Advanced Drainage Systems (WMS): Q4 Revenue Exceeds Estimates

Summary

Water management company Advanced Drainage Systems (WMS) reported a revenue increase of 4.3% year-over-year to $690.5 million in Q4 CY2024, surpassing analyst expectations.

Financial Highlights

* Revenue: $690.5 million (vs. $675.4 million estimate)
* Adjusted EPS: $1.09 (vs. $1.21 estimate)
* Adjusted EBITDA: $191.5 million (vs. $190.3 million estimate)
* Full-year revenue guidance confirmed at $2.94 billion
* Full-year EBITDA guidance in line with estimates at $900 million
* Operating margin: 18.4% (down from 23.1% YoY)
* Free cash flow margin: 19.7% (down from 28.3% YoY)

Business Overview

Advanced Drainage provides clean water management solutions to municipalities and businesses in America, with a focus on pipes and infiltrator systems.

Revenue Growth

* Annualized revenue growth of 13.3% over the past five years
* Recent decline in revenue over the past two years (3.1% annualized)
* Modest revenue growth of 4.3% this quarter, beating estimates
* Expected revenue growth of 4.8% over the next 12 months

Operating Margin

* Average operating margin of 20.6% over the past five years
* Decline in operating margin to 18.4% this quarter
* Increase in expenses contributed to lower margin

Earnings Per Share (EPS)

* Compounded annual EPS growth of 76.2% over the past five years
* Decline in EPS to $1.09 this quarter (vs. $1.37 YoY)
* Expected full-year EPS growth of 6%

Conclusion

Advanced Drainage's Q4 results were mixed, with revenue exceeding estimates but EPS falling short. The company reaffirmed its full-year guidance and highlighted its commitment to clean water management solutions. Investors should consider the long-term fundamentals and valuation before making any investment decisions.