A Letter from our CEO Dear Fellow Shareholders, Fiscal 2023 was ADS’ sixth consecutive year of record revenue and profitability. Net sales grew 11% to $3.1 billion and Adjusted EBITDA increased 34% to $904 million, resulting in an Adjusted EBITDA margin of 29.4%. Since Fiscal 2019, net sales and Adjusted EBITDA have increased at a compound annual growth rate of 22% and 41%, respectively. These results are the product of ADS’ strong business model and long-term strategies to drive above-market results and expand profitability, as both ADS and Infiltrator executed these strategies well in a dynamic macroeconomic environment. We are very proud of this year’s achievements, and we remain focused on key growth strategies as well as the Fiscal 2025 Adjusted EBITDA margin target presented at investor day in March 2022. We executed well to close out the year despite overlapping demand weakness in our core non-residential and residential
end markets. Fiscal 2023 started very strong with favorable demand, shipping rates, and pricing. Beginning in the fall, demand in the residential market weakened, shortly followed by weakness in the non-residential market. We responded with the necessary adjustments to the operations and plan, executing well against these updates. Long-term, we remain confident in the non- residential and residential end markets, but we expect the slower pace to continue due to higher interest rates, inflation on building material costs, and tightening lending standards, all of which impact the customer. Despite the short-term weakness in demand, the need for water management solutions remains highly relevant. We are actively engaging with communities that are improving standards for stormwater and onsite septic wastewater management, staying true to our brand promise to protect and manage water, the world’s most precious resource, safeguarding our environment and communities.
We have a runway for long-term growth in both the stormwater and onsite septic wastewater markets due to the value proposition, solutions package, conversion to plastic from traditional materials, and unique sustainability position in water and recycling. As one of the largest plastic recyclers in North America, we remain committed to finding innovative ways to increase the use of recycled plastics, thereby improving the circularity of the plastics economy and giving us additional scale to manage cost and financial performance. Last October, we broke ground on a world- class Engineering & Technology Center to increase material science innovation, develop new products, and develop technology for manufacturing operations. Importantly, we are being recognized for our impact, effort, and value proposition as companies continue to choose ADS products for water management in large-scale development projects. While there is weakness in the core markets, the
Agriculture, Infrastructure, and active onsite septic markets have a more favorable | ADS Annual Report 20232
Key Financial Highlights FY 2023 Revenue (Figures in millions) FY 2023 Adjusted EBITDA1 (Figures in millions) FY 2023 Sales by Geography FY 2023 Sales by Product Category Non-Residential Construction 47% 1 EBITDA adjustments exclude transaction costs and certain non-cash items; Adjusted EBITDA is a Non-GAAP measure. Please see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of the accompanying Form 10-K for the definitions of non-GAAP measures and reconciliation of non-GAAP measures to GAAP measures. Pipe Allied Onsite Septic 61% 23% Domestic Canada Other International 92% 5% FY 2023 Revenue by End Market CAGR: 40.5% 3% 16% CAGR: 22.0% $3,071 2022202120202019 2023 $2,769$1,385 $1,674 $1,983 $904 2022 2023 $676$232 2019 $362 2020 $567 2021 % of Sales ADS Sales Growth Non-Residential Construction International Agriculture Infrastructure Construction Residential Construction +15%
+8% +11% +2% +8% Residential Construction 33% Infrastructure Construction 6% Agriculture 6% International 8% ADS Annual Report 2023 | 5
Industry Leading Recycling Solutions Sustainability is at the core of who we are and what we do. We are proud of the important work we are doing to have a positive environmental, operational and social impact. We are the largest plastic recycling company in North America. In Fiscal 2023, we purchased approximately 540 million pounds of recycled plastic, keeping it out of landfills and further preventing over 650 million pounds of Greenhouse Gas emissions (GHG) from being released into the atmosphere. Our industry-leading resin blending programs convert this recycled plastic into pipe, chambers and other products that can support America’s stormwater management, wastewater and onsite septic needs. Consumed 25% of the recycled HDPE bottles in the US in 2022 One of the Largest plastic recycling company in North America 650 million pounds of GHG emissions avoided GHG emissions avoided amounts to taking 63,000 cars off the road
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Environmental Social & Governance 540 million pounds of plastic recycled 14% decrease in GHG emissions intensity Sustainability Committee formalized by Board 1% increase in production rate 8% improvement in downtime rate $13 million approved for Environmental, Health and Safety initiatives 9% reduction in fleet fuel consumption 57% of pipe revenue derived from re-manufactured products $4 million contributed to charitable organizations Fiscal 2023 Sustainability Highlights Operational 50% of Board is female or ethnically diverse 39% increase in diversity representation at management level 16% decrease in energy intensity ADS Annual Report 2023 | 7
ADS WINS PLASTICS PIPE INSTITUTE 2022 PROJECT OF THE YEAR ADS | Greencastle, PA Advanced Drainage Systems was recognized by the Plastic Pipe Institute’s (PPI) Drainage Division for its 2022 “Project of the Year Award” for a new warehouse project in Greencastle, Pennsylvania. Plastics Pipe Institute is a major trade association representing all segments of the plastics piping industry. As an association, PPI focuses collaborative efforts to accumulate data, concentrate facts and target resources toward advancements in applications and increases in widespread usage. The 1.5 million square foot building on 83 acres of land required five large underground storage systems to protect the local environment from pollution, erosion and flooding. In addition, watertight joints were required due to karst topography in the area. As one of the largest sites in Franklin County, this project used over 17 miles of ADS® N-12® Dual Wall HDPE
Pipe to construct the underground detention beds. | ADS Annual Report 20238