Earnings Call Transcript - WMS Q3 2025

Operator, Operator

Good morning, everyone, and welcome to the Advanced Drainage Systems Conference Call for the Third Quarter of Fiscal Year 2025 Results. I'm Jale, your conference operator for today. All participants are currently in listen-only mode. We will have a question-and-answer session later. I would now like to hand the presentation over to Michael Higgins, Vice President of Investor Relations and Corporate Strategy. Please go ahead, Michael.

Michael Higgins, Vice President of Investor Relations and Corporate Strategy

Good morning, everyone. Thanks for joining us today. With me, I have Scott Barbour, our President and CEO; and Scott Cottrill, our CFO. 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 speak only as of today. Lastly, the press release we issued earlier this morning is posted on the Investor Relations section of our website. A copy of the release has also been included in an 8-K submitted to the SEC. We will make a replay of this conference call available via webcast on the Company website. With all of that said, I'll turn the call over to Scott Barbour.

Scott Barbour, President and CEO

Thank you, Mike, and good morning, everyone. Thank you all for joining us on today's call. We executed well in the third quarter, meeting our commitments on safety, delivery performance, and operational execution. Financial results were consistent with our expectations communicated in November. Net sales increased 4% to $691 million, including the acquisition of Orenco. Demand in the domestic construction markets continued to trend positively overall and this marks our fifth consecutive quarter of volume growth in the domestic construction markets. Pricing remains in line with expectations as well, sequentially stable from the second quarter. Sales in the non-residential market increased 7% as demand improved in the third quarter. Non-residential is about 45% of total sales. We saw good demand in the South and Southeastern United States such as Florida, Texas, and Georgia. To support growth in the Southeast, we recently broke ground on an expansion of the ADS recycling facility in Cordele, Georgia. This expansion will increase recycling capacity in this region, allowing us to more efficiently service the seven facilities in this growing market. As one of the largest plastic recycling companies in North America, expanding our operations in Georgia will allow us to deliver more high-quality recycled material to our manufacturing sites throughout the Southeast region, while expanding ADS's overall use of recycled plastic in our pipe products and advanced stormwater and on-site septic wastewater solutions. We have a great team in Cordele with many talented, long-serving employees, and we're excited to see the value that will be created with this investment. Sales in the residential market, which are about 35% of total revenue, increased 9%. Infiltrator's organic revenue increased 6% in the quarter, driven by double-digit growth in both tanks and advanced treatment products. The ADS residential land development business continues to perform well as homebuilders continue to acquire and develop land for the structural undersupply of homes in the U.S. Orenco contributed $25 million of sales in the period, slightly ahead of expectations. Sales in the infrastructure market were down 6% in the quarter on a difficult comparison. As a reminder, sales in the infrastructure market increased 22% in the third quarter last year. This is a market where ADS has historically under-participated, representing about 7% of overall revenue, but we are now positioned well following investments in go-to-market resources and additional capacity in key geographies. Because it is a small portion of the business and revenue is concentrated in geographies where we have stronger approvals, swings in this market can appear more dramatic than the non-residential and residential markets. Our leading indicators in the infrastructure market remain favorable over the long term as we continue to benefit from funds allocated under the IIJA as well as increased market participation. As we think more broadly about ADS and how climate patterns are evolving, we have a significant role to play in investing in the future of stormwater management. It's clear by the trends shown on slide five that these large-scale storm events are increasing in frequency over time. In 2024, the National Oceanic and Atmospheric Administration recorded 27 large-scale weather and climate disaster events in the United States, collectively costing over $180 billion. The frequency of these events in 2024 is more than double the average number of events from the previous decade, which was 13. ADS and Infiltrator products help build resiliency into communities by mitigating flooding, returning groundwater to aquifers, rivers, and other natural sources, as well as securing agricultural resources and food supply. As large-scale storms become more frequent, it is no surprise that Americans are growing