and it is not possible for the Company to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this press release. In light of the significant uncertainties inherent in the forward-looking information included herein, the inclusion of such information should not be regarded as a representation by the Company or any other person that the Company’s expectations, objectives or plans will be achieved in the timeframe anticipated or at all. Investors are cautioned not to place undue reliance on the Company’s forward-looking statements and the Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

This presentation includes certain non-GAAP financial measures to describe the Company’s performance. The reconciliation of those measures to GAAP measures are provided within the appendix of the presentation. Those disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies.

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Q3 FY 2019 Highlights

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Domestic construction market sales grew 6% despite record rainfall in the quarter, in led by non-residential and residential construction.

Double-digit growth of key products such as HP pipe, StormTech and Nyloplast.

Well positioned to achieve financial targets for fiscal year due to solid January revenue, order activity and backlog.

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Domestic construction market sales grew 6% despite record rainfall impacting the market, led by growth in the non-residential and residential markets.



Q3 Year-Over-Year Weather Trend*

5*Data from 2017 and October/November 2018 provided by NOAA. December 2018 data based on management estimates.

% Change in Precipitation Inches % Change in Temperature



Q3 FY 2019 Financial Performance

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17.5%15.2%

Q3 FY18 Q3 FY19

(230) bps

(USD, in millions)

$321 $318

Q3 FY18 Q3 FY19

(0.8%)

Domestic Markets+ Construction +6%

+ Non-Residential +6%+ Residential +12%− Infrastructure - 9%

− Agriculture - 30%

− Pipe - 1%+ Allied +6%

By Geography+ Domestic +1%− International - 11%

By Application− Pipe - 2%+ Allied +3%

Q3 FY18 Volume Price / Mix,Materials

Mfg / Trans SG&A andOther

Q3 FY19

$56.0 ($2.5)($0.2) ($3.2)

($1.7)$48.4

Revenue

Adj. EBITDA



Free Cash Flow

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% of Sales 2.7% 3.5%

All figures in USD, mmNumbers may not add due to rounding

$294 $357

$0

$100

$200

$300

$400

$500

December 31, 2018 December 31, 2017

Net Debt³

1Operating Cash Flow less CapEx 2Inventory, Accounts Receivable, Accounts Payable 3Total debt less cash (includes capital leases)

1.5x Leverage

2.0x Leverage

$31 $35

$0

$10

$20

$30

$40

FY 2019 FY 2018

CapEx

$333 $320

$0

$100

$200

$300

$400

$500

December 31, 2018 December 31, 2017

Working Capital²

FY 2019 FY 2018 ∆Adjusted EBITDA $195 $183 $12Working Capital(2) ($2) ($4) $2Cash Tax ($28) ($25) ($3)Cash Interest ($12) ($14) $2Other ($5) ($1) ($4)Cash flow from operating activities $148 $139 $9Capital Expenditures ($31) ($35) $4

Free Cash Flow $117 $104 $13

Free Cash Flow¹



Fiscal 2019 Financial Outlook

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Key Metric FY 2018 FY 2019 Y-o-Y Change

Net Sales(in Millions)

$1,330 $1,375 - $1,425 Up3% to 7%

Adj. EBITDA(in Millions)

$210 $225 - $240 Up 7% to 14%

Adj. EBITDAMargin

15.8% 16.4% - 16.8% +60 to +100basis points

Fiscal 2019 Expectations



Key Net Sales Drivers – Market Outlook

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Market FY2019 Outlook Comments

Domestic Construction End Markets

Growth driven by market conversion and continued strength in the domestic construction markets.

Agriculture End Market Spring and fall selling seasons impacted by inclement weather.

International End Market

Conversion strategy expected to drive growth in Canadian construction markets. Modest growth anticipated in Mexico.

LSD to MSD

Down

MSD

ADS: Up MSD

ADS: Market Perform

ADS: Up MSD

Market Outlook


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Q&A Session



Closing Remarks

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Domestic construction market sales grew 6% despite record rainfall in the quarter, in led by non-residential and residential construction.

Positioned for continued above-market growth in fiscal 2019 due to conversion and solutions strategies.

Focused on execution, fundamentals and driving internal initiatives to continue improving profitability.

