Latest news with #RobertWBaird
Globe and Mail
a day ago
- Business
- Globe and Mail
Robert W. Baird Keeps Their Hold Rating on Tesla (TSLA)
In a report released today, Ben Kallo from Robert W. Baird reiterated a Hold rating on Tesla (TSLA – Research Report), with a price target of $320.00. The company's shares opened today at $342.70. Confident Investing Starts Here: Easily unpack a company's performance with TipRanks' new KPI Data for smart investment decisions Receive undervalued, market resilient stocks right to your inbox with TipRanks' Smart Value Newsletter According to TipRanks, Kallo is an analyst with an average return of -1.6% and a 43.26% success rate. Kallo covers the Consumer Cyclical sector, focusing on stocks such as Tesla, Rivian Automotive, and QuantumScape. Tesla has an analyst consensus of Hold, with a price target consensus of $287.00, which is a -16.25% downside from current levels. In a report released on June 20, Barclays also maintained a Hold rating on the stock with a $275.00 price target. TSLA market cap is currently $1121.5B and has a P/E ratio of 187.24. Based on the recent corporate insider activity of 51 insiders, corporate insider sentiment is neutral on the stock. Earlier this month, Xiaotong Zhu, the SVP, APAC of TSLA sold 15,000.00 shares for a total of $4,857,000.00.
Yahoo
3 days ago
- Business
- Yahoo
Rubrik (RBRK) Rides Cloud Security Tailwinds, Baird Remains Bullish
Rubrik Inc. (NYSE:RBRK) is one of the top 10 stock picks from Harvard University's stock portfolio. It was among the three new stock positions initiated in the portfolio in Q1 2025, though the position is relatively small (0.7% of portfolio value) versus other stocks. That said, the stock is a strong performer with YTD gains of approximately 31% and around 190% over the last one year. On June 11, Shrenik Kothari of Robert W. Baird reiterated his Buy rating on the stock, maintaining a price target of $110. He pointed to continued strength in the company's financial indicators, particularly a steady rise in remaining performance obligations (RPO), both year-over-year and sequentially, a signal of sustained customer demand. An employee standing in front of a large data center, looking toward the future of cloud security. The company also appears to be converting a significant portion of deferred revenue into current income, reflecting solid revenue recognition practices and billing efficiency. The U.S. remains Rubrik's largest and fastest-growing market, playing a pivotal role in driving growth. While its revenue from channel partners has become slightly more diversified, those partnerships remain central to the company's go-to-market approach. The analyst added that rising subscription revenue across Rubrik's offerings reflects healthy customer uptake and growing interest. Altogether, these trends suggest the company's momentum is holding steady. As a result, Kothari remains upbeat, citing reliable performance indicators as the basis for his optimistic view. Rubrik Inc. (NYSE:RBRK) is a cloud data management and cybersecurity firm that offers the Rubrik Security Cloud, a unified SaaS platform combining backup, threat detection, ransomware recovery, and sensitive data monitoring across on-premises, cloud, and SaaS environments. While we acknowledge the potential of RBRK as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock. READ NEXT: The Best and Worst Dow Stocks for the Next 12 Months and 10 Best Tech Stocks to Buy According to Billionaires. Disclosure: None. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
15-06-2025
- Automotive
- Yahoo
Baird Lowers Tesla (TSLA) to Hold, Citing Valuation and Robotaxi Risk
Tesla Inc. (NASDAQ:TSLA) is one of the 10 best tech stocks to buy according to billionaires right now. On June 9, Ben Kallo of Robert W. Baird downgraded Tesla from Buy to Hold mainly on valuation concerns, while keeping his price target unchanged at $320. In his view, much of the recent upside in the stock, up over 20% since Q1 earnings, has already factored in the excitement around Tesla's planned robotaxi service and the prospect of a lower-cost electric vehicle. Hadrian / Kallo cited two key areas of concern behind the downgrade. First, he flagged elevated market expectations ahead of Tesla's upcoming robotaxi event, which he believes could be difficult to meet. Second, he raised questions around 'key-man' risk, pointing to ongoing uncertainty tied to CEO Elon Musk's central role in the company's strategic direction. While Musk has resigned from the Department of Government Efficiency (DOGE), it may still take time for him to recoup investor confidence. While Kallo still considers Tesla a core long-term holding, he expressed skepticism about the near-term ramp-up of the robotaxi program, describing current projections as potentially too ambitious. He also noted that Elon Musk's political affiliations, particularly his perceived alignment with former President Trump, could introduce additional headline and regulatory risk moving forward. Tesla Inc. (NASDAQ:TSLA) is an EV manufacturer and clean energy company known for its innovative approach to sustainable transportation and energy solutions. It designs, manufactures, and sells electric vehicles, battery energy storage systems, solar products, and related services. It currently manufactures five different consumer vehicles: the Model 3, Y, S, X, and the Cybertruck. While we acknowledge the potential of TSLA as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock. READ NEXT: The Best and Worst Dow Stocks for the Next 12 Months and 10 Unstoppable Stocks That Could Double Your Money. Disclosure: None. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
16-05-2025
- Business
- Yahoo
Q4 2025 Advanced Drainage Systems Inc Earnings Call
Michael Higgins; VP of Corporate Strategy & Investor Relations; Advanced Drainage Systems Inc D. Scott Barbour; President, Chief Executive Officer, Director; Advanced Drainage Systems Inc Craig Taylor; Executive Vice President; Advanced Drainage Systems Inc Scott Cottrill; Chief Financial Officer, Executive Vice President, Secretary; Advanced Drainage Systems Inc Mike Halloran; Analyst; Robert W Baird Matthew Bouley; Analyst; Barclays Bryan Blair; Analyst; Oppenheimer John Lavallo; Analyst; UBS Garik Shmois; Analyst; Loop Capital Partners Jeffery Hammond; Analyst; KeyBanc Capital Markets. Trey Grooms; Analyst; Stephens Collin Merano; Analyst; Deutsche Bank Operator Ladies and gentlemen, thank you for standing by. Today's presentation will begin in 2 minutes. Thank you for your patience. Good morning ladies and gentlemen, and welcome to the Advanced Drainage Systems fourth-quarter of the fiscal year 2025 results conference call. My name is Tamika, and I am your operator for today's call. (Operator instructions) I would now like to turn the presentation over to your host for today's call, Michael Higgins, Vice President of Investor Relations and Corporate Strategy. Please go ahead, sir. Michael Higgins Thank you. Good morning, everyone. I'm here with Scott Barbour, our President