Advanced Drainage Systems sales rise 9.9% as acquisition costs weigh on net income

Advanced Drainage Systems (NYSE:WMS) reported a 9.9% increase in net sales for the fourth quarter of fiscal 2026, driven by growth in its core stormwater segment and recent acquisition volume, even as transaction and restructuring costs dragged down its bottom-line net income.

The Hilliard, Ohio-based water management company announced that net sales reached $676.8 million for the quarter ended March 31, 2026, up from $615.8 million in the same period last year.

Stormwater sales led the expansion, climbing 11.7% to $534.7 million.

This segment's growth was heavily supported by the addition of National Diversified Sales, which contributed $48.8 million in revenue following its acquisition.

On an organic basis, stormwater sales grew by 2%.

Meanwhile, wastewater sales posted a moderate increase of 3.7%, reaching $142.0 million.

Gross profit for the quarter rose 5% to $237.7 million, up from $226.3 million a year earlier.

Management attributed the gains to overall volume growth, a favorable price-and-cost dynamic, and an advantageous product mix involving its Allied products and Infiltrator lines.

However, the financial impact of integrating NDS and executing corporate realignments was reflected in the company's operating expenses.

Selling, general, and administrative expenses jumped 50.5% to $137.6 million, up from $91.4 million in the prior year quarter.

As a percentage of sales, these expenses expanded to 20.3% compared to 14.8% previously, heavily influenced by direct acquisition and transaction costs.

Consequently, net income from continuing operations experienced a 54.1% decline, dropping to $35.2 million from $76.8 million in the prior year's fourth quarter.

Diluted earnings per share from continuing operations fell by $0.56 to $0.43 per share.

When stripping out the one-time impacts of the acquisition, restructuring, and realignment expenses, the company's underlying profitability remained steady.

Adjusted earnings per share from continuing operations grew 3.9% to $1.07, up from $1.03 last year.

Adjusted EBITDA also climbed 6.4% to $188 million, though the adjusted EBITDA margin contracted slightly by 90 basis points to 27.8% of net sales, down from 28.7% in the previous year's quarter.