increasingly concerned about stormwater management in their communities. In November, we conducted a second stormwater awareness survey in partnership with The Harris Poll, following up on the first stormwater awareness survey in 2023. The survey results show 60% of Americans are concerned about the stormwater infrastructure in their communities, a notable increase from 51% in 2023. In addition, nearly two-thirds of Americans indicated stormwater negatively impacts their community with flooded streets, property damage, and standing water identified as the most frequent consequences of insufficient stormwater management. The increased concerns are not surprising given the strength of the 2024 Atlantic hurricane season, which runs from June through November. The Atlantic Basin experienced an above-average 18 named storms, including five hurricanes that made landfall in the continental U.S., impacting areas from Texas to Florida and up into North Carolina and Tennessee. To help communities mitigate water management challenges, we continue to build out our product portfolio. We recently launched a new stormwater treatment solution, the EcoStream biofiltration product. Biofiltration is a category in water quality designed to remove pollutants such as nitrogen, phosphorus, sediments, metals, and hydrocarbons through low-impact environmentally friendly systems that often incorporate green infrastructure. ADS's new biofiltration product has been approved by both the Washington DOE and the New Jersey CAT, the two leading testing agencies in water quality. Our new engineering and technology center is equipped with a 90,000-gallon closed-loop hydraulics laboratory, which allowed us to test and commercialize this product much more quickly than was previously possible. We have also expanded our storage product offering with two new chambers, as well as a partnership with a plastic crates manufacturer. Expanding into plastic crates gives us the ability to participate in deep storage applications that our current chambers are not designed to meet. Infiltrator continues to roll out their single-tank residential advanced treatment solution, the ECOPOD-NX. This product is designed to meet new regulations that require higher levels of nitrogen removal to protect watersheds and the environment. Already, Infiltrator organic sales in the residential advanced treatment market have doubled this fiscal year, and advanced treatment remains a significant growth opportunity for Infiltrator. To that end, in the third quarter, we closed the acquisition of Orenco. This acquisition further enhances our product offering and complements Infiltrator products in the decentralized wastewater treatment market. Orenco is an excellent strategic fit for Infiltrator. We identified the advanced wastewater treatment opportunity at our 2022 Investor Day, and market demand has continued to grow since then. This acquisition establishes a leadership position in a highly fragmented and fast-growing segment of wastewater. The enhanced portfolio of complementary solutions combined with a broader sales force, geographic reach, and distribution footprint will drive further penetration in this attractive segment. On slide seven, we highlight three of Orenco's product categories we are most excited about. The AdvanTex advanced treatment systems are complementary to the Infiltrator products and increase our exposure to commercial systems as well as residential systems where Infiltrator is already used today. There's also an opportunity to use Infiltrator tank products in the AdvanTex product line, which has historically only used tanks made of composite and concrete materials. The Prelos product separates waste from wastewater, sending the liquid-only sewer to secondary treatment. This product is used in septic to sewer conversion and makes the process lower cost and less intrusive by avoiding significant disruption and investment in the existing infrastructure. The Prelos product line and the Controls business are incremental to today's Infiltrator offering. In addition, the Controls business provides another cross-selling opportunity between Infiltrator and Orenco, as Infiltrator currently purchases control panels from a third party. We are very excited about bringing Orenco to Infiltrator and the collective opportunity in decentralized wastewater management. Finally, today, we're announcing our 2025 Investor Day will be held on June 26 in Hilliard, Ohio, at ADS's new engineering and technology center. In addition to business updates and a new three-year plan, attendees will have the opportunity to tour the center, which is the largest and most advanced stormwater engineering and technology center in the world. Invitations will be sent in the next couple of months, and we are very excited to display this one-of-a-kind facility that demonstrates our commitment to advancing material science, engineering, and product design for stormwater management. With that, I will turn the call over to Scott Cottrill, who'll discuss our financial results.