and CEO; and Scott Cottrill, our CFO, and Craig Taylor, Executive Vice President of ABS and President of Infiltrator. I would also like to remind you that we will discuss forward-looking statements. Actual results may differ materially from those forward-looking statements because of various factors, including those discussed in our press release and the risk factors identified in our Form 10-K filed with the SEC. While we may update forward-looking statements in the future, we disclaim any obligation to do so. You should not place undue reliance on these forward-looking statements, all of which should speak only as of today. Lastly, the press release we issued this morning is posted on the investor relations section of our website. A copy of the release has also been included in an in case to the SEC. We will make a replay of this conference call available via webcast on the company website. With that, I'll now turn the call over to Scott Barbour. D. Scott Barbour Thank you, Mike, and good morning, everyone. Thank you all for joining us on today's call. We concluded fiscal 2025 with net sales of $2.9 billion, an increase of 1% over the prior year. Importantly, domestic construction market sales increased 3% as we continue to drive above market performance through our material conversion strategy in the stormwater and on-site wastewater markets. We saw strong growth in places like Florida with double digit growth in pipe. Allied products and infiltrator products. And in Texas, with double-digit growth in infiltrator products as well as growth in pipe and the non-residential market. From a product standpoint, water quality products increased double digits, as did the [Caltech] retention detention chambers that we acquired in 2022. The tank and active treatment products and infiltrator each through double digits also, and Craig Taylor will talk about those here in a few minutes. Moving to profitability, this year's 30.6% adjusted EBITDA margins marks the second most profitable year in the company's history, down modestly off peak in a year when we face headwinds and pricing and material costs, in addition to a challenging economic backdrop that impacted demand. The resiliency demonstrated by this year's profitability is partially due to our strategy to grow the more profitable segments, infiltrator and allied products to be a higher mix of overall sales. Organic sales in these segments increased 5% and 3% respectively, and the on-site wastewater and allied products now represent a collective 44% of revenue. The evolution of ADS's product mix is one of the topics we intended to discuss in our Investor Day originally planned for this upcoming June. We have a lot of exciting things to highlight about our future at both infiltrator and ADS around growth, innovation, and the customer experience. However, right now the industry is highly dynamic and as we wait to see how the construction economy unfolds with the current economic uncertainty. While the current dynamics play out, I didn't think that the audience is going to be the most receptive to a major investor today talking about how things look over the next three years. So I think that there'll be a better opportunity for that type of discussion later in the year when we have a much better picture of what this three year outlook will look like. Therefore, we are going to push the Investor Day and we'll be in touch with the new day that'll be sometime later this year. Now I want to turn to slide 5, which highlights this journey that ADS has been over the past 10 years. So if we move from left to right, from FY16 to FY25, we have strategically diversified the product, the geography and the end -market mix to become a higher margin, more profitable business. We focused on driving growth in our higher margin allied products, which grew at 10% cater over this time period, outpacing the core pipe business. We deepen and broaden our exposure to the residential market through both our pipe business and infiltrator products. Our exposure to the residential land development has grown at an 18% CAGR over this time period, driven by a focus on building relationships with large national home builders and pursuing approvals and engineering acceptance in some of the fastest growing residential areas, primarily the Southeast. We have deployed incremental resources around that over this time period, and we think that paid off, very well for the company. This focus on residential was complemented by the acquisition of Infiltrator, which increased our residential exposure to 36% of their overall company. Again, accelerating our overall growth and enhancing the margin profile of the company. This diversification is incredibly important to our go-for strategy. It increases the profit resilience of the company. It supports ongoing margin expansion, and it enables us to pursue projects across nearly all facets of the water management we participate in. We have evolved through simply a pipe manufacturing company in FY16 to a broader water management solutions provider, and I think our profitability is reflected in that, and we're really pleased with this diversification growth in the leadership we have in each one of these segments. I'm going to move to slide 6. This diversification has expanded our total market opportunity by about $10 billion over this time frame. And we have a very nice addressable market. And then we have a long runway to continue executing the conversion strategy across these markets and all of our product lines. In a stormwater market, where ADS is the clear market leader, plastic pipe is about 40% of that $5.5 billion market. And the Allied products, again, where we have market lead product lines and participation, we're probably around 10% of that. And in the on-site wastewater, Infiltrators share is about one-third of the market. So in each of those categories, we feel we have a long way to go, and we'll drive that, through our tried and true, getting approvals, keeping good teams in the field and driving this through our distribution. There are also some secular tailwinds that are going to drive these markets. We've talked about these in the past. It's really the underbuilt US water infrastructure, this increasing frequency and intensity of large scale storm events, and the residential underbills, that is highlighted many times when we talk with you. We've mentioned these studies in the past. The one we really like is from the American Society of Civil Engineers. They did their 2025 infrastructure report card and water infrastructure has a grade of D, which simply says the existing infrastructure is in poor to fair condition and mostly below current standards. This is good. This is a good trend for us. I mean this will continue to pace investment in water management infrastructure across a broad array of products and geography. So over the long term, we will continue to have these secular growth tailwinds. We'll drive that growth through a good current portfolio of offerings, continuing new product