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Reaffirming guidance for fiscal 2019 sales and Adjusted EBITDA.


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Appendix



YTD FY 2019 Financial Performance

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17.0% 17.5%

YTD FY18 YTD FY19

+50 bps

(USD, in millions)

$1,080 $1,113

YTD FY18 YTD FY19

+3.0%

Domestic Markets+ Construction +6%

+ Non-Residential +7%+ Residential +9%− Infrastructure - 5%

− Agriculture - 23%

+ Pipe +1%+ Allied +8%

By Geography+ Domestic +3%+ International +6%

By Application+ Pipe +1%+ Allied +7%

YTD FY18 Volume Price / Mix,Materials

Mfg / Trans SG&A andOther

YTD FY19

$183.2 $3.9

$14.2 ($5.8)($0.4) $195.1

Revenue

Adj. EBITDA



Adjusted EBITDA Reconciliation

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(Amounts in thousands) 2018 2017 2018 2017Net income 16,550$ 33,215$ 79,573$ 69,648$

Depreciation and amortization 17,549 17,852 52,912 55,793 Interest expense 5,695 3,086 14,028 12,620 Income tax expense (benefit) 2,490 (7,371) 28,968 15,812

EBITDA 42,284 46,782 175,481 153,873 Derivative fair value adjustments 1,067 (145) 1,209 (735) Foreign currency transaction (gains) losses (423) (430) 224 (2,878) Loss on disposal of assets and costs from exit and disposal activities 144 1,924 1,572 10,468 Unconsolidated affiliates interest, tax, depreciation and amortization 587 637 1,237 2,060 Contingent consideration remeasurement (8) 1 (15) 33 Stock-based compensation expense 1,658 1,640 5,029 5,140 ESOP deferred stock-based compensation 2,724 2,737 11,113 7,946 Executive retirement (benefit) expense 50 73 (228) 982 Restatement-related (benefit) costs (742) 888 (1,938) 3,390 Legal settlement - 1,800 - 1,800 Transaction costs 83 92 404 1,149 Strategic growth and operational improvement intiatives 1,010 - 1,010 -

Adjusted EBITDA 48,434$ 55,999$ 195,098$ 183,228$

Net sales 318,113 320,832 1,112,515 1,080,240 Adjusted EBITDA Margin 15.2% 17.5% 17.5% 17.0%

Three Months Ended Nine Months EndedDecember 31, December 31,

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AddressValueTypeValue

ADJ EBITDA

Three Months EndedNine Months Ended

December 31,December 31,

(Amounts in thousands)2018201720182017

Net income$ 16,550$ 33,215$ 79,573$ 69,648

Depreciation and amortization17,54917,85252,91255,793

Interest expense5,6953,08614,02812,620

Income tax expense (benefit)2,490(7,371)28,96815,812

EBITDA42,28446,782175,481153,873

Derivative fair value adjustments1,067(145)1,209(735)

Foreign currency transaction (gains) losses(423)(430)224(2,878)

Loss on disposal of assets and costs from exit and disposal activities1441,9241,57210,468

Unconsolidated affiliates interest, tax, depreciation and amortization5876371,2372,060

Contingent consideration remeasurement(8)1(15)33

Stock-based compensation expense1,6581,6405,0295,140

ESOP deferred stock-based compensation2,7242,73711,1137,946

Executive retirement (benefit) expense5073(228)982

Restatement-related (benefit) costs(742)888(1,938)3,390

Legal settlement- 01,800- 01,800

Transaction costs83924041,149

Strategic growth and operational improvement intiatives1,010- 01,010- 0

Adjusted EBITDA$ 48,434$ 55,999$ 195,098$ 183,228

Net sales318,113320,8321,112,5151,080,240

Adjusted EBITDA Margin15.2%17.5%17.5%17.0%

Advanced Drainage SystemsManagement PresentersForward Looking Statements and Non-GAAP Financial MetricsQ3 FY 2019 HighlightsQ3 Year-Over-Year Weather Trend*Q3 FY 2019 Financial PerformanceFree Cash Flow Fiscal 2019 Financial OutlookKey Net Sales Drivers – Market OutlookQ&A SessionClosing RemarksSlide Number 12YTD FY 2019 Financial PerformanceAdjusted EBITDA Reconciliation

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