Scott Cottrill, CFO

Thanks, Scott. The third quarter adjusted EBITDA decreased 6% year-over-year to $191 million. Favorable volume in the period was offset by unbearable price cost, while manufacturing and transportation costs were relatively flat to the prior year. It's important again to highlight that pricing in the quarter was sequentially stable as we had expected. We continually evaluate our manufacturing network and costs with a goal of optimizing our footprint without disrupting product availability and customer service. To that end, we recently announced the consolidation of one pipe manufacturing plant and two of our distribution yards. This strategic move is aimed at optimizing operations and ensuring that we allocate resources more effectively across the network. These actions will enhance overall efficiency, reduce operational costs, and continue to deliver high-quality service to our customers. On slide nine, we present our free cash flow. We generated $374 million of free cash flow year-to-date compared to $564 million in the prior year. Our year-to-date capital spending increased 22% year-over-year to $166 million, and we now expect to spend approximately $225 million for the full year. At the end of the third quarter, our net-debt to adjusted EBITDA leverage was one-time. With $489 million of cash on hand and $590 million of availability under our revolving credit facility. With ample liquidity and low leverage, we are in a great position to execute on our capital deployment priorities. On slide 10, our disciplined approach to capital allocation remains unchanged. Our first priority is to grow the business organically through capital investments and innovation, closely followed by strategic M&A to enhance our market position and scale. The capital investments we've made in the last several years are clearly paying off, and one of the reasons for our continued strong profitability profile. We have reinvested $416 million back into the business during the first nine months of this year as compared to $136 million in the prior year, while also returning $107 million to shareholders through dividends and share repurchases, staying true to our disciplined approach to capital allocation. Finally, on slide 11, based on our performance to date, current visibility, backlog of existing orders, and business trends, our fiscal 2025 revenue and adjusted EBITDA guidance remain unchanged. With that, operator, you may now open the line for questions.

Operator, Operator

Thank you. The floor is open for questions. Your first question comes from Matthew Bouley of Barclays. Your line is open.

Matthew Bouley, Analyst

Good morning, everyone. Thank you for taking the questions. Just one on the guide looking at the fourth quarter guidance, a bit of a wide range. I know March is always a big chunk of the quarter. So you typically leave a little bit of wiggle room there, but just any color on this, I guess, $40 million EBITDA range for the fourth quarter, maybe any finer points on kind of where you're tracking within that? Thank you.

Scott Cottrill, CFO

Yes, Matt, Scott Cottrill here. So again, as we look at the first quarter, largely, we look at it to be the same, if you will, or equal to what we did in the fourth quarter last year. If you remember the fourth quarter last year, it's a really tough comp given kind of the weather, precipitation, all of that in mid-Feb through the end of March really opened up and the construction season began a lot earlier. So again, it's going to be a tough comp year-over-year, but again, we think that the range that we have for the year and the guide, the key thing from our perspective is pricing is stable, right? We've talked about that sequentially and that's really important. And we're seeing material costs kind of flatten out, as well as we go. So again, a lot of those things lead us to be confident that plus the Orenco acquisition for us to be able to duplicate what we did in the fourth quarter last year. So that's just some of the attributes behind the guide.

Matthew Bouley, Analyst

Okay. Thank you for that, Scott. Yes, and then I guess you just touched on price and costs. I'll let someone else ask on that in more detail. So I'll ask on the non-residential end-market. You had some nice acceleration there even, despite what looked to be a bit of a harder comparison year-over-year. So just any color there on, kind of maybe, share gain, material conversion, how that's playing into it or regionally, maybe where you're seeing any kind of strength on the non-resi side specifically? Thank you.

Michael Higgins, Vice President of Investor Relations and Corporate Strategy

Hey, Matt, Mike Higgins here. I believe all the points you mentioned are relevant. We perceive our conversion narrative as strong and intact. We have often discussed our geographic focus in the South and Southeast, where we are observing positive activity and are well-prepared to capitalize on that opportunity. These markets typically provide the greatest potential for gaining market share, as they tend to be less mature compared to some of our more established markets in the Midwest and Northeast.

Scott Barbour, President and CEO

Matt, Scott Barbour here. I want to add that the Allied products segment saw improvement over the last quarter, as we have been strongly focusing on Allied products and related sales initiatives. The new offerings, especially in water quality, have contributed positively, including our biofiltration product. We are also set to launch an exciting new separator product in the coming weeks. Our primary emphasis is on Allied products, which are largely non-residential, and this is an important aspect of our story along with the geographic focus.