introductions. Acquisitions it will drive that conversion and shared wallet that is our opportunity on these different projects. And I'll turn to the next page, and this is how we drive that share of wallet. This is really what we think of as our value proposition, and it starts at the top of this chart with the best in class portfolio of water management products. We are the only company that could deliver complete water management solutions on a national or North American scale that are safer, more sustainable, faster to install and at a lower installation cost. It is a superior line of products we have at the this top of this page. And for many years we have run this market share model. It's a proven go to market strategy of approvals, acceptance, coverage win rate. It's supported by the 300 professionals in the field, which are the envy of our industry in terms of field, sales, capability, and technical know-how in the field. So we're very proud of that product line and our ability to kind of sell those product lines with our distributors in the field. But I think there's more to it than that and it's that bottom tier of this chart and that balance sheet. As we've improved the profitability and cash flow profile of the company, we can reinvest at an appropriate pace with the right returns in new capacity in the critical geographies, new products, new capabilities for engineering, innovation, and increasingly investments around customer service and the design tools. Over these last several years, we have built some industry leading design tools where customers can design around our products, select our products, we make these available to them in many different ways digitally, and it is really a superior service or asset of our company that I think we don't talk about enough. In addition, the kind of leading service we've always had is our fleet. We deliver over 70% of the products we sell on the ADS side and we've refreshed that fleet and modernized it and have really a great set of assets out there working for our customers. I mentioned this modernizing our customer experience, we've invested in that heavily over the last year. We needed to do that. Our delivery performance is now over 90%, and these tools are rolling out and giving differentiated market leading information and availability information for our customers. I think you all know, we opened our Engineering and Technology center about nine months ago. It is by far the most advanced stormwater facility in the world, which enables us to develop and launch new products faster while also working on our manufacturing processes and safety and efficiency. We really have everything we need to do around that stormwater business contained in this facility from an engineering and product management standpoint. And we are already in the first nine months, have some great examples of accelerated in the market products and materials that we've benefited from and from that, from this new investment that we have. So when you stack all three elements of this chart together, the scale, the best in class products, the go to market strategy, our ability to reinvest, I think it's really clear to me what hands you would rather play. It is that company that we have now and move to FY26 versus the company that we had in FY16, and I would argue versus any company that we're competing against on a daily basis. So I'm very proud of the team for the performance delivered in a really challenging year. We got a lot of things done in spite of a very difficult demand environment and a difficult pricing and materials market. We continue to make progress in safety, we passed a milestone this year and safety performance that we're very proud of. So lots of good things to talk about. And we'll kind of gather those along with our three year plan to show its Investor Day that we'll do a little bit later this year. Scott Cottrill is going to give you an outlook on FY16 in a minute, and we feel confident in our ability to achieve above market growth in our core domestic construction markets and maintain attractive profitability, even if it is still a bit of a challenging demand environment. First, I'm going to turn this over to Craig Taylor, the President of our Infiltrator, business to review their fiscal 2025 performance and talk a little bit about the great year they ahead there. Craig Taylor Hey, Scott. Good morning. I'm happy to be here today. Fiscal 2025 was another strong year at Infiltrator. We reported $516 million in sales, an increase of 15% over prior years, including $46 million in (inaudible) sales. On an organic basis, sales increased 5%, driven by double digit growth in both septic tanks and advanced treatment products. Tank sales increased 12%, driven by material conversion and new product introductions. Just like ADS's material conversion strategy, Infiltrator plastic tanks are driving market conversion from the traditional concrete tanks. In fiscal year 2025, we launched two new products to address market needs and to provide contractors with additional installation flexibility. Organic advanced treatment sales increased 33% compared to prior year, primarily driven by market growth, as well as the introduction of the [Ecopod] NX. This product is the next generation of advanced wastewater treatment technology designed to meet new regulations that require higher levels of nitrogen reduction to protect watersheds and the environment. Adjusted gross margins increased 60 basis points to 53.6%. This includes the impact of the (inaudible) acquisition. Organically, we expanded adjusted gross margin by 250 basis points, primarily driven by favorable pricing, manufacturing efficiencies, and material costs. Infiltrators' profitability today demonstrates the benefit from capital investments made in machinery and equipment over the last six years. Most significantly, the highly automated advanced manufacturing facility opened in 2020. Since opening, Infiltrators profitability has improved by 1,100 basis points. When the market slowed two years ago, we were able to utilize the facility while we took older equipment offline for refurbishment. As we ramped back up, we achieved a 15% improvement in productivity and efficiency. In addition, our business continues to be very innovative. New products we have introduced in the past three years account for over 20% of our revenue. As we look at (inaudible), we see an opportunity to grow revenue and improve the processes and efficiency in our manufacturing. We are targeting marginal improvement of 1,000 basis points over the next three to four years, and we are excited about the additional breadth this acquisition brings to our product line. The acquisition also gives us access to new applications. For example, the [Prevos] product assists homeowners converting to centralized wastewater systems by making the process lower cost and less disruptive. In addition, [Arereco's] advanced treatment products increases our exposure to the commercial systems where the Infiltrator products have a strong foothold in