ADS executed well this quarter in spite of a challenging market environment, driving growth at strong margins. In the second quarter, we delivered 9% revenue growth and 17% growth in adjusted EBITDA. As we continue to deliver above-market growth and industry-leading margins, we remain committed to investing in both organic and inorganic growth to further strengthen our position as a leader in water management. With double-digit growth in several key products, including the StormTech retention-detention chambers, the Nyloplast catch basins, and the water quality products, all of which benefited from new products introduced over the last year.
Infiltrator revenue increased 25%, including Orenco, or 7% on an organic basis, driven by double-digit growth in both tanks and advanced treatment products launched in the last several years. Pipe revenue increased 1%, with double-digit growth in the HP pipe products and construction applications being offset by weakness in the agriculture market. From an end-market perspective, 15% non-residential sales growth was broad-based geographically across the U.S. Organic growth of 12% was driven by double-digit growth of Allied products, as well as the strong growth in HP pipe products.
For the second quarter in a row, we experienced strong Allied product growth in the multi-family development activity. Overall, we executed well in a challenging market environment and remained focused on driving profitable growth by executing these strategies: introducing new products and customer programs, pursuing acquisitions, and investing capital for long-term growth. The market outlook presented at the bottom left of chart four remains unchanged. Their disciplined execution and commitment to continuous improvement resulted in our safest first half of the year on record, achieving a total recordable incident rate, one half of the industry average.
| Metric | Period | Current guidance |
|---|---|---|
| Revenue (FY2026) | Full-year fiscal 2026 | $2,945 million midpoint (raised 2%) |
| Adjusted EBITDA (FY2026) | Full-year fiscal 2026 | $920 million midpoint (raised 5%) |
| Adjusted EBITDA margin (FY2026) | Full-year fiscal 2026 | approximately 31.2%, or 60 basis points higher than fiscal 2025 |
| Capital expenditures (FY2026) | Full-year fiscal 2026 | approximately $200 million-$225 million for the full year |
| Metric | YoY | Note |
|---|---|---|
| Revenue | +9% to $850 million | Growth in both non-residential and residential end markets and favorable price-cost, outpacing the end markets overall. |
| Adjusted EBITDA | +17% | Favorable price-cost and self-help operational initiatives, yielding a 33.8% adjusted EBITDA margin. |
| Allied product sales | +13% | Double-digit growth in StormTech chambers, Nyloplast catch basins, and water quality products, benefiting from new products introduced over the last year. |
| Infiltrator revenue | +25% (7% organic) | Double-digit growth in both tanks and advanced treatment products launched in recent years, plus the Orenco acquisition. |
| Pipe revenue | +1% | Double-digit growth in HP pipe and construction applications offset by weakness in the agriculture market; pricing stable. |
| Non-residential sales | +15% (12% organic, 3% inorganic) | Broad-based geographic growth across the U.S. driven by Allied products and strong HP pipe growth. |
| Year-to-date free cash flow | $399 million vs. $238 million prior year | Increased profitability, better working capital performance, and lower cash taxes. |
| Topic | Previous mention | Current period | Trend |
|---|---|---|---|
| Material conversion and Allied/Infiltrator mix strategy | — | Continued prioritization of higher-growth, higher-margin Allied and Infiltrator products, which grow faster and carry larger adjusted gross margins than pipe, driving margin accretion over time. | — |
| NDS acquisition | Agreement announced in September | All-cash deal valued at $1 billion ($875 million net of tax benefits), 10x trailing-12-month adjusted EBITDA ended June 30, 2025, expected accretive to adjusted EPS in year one with $25 million of annual cost synergies by year three; regulatory process ongoing. | — |
| Orenco integration | Owned about one year | Integration exceeding expectations with earnings growing faster than sales and improved margins; commercial synergies still ramping and safety performance strong. | — |
| Second-half demand caution | Original guidance assumed some deterioration in dynamics | Guidance implies modest year-over-year degradation using a 30%-40% decremental margin approach, with demand seen as the largest risk given seasonality, government-shutdown friction, and interest-rate uncertainty. | — |
| Price-cost and resin | Prior guide expected price-cost roughly neutral for the year | Price-cost favorable to expectations and largely stable both sequentially and year over year, with resin costs a tailwind now flattening on a procured basis. | — |
| Texas water infrastructure | — | Newly passed ~$20 billion Texas fund (about $1 billion a year to replace aging pipe, starting around 2027) viewed as a good long-term opportunity across non-residential, residential, and rainwater harvesting; ADS lobbied for the bill. | — |