Matthew Bouley, Analyst

Great. Thanks, Scott. Thanks, Mike. Good luck, guys.

Operator, Operator

Your next question comes from the line of Bryan Blair of Oppenheimer. Your line is open.

Bryan Blair, Analyst

Thank you. Good morning, guys.

Scott Barbour, President and CEO

Good morning.

Bryan Blair, Analyst

I was given the chance to explore price costs further, and I plan to take it. The spread narrowed somewhat in fiscal Q3, and you mentioned that pricing remained stable sequentially. Input costs have become slightly more manageable. In the Q4 guidance, is it reasonable to assume that you are nearing neutral price-cost?

Scott Cottrill, CFO

No. Again, when you're talking year-over-year, you're going to see a little bit of a continuation of the trend we've seen. Our comments are more of what we're looking at sequentially, Bryan, which is basically really important to us as we look at that pricing stabilizing, as well as that material input cost. You remember, we've talked over the last couple of quarters about the material cost has just gone up incrementally month after month after month, which has really been difficult in this environment to recover. So what we're saying is we've seen that kind of flatten out on a procured basis on the materials that we're buying currently. And equally important is the fact that we're seeing on the pricing side, it stabilized as well, continuing to stabilize. It did in Q3 versus Q2, and we expect it to stabilize sequentially in Q4.

Bryan Blair, Analyst

Okay, understood. And that does provide kind of a bit of a segue to fiscal '26 discussion. Yes, respecting you don't have guidance out yet, but maybe frame given current visibility, how your team is thinking about growth prospects, the high-level puts and takes in looking across non-res, resi, infrastructure, construction markets along with ag and maybe overlay the potential of pricing upside looking through the new year?

Michael Higgins, Vice President of Investor Relations and Corporate Strategy

Hey, Bryan, Mike Higgins again. We don't want to get into specifics around next year. What we're really focused on is hitting the expectations that are out there. From an end-market perspective, kind of what we see today, residential, pretty solid. We made comments on the call about how we see good opportunities still in infrastructure that's a little variable by geography depending on how strong our approvals and acceptance are in those states. And again, with non-residential, I would go back to what we've said all year, right. It's highly variable by geography and see that kind of in our performance that we talked about South, Southeast, Texas, places like that remain pretty good and it's kind of pockets of strength, pockets of weakness elsewhere. So as we get through the rest of Q4 and get into the spring, we'll have a more solid picture and conviction around kind of what we think the end-markets are going to do next year. Obviously, the news headlines are dominated by a lot of political and geopolitical.

Scott Barbour, President and CEO

And natural things that are happening…

Michael Higgins, Vice President of Investor Relations and Corporate Strategy

Happening, yes. So I think we're in a very fluid situation, and kind of our end-markets could be impacted by those things.

Scott Barbour, President and CEO

Yes, it hasn't been a clean start. So just looking at-the-market perspective, this is Scott Barbour, Bryan. And with the poor weather in January, just all that stuff kind of takes you away from the planning for the year from a market perspective. And that's kind of what we saw. And we'll think that we'll work our way through that.

Bryan Blair, Analyst

Yes, understood. Appreciate all the color. Thanks guys.

Operator, Operator

Your next question comes from the line of Mike Halloran of Baird. Your line is open.

Mike Halloran, Analyst

Hey, good morning, everyone.

Scott Barbour, President and CEO

Good morning.

Mike Halloran, Analyst

Hey, just to simplify things a little bit, when you take a step back, acknowledging the weather headwinds and some of the things you just referenced, I mean, has much changed with the customer conversations or how you're thinking about the base outlook? I mean, I hear Mike's comments, and choppy by region doesn't seem that different. Some strength in resi doesn't seem that different. I mean, are you seeing much change in how you're thinking about these end-markets today versus, say, three, six months ago or has it just been relatively stable with some choppiness?