residential systems. All in, we are very proud of this year's accomplishments and excited about the future growth at Infiltrator as we continue to drive material conversion and capitalize on growth in the advanced treatment market. Now I'll turn the call over to Scott Cottrill. Scott Cottrill Thanks Craig. In the fourth quarter, net sales decreased 6% overall as demand was impacted by higher interest rates, economic uncertainty, and unfavorable weather conditions. Recall last year we experienced favorable weather conditions that allowed for an early start to the spring selling season in both construction and agriculture. From a timing perspective, construction activity and agriculture accelerated by about six weeks this year compared to last year. Importantly, price costs remained in line with expectations, and manufacturing and transportation costs were both favorable in the period. On slide 10, we present our free cash flow and liquidity. As most of you know one of the strategic advantages of the business is the consistency and quality of our cash flow generation. Even in a choppy and uncertain macro environment, we generated $581 million of cash from operations during fiscal 2025. The strong cash generation of the business gives us the flexibility to invest in production, capacity and innovation to grow our position in the highly attractive stormwater and on-site wastewater markets. That's an envious position to be in and one we intend to optimize to continue driving long term shareholder value. Capital spending increased 15% to $212 million in fiscal 2025, as we continue to invest in improving customer service through investments in technology and better order management processes, accelerating innovation in new products and new technologies that add to our storm water and wastewater solutions packages. Increasing our production capacity in certain regions and in certain products that have superior demand, profitability, and growth characteristics, de-bottlenecking and expanding our recycling operations, such as our recycling facility in Corddill, Georgia, as well as our material science and blending capabilities and filing increasing the safety, productivity, and efficiency of our manufacturing network. In addition, we upgraded our transportation assets, including refreshing the fleet and implementing the latest telematics and safety technology to improve superior delivery and customer service. Starting the capital allocation. Our priorities remain unchanged and rooted in our commitment to drive growth and create long-term shareholder value. First and foremost, we will continue to invest strategically in the core business for all of the reasons I just mentioned. A close second, the pursuit of acquisitions to grow our product offering and leadership in the stormwater and on-site wastewater markets. That said, we recently announced the acquisition of River Valley pipe, a manufacturer of corrugated plastic pipe products serving the agricultural market in the Midwest. We will continue to focus on opportunities to expand our product offerings and capacity. Our balance sheet and free cash flow profile gives us the ability to move decisively when the right opportunities emerge without needing to dilute shareholders or take on excessive leverage. We remain opportunistic in evaluating M&A that enhances our portfolio and aligns with our long term strategies. We've also maintained a balance sheet to capital deployment, or I'm sorry, a balanced approach to capital deployment, returning $121 million in fiscal 2025 to shareholders through dividends and share repurchases. We have deliberately built and maintained a fortress balance sheet that provides us with the flexibility to navigate cycles as well as promptly act on opportunities. We closed the year with $1.1 billion in liquidity and a net leverage of 1.1 times. In addition, today we announced a 13% increase in our annual dividend to $0.72 per share. Moving on to slide 11, we present our fiscal 2026 guidance ranges. Based on our order book, backlog, and market trends, we expect revenues to be in the range of $2825 million and $2975 million and adjusted EBITDA to be in the range of $850 million to $910 million. These ranges result in an adjusted EBITDA margin of 30.1% to 30.6%, down 50 basis points to flat compared to this year's 30.6% margin. It is important to note that we do not expect a material impact from tariffs. Today's guidance reflects the end market outlook on slide 12. We do not expect a non-residential or residential end markets to accelerate, as both are under pressure from higher interest rates and economic uncertainty. We expect a non-residential end market to be flat to down low single digits, and the residential market to be down low to mid single digits. The infrastructure market continues to benefit from IIJA funds, and we expect that market to grow low single digits next year. Finally, both the agriculture and international markets are expected to be down double digits in the year. Finally, the fiscal 2026 guide at the midpoint includes the following key assumptions for revenue, volume up low single digits and pricing down low single digits. For profitability, price/cost should be neutral for the year, as we expect lower material costs year-over-year to offset the impact of pricing I just noted. Manufacturing costs will be unfavorable due to fixed cost absorption, primarily in the first quarter. The higher costs are due to the lower production volume over the winter months due to the slower demands experienced in Q4, as well as expected in fiscal 2026. Transportation costs are expected to be favorable year-over-year due to improved efficiency and route planning, and SG&A costs are expected to be 14% of revenue for the year. We will remain focused on executing our long-term strategy to drive consistent long-term growth, margin expansion, and free cash flow generation in the large and attractive stormwater and on-site wastewater markets, the significant conversion opportunity. With that, I will open the line for questions. Operator (Operator instructions) Mike Halloran, Baird. Mike Halloran First, Scott, I'd like to clarify the comment you just made there on the price cost side of things on the pricing side of things. How is pricing tracking sequentially? Have you seen any incremental pressure embedded in that pricing comment, are there any mix components to what that pricing looks like I certainly heard that you expect to be price/cost neutral as we work through the year because of those dynamics. Just want to understand what's happening on the pricing side of things. Scott Cottrill Yes. And Michael, so largely basically sequentially level, as we've talked about since Q2 of this past year. So most of what you see in the comment related to price being down low single digits is relative to -- it doesn't lap the pricing impact until Q2 of this fiscal year. So most of that relates to just the comment that we'll see continued unfavorability especially in Q1 as we work through the year. But then sequentially throughout the year relatively flat on price. Mike Halloran Okay. That makes sense. So you're basically saying first quarter is where the pressure point is and then kind of static year-over-year once you lap that comp. Okay. That helps. And then the demand side of the equation, modestly positive volumes. I mean it seems like you're embedding some sort of share gain potential within the context of that based on the end market commentary that you have on slide 12. Maybe just talk about where you are expecting the share gains to come in and what are the catalysts for that on an insular level by products? And Mark, how do you want to go after it? D. Scott Barbour So Mike, this is Scott. Yes, there are share gains through conversion from traditional materials to plastic pipe. As there usually are in our guidance there. That are primarily the HP or polypropylene products and primarily in the -- what I would call the larger diameter. And we've been gaining share there in the comment, I mean, in the discussion, we mentioned the residential segment where we clearly gained share, continue to gain share there through our sales efforts the superiority of our value proposition for those -- that type of development or that type of project, kind of an early land development. And yes, we see that market can have different levels of growth and uncertainty, but we've been growing pretty steadily through that and started from a low point. Operator Matthew Bouley, Barclays. Matthew Bouley Good morning everyone. Thank you for taking the questions. Just wanted to ask first about the cadence for the year, thinking about the top line. So a lot of great color there around some of the margin impacts in Q1. But just think about revenue. I mean I guess if I look at the fourth quarter, organic growth was maybe down 3% or so. Is Q1 shaping up similar to Q4, plus or minus? And kind of what I'm getting at is what's the implication to year-over-year growth as you think about the second half of the year within your guide? Thank you. Scott Cottrill I don't be -- careful to get too much at into the quarters. But I will highlight, we do talk about 1H and 2H. And typically, the business will see 55% to 60% of the revenue in the first half of the year and 40% to 45%, obviously, in the second half. We expect to see that same dynamic this year. I think in the first quarter on a year-over-year basis, obviously, there is a little bit of upside opportunity given that some of that pull ahead that we saw last year, we mentioned, so a year-over-year comp. That's a little bit easier in the first quarter, but expect 55% to 60% of the revenue in the first half, consistent with what we normally generate and drive. You've got to see real -- impact in the first quarter. Matthew Bouley Okay. Got it. Great. That's helpful. Thanks for that, Scott. And then I wanted to maybe just step back, the Investor Day. I just wanted to ask a little bit more about the, I guess, the postponement there. Because I certainly hear you around the uncertain cycle. But obviously, you have a lot of date sort of non-cycle to fix the point to as you went through in your prepared remarks. And you obviously just guided to 2026. So presumably, you have a starting point to think a three-year guide. So I guess what I'm asking is, are you just seeing the end market volatility to such a degree that you sort of lost the comfort, I guess, around putting out a longer-term outlook? Or, yes, I'm just trying to understand how these current market conditions are giving you that sort of pause there. Thank you. D. Scott Barbour This is Scott Barbour. Good question. I think it comes down to kind of two things, Matt. One was, just getting to FY26 kind of nailed down, yes, there was a lot going on over the last three months to try to build out that. And then every time we got into what kind of assumptions to make on market growth and these other things to really nail down a three-year plan, we couldn't. We just didn't feel comfortable nailing down a three-year plan underneath those kind of conditions. I mean I know you all will hold me highly accountable to that plan, and I didn't want to have to give you such a big range, it didn't make sense. So that's why we postponed it. You're right. We have a lot of great things to talk about, but that felt like without a really solid economic three-year plan in front of you, we wouldn't accomplish what we wanted to accomplish with you. And I didn't want to waste your time on that. So I'd rather give you a really solid plan, take an extra couple of months to get it done, and that was my logic on that. Operator Bryan Blair, Oppenheimer. Bryan Blair Thanks. Good morning, I wanted to circle back to order rates. I understand the framework for the full year guide and then appreciate the moving parts there and how you're contemplating end market dynamics. Just curious what you're seeing on a run rate basis, you mentioned that the orders are positive year-to-date. Just curious how end markets are trending relative to the guidance framework that you have and maybe speak to potential catalysts versus risk as we think about the full year progression. D. Scott Barbour Okay. This is Scott B. Order rates are trending positive and definitely support the guidance that we gave in the first half, second half that Scott mentioned a bit earlier. I think what we are really very focused on right now is we've mentioned there was a -- because of seasonality and a favorable weather last year, unfavorable weather this year, there was clearly a shift from our fourth to our first that's going on right now. Now we think it is if you strip that out to the market is growing, but we would just like to get through that in April, May, June to really understand that impact. And as you can appreciate, particularly on the Infiltrator side, as the season starts, there's an ordering and how those reorder patterns occur really beginning in the first of June. I know Craig has got a dime on that very, very, very much, particularly on those core leach field products that we have, where we have really great visibility into the market. So we need to get to that point, Brian, that reorder point to make sure that kind of shifting to seasonality is in head taking us, for I think we really want to comment deeply about the strength of the market. Bryan Blair Okay. Understood. I appreciate that detail. And I guess, perhaps offer a little more -- I have an update on Renco integration and confirm here that the target is 1,000 basis points margin expansion. And then perhaps touch on strategic fit and expected financial contribution of River Valley pipe. Thank you. D. Scott Barbour Craig, you're talking about Renco, he did his back to that big of a number. Yes. So the margin expansion is on really the growth that I talked about, growing the top line, merging the commercial business together with our business -- and then using our distribution channels and growing the GOP, which is our -- product. So we really focused on the growth opportunity there, bringing them our promise of