Scott Barbour, President and CEO

Mike, this is Scott Barbour. My perspective on how these customers are communicating has not changed since last quarter. I believe they remain somewhat uncertain about the overall direction and pace across the country. Conditions vary in different regions, as we've mentioned, but there is no excitement suggesting a significant upward trend. Customers are taking a three to six-month view. At this time of year, they may be considering larger projects that could arise this year, but most are focused on a three to six-month timeline.

Mike Halloran, Analyst

That helps. I have a broader question regarding your perspective on the competitive and pricing landscape. Stable pricing seems to be the trend for the past 9 to 12 months on a sequential basis. What are you observing from your competitors? Have there been any changes in the competitive dynamics? It appears that the environment is a bit more volatile, with higher competition, but it doesn't seem significantly different from the past. I'm interested in whether you share that viewpoint.

Scott Barbour, President and CEO

So Scott Barbour again, and I would say that behavior has remained very steady, with no significant changes over the past seven to nine months. We are continually making pricing decisions similar to our competitors to achieve localized goals. I want this job, I want to establish a partnership with this contractor, and I want to grow with this specific distributor. This consistent behavior among all of us has persisted for seven to nine months now, and I believe it is reflected in our comments and our pricing analysis.

Mike Halloran, Analyst

Great. Really appreciate everyone. Thank you.

Scott Barbour, President and CEO

Good, welcome.

Operator, Operator

Your next question comes from the line of John Lovallo of UBS. Your line is open.

John Lovallo, Analyst

Hey, guys. Thank you for taking my questions as well. Maybe I'll just focus a couple on the outlook. And maybe starting with the midpoint of the full-year outlook, it implies fourth-quarter revenue would be down about 6% sequentially, but EBITDA margins would be up about 120 basis points quarter-over-quarter to, I think 28.9%. Can you just help us kind of bridge that, what's driving that incremental margin expansion there?

Scott Barbour, President and CEO

There's only one person that can answer that question in this room, Scott Cottrill.

Scott Cottrill, CFO

I think, John, as you look at it, I guess part of it's kind of what we've seen. We've talked about price-cost, manufacturing cost, transportation costs as we go. Again, you look at what's on the balance sheet. You look at what our performance has been over the last couple of months, what's sitting in inventory, what's going to come through. So that's part of it. You also look at SG&A and you look at the costs that we've had, not only sequentially, but year-over-year. And you look at the SG&A piece, which will be a nice part of kind of that margin story as we look at Q4 as well on a year-over-year basis. So we look at all that. We obviously have really good visibility to the balance sheet and what's sitting at inventory and what's going to be coming off. And again, most of it, we talk price-cost sequentially being kind of flattening out and sequentially being where we wanted it to be. I think you'll see manufacturing and transportation kind of continue that story as we get into Q4 and then you'll see some favorability around SG&A. So that will explain kind of the margins. And again, we talked about year-over-year, we've got some tough comps out there. So again, we're counting on good growth in Allied like we've seen. Infiltrator will hold in there solidly. And then we've got the dynamics in the pipe business that we've been talking about that'll continue into Q4. Again, a tough comp year-over-year, but all of that leads us to believe that roughly flat on a year-over-year basis when all of those moving pieces are kind of brought together.

John Lovallo, Analyst

Okay, that's helpful, Scott. And then maybe just to clarify that last comment. When you say flat year-over-year, I mean, are we talking organic or including Orenco and are we talking revenue or revenue and EBITDA both?

Scott Cottrill, CFO

My comments are basically that the Infiltrator business and Allied will be up organically. Then you've got the Orenco business and then you've got the pipe business, again, via tough comps will be down as well on a year-over-year basis.

Operator, Operator

Your next question comes from the line of Garik Shmois of Loop Capital Markets. Your line is open.

Garik Shmois, Analyst

Hi, thanks. Just wanted to follow up on the manufacturing and transportation line. It was pretty much in parity this quarter, but I think that's coming off of a 2Q in which it was a nice tailwind. So I think you had called out last quarter good leverage on investments. I'm just kind of wondering what the variance was in 3Q versus 2Q on the manufacturing and transportation line?