our manufacturing efficiencies into that operations there going to help that margin expansion over the next couple of years. So that's a three- to five-year outlook for that extension. No, I think the -- guys are really talented engineering and manufacturing people. And I think they're out there on a rotating basis in Oregon, working through a very good plan. And as Craig said, they've done a lot of, I would say, commercial integration already opened up some new distribution and already kind of starting to see some benefits from those things. It is an (inaudible) plan and you did hear -- but we're really encouraged to try this first seven months of ownership with the team out there in Oregon and -- River Valley. So River Valley, we always wanted to be bigger and more competitive, the Illinois and ligand in Iowa, River Valley has a couple of facilities, one in each of those states. So this was a chance to gain market share and give us future optionality on our footprint. And honestly, we want to -- with assets like this come up, we want to own them and not have others on. So I think for those three reasons, River Valley makes a lot of (inaudible) and we acquired a nice customer list in addition to a nice product line that will be sit right alongside ours in those two geographies where we think we definitely over many years, ADS has wanted to be stronger in those two states. This opportunity came up, and I wasn't going to walk out. Operator John Lavallo, UBS. John Lavallo Good morning guys. Thanks for taking my questions. I wanted to go back to just kind of market growth and your forecast for internal growth. It seems on a blended basis, you're expecting your end markets to be down kind of low single digits. And you're guiding roughly flat sales. If we back out Aramco and River Valley, I mean how much of this is organic sales versus kind of the inorganic portion. I mean I guess the point is it seems like the expectation is for only sort of modest outperformance versus the end markets this year. Scott Cottrill Yes, John, it's Steve here. You're right. I mean, if you look at the end markets, you got to want to weight the end markets based on about 45% of our business is non-res, 35% is res, when you look at what we think those end markets are going to be down low to mid-single digits, roughly our guide would say organically at the midpoint, we're going to be flat on the volume side of the house. So again, we think that is still a really great example of conversion and continuing that trend. So that's the way we look at it and the way we think it's going to play out based on what we know right now. John Lavallo Okay. Got you. And then for the 2026 EBITDA margin of 30.3%, I mean it's down roughly 30 basis points year-over-year on sort of flattish sales. I guess a similar question. I mean how much of this decline is organic versus inorganic? And on the organic piece, is that dominantly focused on the first quarter where that price cost is going to be unfavorable? Scott Cottrill Yes. I would say right now, you got to remember the absorption impact we talked about that's coming in the first quarter. So roughly, when you look at kind of what we think at Renco, it's going to be about 50 bps dilutive to what we're going to do organically versus about 30 bps what it was in the first in '25. So I think basically relatively flat year-over-year organic is the way I think about it, with a little bit more dilutive from Aramco having for the full year at their lower margin profile. Operator Garik Shmois, Loop Capital Partners. Garik Shmois Hi, thanks Just wanted to follow up on the pricing piece, recognizing it's been stable for several quarters, but just with the market expected to again be down, just any additional maybe handholding us to your level of confidence that pricing will remain stable from this point forward in the softer market. D. Scott Barbour Yes. I think that -- the way we manage this on a very daily basis, and looking at participation, competitor, the nature of the job, the nature of the customer stuff. We've been doing that for the last four quarters in a lot of detail and then trying to find opportunities for pricing advancement. And we like that process. We feel that, that gives us good visibility. It's really on the pipe piece of the business. And it's contained in certain geographies. So I think we feel pretty confident that this process we have, the managers we have, looking at that, the data we can look at is going to continue to be a good tool for us to manage that price and participation. And we feel good about both right now. We've always had competitors. We're always going to have competitors, and this is just a daily factor line. Scott Cottrill Garik, the other thing I'll add to that is there are examples where we do have pricing that will be increasing, whether it's in certain regions, products or end markets. So it's always a mix, and it's a balance there up. So you've got the lapping that we already talked about as well, that will impact year-to-year. So we blend all that together to come out with that kind of vision as to what we think it will be on a relatively flat basis. But you got to factor all those pieces in there when you look at it. Garik Shmois Okay. That's helpful. And then just a follow-up is just on capital allocation and you're sitting at a pretty comfortable leverage ratio, and you have a slide in the deck that does talk to your capabilities in your balance sheet is quite attractive to accelerate your investments. Is there a scenario here and I know you've made two -- over the last several quarters, but is there an opportunity for you to ramp that up even further or go larger if the opportunity presents itself? Scott Cottrill Yes. I mean our growth algorithm is very calling at growing above our end markets via the conversion story. The innovation and new products and then put this balance sheet to work through acquisitions to get incremental growth on top of that. We like what we've been able to do over the last 12, 18 months, going all the way back to fiscal '20 for the Infiltrator acquisition that's been a grand plan have all run. So we look at that being at 1.1 times levered. We have a lot of opportunity to put this balance sheet to work. And we're actively looking at all options, including the engineering and technology center and innovation and what we can do there with new products. So again, very excited about that long-term shareholder value creation. And acquisitions will definitely be part of that. Operator Jeff Hammond, KeyBanc Capital Markets. Jeffery Hammond Hey, good morning, guys. It sounds like the near-term orders are good, but I'm just wondering if you look a little further out in the pipeline. One, what are you seeing on residential development trends? And two, just any real-time signs of delays, deferrals on construction projects, just given the tariff noise and uncertainty and higher costs, et cetera. D. Scott Barbour So Scott Barbour here, Jeff. So we're not really impacted by tariffs, very minimal impact for us as a company. We do worry about demand being impacted and construction projects be pushed and pushed and pulled. We haven't seen a meaning over the last 60 days. We didn't see a meaningful bunch of projects coming off the board. It since last week in whatever you want to call the agreement to delay these actions were -- China by 90 days. We haven't seen a bunch come back on. I think people are a little -- their heads a little bit sort from swiping and being jerked around so much. So we see -- what we just see is a fairly consistent pace of orders, pace of quotes that is improved over last year. It's not radically high, but it's not going down either. I mean it's at a very modest pace. And we anticipate that will continue here for the rest of the quarter. But I really don't know what's going to happen in the second half of the year. I mean it's pretty hard to gauge what -- whether in 90 days, these things get resolved, and everything goes back to normal or what's going to happen with interest rates. I mean it's pretty uncertain out there. So we're going to be very conservative in our response to that and are forecasting in our guidance. But I haven't seen anything radical in terms of changing what happens to us over these last days with these different amounts. Michael Higgins (multiple speakers) Go back to February, right? When we released our earnings and everybody though the world was going to end because of all of these tariffs is creating, it's not about certainty. And there's been a lot of moves since then. So move, as Scott referenced, a week or so, 10 days ago with relation to China, everybody is feeling good about themselves. But again, that can change in another 60, 90, 120 days. D. Scott Barbour They open their first thing for that. Michael Higgins Yes. So it's just really we're -- we feel we have a good plan and a very solid strategy and a good position in the market to execute that. And we can't control the end markets, but we can control how well we execute on our strategy of outperformance, growing out of the products (inaudible) trader faster than the pipe business and good price cost discipline. Jeffery Hammond Okay. Great. And then just back on the capital allocation question. So to ask it a different way, maybe, one, a lot of my companies are saying, "Hey, it's tougher to get deals done in this environment, just given all the uncertainty. Wondering if you're seeing any of that. And then I think your answer to the prior question was a lot more towards growth and external growth and just how you're thinking about buybacks because you highlighted a lot of great things about the business. The market doesn't seem to be appreciated and we just wanted to see when and if you want to lean in buybacks. D. Scott Barbour So again, I think like we talked -- our priority remains the same. It's reinvesting in the business. You saw we're going to increase CapEx. We did about $212 million in fiscal '25, we're now projecting $275 million in fiscal '26. So innovation through the engineering technology center and new products, new technologies, new things. We intend to accelerate through that process. So a lot of really core good opportunities to invest internally, this is -- absolutely. There's things that are always in the funnel, things that we're looking at. And then returning excess cash to our shareholders and that balanced capital allocation approach is absolutely core for us. We did $120 million of that this past year through dividends and buybacks. It's continually something that we look at, and we'll do that. We always look at that based on the outlook for the company, where is our working capital, our cash flow and opportunities and the macroeconomic backdrop that's coming at us in the next 6, 12, 18 months. So it's balanced, a really good approach. I would say the share buybacks are always something that we think about and look at after we look at the first couple of buckets that I already mentioned. So we'll continue to do that. And again, if opportunities -- if we generate the cash do we think and other opportunities don't avail themselves as we think they might, then yes, you could expect us to be back in the market. Scott Cottrill I would add one thing to that, which is we are still in a period of relative uncertainty and we want to have a very strong balance sheet if we're ever moving into those kind of times. But I think Scott is right. I mean it's excess cash beyond what we see for our needs and so we obviously see some needs out there with an appropriate level of conservative. Operator Trey Grooms, Stephens. Trey Grooms Hey, good morning. Thanks for taking my question. So you guys did a great job in the quarter managing SG&A. How should we be thinking about the SG&A expense in '26. And maybe if you could talk about some of the levers you're pulling or cost out you can tap if end markets remain subdued or maybe even decrease more than expected from here just kind of given the current level of uncertainty. D. Scott Barbour Sure, Trey. So obviously, you've got the impact of Orenco coming in there. So that's part one. Craig did a good job highlighting the synergy program and some of the things that we're looking at there. On the internal basis, absolutely things that we're going to continue to invest in as we look to the long-term growth of the company. Obviously, when top one is not growing and at the midpoint, it's flat year-over-year, that's tough, right? Because there are certain things you need to invest in and so forth. So right now, we've got a bunch of initiatives in place, a lot of things that we're looking at related to outside spend and things that we could do there through our procurement team as well as our team here and -- managed with our partners. So a lot of actions in flight that we're looking at to keep that manageable, if you will. So that's what I would tell you. Right now, that 14% of revenue is where it rolls up, but a lot of things in flight to mitigate such as we move through the year. Trey Grooms Okay. Great. That's helpful. And then you mentioned just kind of geographically, if we could touch on that. Strength in Florida, Infiltrator strong in Texas. Any other geographic puts and takes you could talk about as we look at your footprint? D. Scott Barbour So I think, Craig, you were pretty strong in the last year across all geographies. Both companies -- those -- ADS remain very focused with capacity and have all those kind of things on the Southeast and the Atlantic Coast. And we haven't seen that slow down, Trey. I mean it does continue to be very, very good for us. Texas, we had a very good year with Infiltrator new tanks, I think, done quite well there, and we've stricted our distribution there. And we continue to believe Texas for the ADS side both pipe and allied products to be a good opportunity for us to increase our market share and growth. It's not an easy market. It's competitive, but it continues to be a good one. Mike, can you think of any other geographies in particular? Or I mean the core geographies have been going along at kind of a. Michael Higgins Yes. I would say, Trey, Scott mentioned a handful of states, Florida, Texas, Carolinas, et cetera. We talk a lot about these priority states, and this was a year again where we saw it's a group of 15, 16 states, primarily concentrated in the lower half of the US. Again, we saw those states grow faster than the company average. And again, as we've told you guys many times, the states, we all know them, they're growing faster than the rest of the country. Our market shares are lower in those states. So they provide very good runway for growth, and they help offset some of the softness that we've seen in some of our other geographies that tend to be more mature like the Northeast Ohio, some other places in the Midwest, et cetera. But it's that focus, a geographic focus on where those opportunities are, where we're really seeing kind of continued consistent strength despite end markets that were quite a bit softer this faster Operator Collin Merano, Deutsche Bank. Collin Merano Good morning. Thanks for taking my question. I just wanted to dive a little bit more into the manufacturing transportation side. They were quite favorable in the first quarter -- in the fourth quarter here. You noted manufacturing is going to flow to a headwind in the first quarter, but transportation sounds like it's going to continue to be favorable to fiscal year '26. So any additional color on how we should think about sort of the manufacturing and transportation? D. Scott Barbour Yes, Collin. Sure. This is Scott Barbour, and I say logistics, there are several things we're doing primarily the ADS side. that are decreasing our village. And I would call this to some planning techniques, some different strategies. We're taking around the service to -- without any degradation of delivery performance and some things that (inaudible) are doing on the making sure we use the right mix of assets in the right place internal versus external. So lots of different programs going on in logistics. We've also refreshed our fleet and brought down the average age of our fleet pretty significantly over the last 18 months. So that's going to decrease our repair and maintenance costs and increase our miles per gallon. So the fleet is being more efficient. So I think that will continue to be a good service through the year. And again, all things we have invested in done differently in intentionally set strategies about. On our manufacturing cost, in the fourth quarter, we benefited not only from better efficiency, but also we had favorable absorption earlier in the calendar year. And you might recall that we -- that either favorable or unfavorable absorption in manufacturing goes on our balance sheet, releases to the P&L about three months later. So as we had to take volume down really beginning December, December, January through March because we were in good shape on our inventories and our delivery performance. We had some underabsorption. And that's what's primarily going to come through and hit us in June -- April, May, June. And so now we're working very hard to offset that under absorption, but kind of that's favorable in the fourth turning to unfavorable is the timing of that under-absorption of the balance sheet. That said, the Infiltrator pipes operating at very, very good manufacturing cost. Today, as we operate in the pipeline, very, very good manufacturing costs. The benefits of the investments we've made, the organizations we've built in some of the actions we took back in starting November, December, January, February, we will see this coming through later in this year as those costs are going on to our balance sheet now and we'll release later. So I really think we're on the right track with respect to both the logistics and the manufacturing costs. Collin Merano Great. That's really encouraging commentary. And I guess just on the CapEx really quickly. You called out the step-up. Just giving a step up, how are you guys thinking about free cash flow generation this year? And then how are you thinking about CapEx sort of in the medium term as you move beyond fiscal year '26? Scott Cottrill Yes. So yes, we'll always look at cash flow from us. We target anything greater than [$0.60]. It's always kind of the target that we look at. Obviously, working cap as a percent of sales, we're build and stock type of operation. So we target 20% working cap percent of sales. So those are some of the key metrics we keep in front of us to manage the business. So right now, again, as a free cash flow level, 40% plus conversion of is what we look at and target. Obviously, we're going to invest in the business. And we see that as the best use and highest return use of our capital. But we keep all of those kind of key KPIs and guardrails and benchmarks in front of us to make sure that we're managing it correctly. So again, free cash flow, targeting greater than 40% of EBITDA, cash flow from operations targeting greater than 65%. D. Scott Barbour I think keep it in those guardrails and then we'll spend -- capital will be probably in this range -- Yes, we have some things coming up through the big year with a couple of big investments in facilities on the ADS side, there will be some investments in Infiltrator coming up. It will balance those as we go through the year, we push and take. But that was working out for you this time. Scott Cottrill Yes. I think the other thing I would highlight there is the fact that to Scott's point, A big part of that $275 million is infiltrated. So again, when you look at the margins and profitability of that business, where else would you rather have us put those funds to work. So that's really important. When you think of innovation in that engineering and technology center and those products, particularly in the Allied area that we see some of the early wins there as well out of the gate. There's some really exciting things to go in areas that are very profitable for the business, and that's how we're prioritizing -- so it's not $275 million of CapEx, it's going to take five years for returns at a low margin, it's basically the other way around. It's spending in areas that are high profitability and are going to add really greatly to that shareholder value over time. D. Scott Barbour All right. Thanks, Scott. We have all the questions. So we appreciate everyone being on the call today in the questions and engagement. And we'll be on phone with many of you later today. But a year with a lot of accomplishments that we just closed. I mentioned several of them, a year with some frustrations and disappointments on a couple of things, we finished pretty strong as we ended. The team never gave up as we closed the year. And as we mentioned, kind of in line with this guidance in April and May so far. So we'll continue to push forward, and we look forward to seeing -- talking to you all or seeing you all in the near future. Thank you. Operator This concludes today's call. Thank you for joining. You may now disconnect your lines. Sign in to access your portfolio