Michael Higgins, Vice President of Investor Relations and Corporate Strategy

We continue to see efficiency in transportation, not only in our third-party sales but also in our internal processes, which refers to the costs we incur to move products within our network. We account for this as part of our inventory costs, providing visibility into it. We have made our operations more efficient, including consolidating one of our pipe manufacturing plants with two distribution centers. We are always exploring ways to optimize our operations. Additionally, the investments made by the Management team and the Board in efficiency and productivity are reflected in the performance you observed in the third quarter.

Garik Shmois, Analyst

Okay, thanks. And then just on the consolidation of some of these facilities you just cited, is there any quantifiable cost savings that we should be expecting?

Michael Higgins, Vice President of Investor Relations and Corporate Strategy

Again, it's one pipe plant as well as two yards, it's definitely a savings. It's embedded in our guide, but nothing that we'll call out separately right now.

Garik Shmois, Analyst

Okay. Thanks. I'll pass it on.

Michael Higgins, Vice President of Investor Relations and Corporate Strategy

Thanks, Garik.

Operator, Operator

Your next question comes from the line of David Tarantino of KeyBanc Capital Markets. Your line is open.

David Tarantino, Analyst

Hey, good morning, everyone.

Michael Higgins, Vice President of Investor Relations and Corporate Strategy

Good morning.

David Tarantino, Analyst

Maybe just starting with a quick one. You mentioned weather being a factor. Could you give us some detail on how it impacted 3Q and how we're thinking about it for 4Q and which businesses it was primarily affecting?

Michael Higgins, Vice President of Investor Relations and Corporate Strategy

Yes, I think with the Q3 weather, right, obviously, I mean, it's really coming across all of our businesses, David. I mean we have products that are delivered and installed outside. So kind of think of where the bad weather was and that's kind of where you're going to be impacted somewhat. As you look at Q4, again, January was a cold month for the middle part of the month through a lot of the country and that will slow down activity. As we kind of move through the quarter, that business, we've talked before, if it gets slowed by weather, it doesn't go away, it just gets pushed a bit to the right. So we'll see how the rest of this quarter unfolds. And again, that guidance kind of implies a couple of different scenarios around the weather, whether it's bad or whether it's kind of normal and improves, and that's in that guidance.

David Tarantino, Analyst

Okay, great. Could you provide more details on the declines in infrastructure? Is it primarily a matter of timing? I know we have a renewed focus in this area. Also, what are your thoughts on the risks associated with the stimulus under the new administration?

Scott Barbour, President and CEO

So this is Scott, David. And I don't think there's a lot of risk for IIJA type of money for roads and highways and things like that. A lot of that is kind of flowing already. Maybe there's some risk in some of these industrial development or policy type things. We benefited from that over the last couple of years as some of those really big projects got going quickly on battery plants and the semiconductor plant in Ohio and things like that. So maybe there will be some impact there, but not on the roads and highways IIJA. The difficult comparison a year-ago, we also were shipping a lot of storm tack airport. I think there were 33 or 35 active airport projects a year-ago. So that money, FAA controlled, more federally controlled than kind of money to close to the states. I mean, a lot of that came out of pretty quickly and there was a benefit in that. Those could be lumpy. The airport jobs, but the road and highway stuff, we think will be pretty consistent over the next couple of years. So I don't think we're really alarmed that down-drafted a bit right now. We still have a pretty good effort at building backlog and jobs in that segment.

Michael Higgins, Vice President of Investor Relations and Corporate Strategy

And I think when you look at the quarter performance, as we've said, we tend to kind of do better where approvals and acceptance are stronger. Some of those states had a little weaker year-over-year performance, but the positive end of that is you look at states where we're trying to further and accelerate penetration, they had good quarters. Those are places like North Carolina, places like Georgia, Texas, those states where we did see good positive year-over-year volume growth in that end market.

David Tarantino, Analyst

Okay, great. Thanks for the time, guys.

Operator, Operator

Your next question comes from the line of Trey Grooms of Stephens. Your line is open.

Trey Grooms, Analyst

Hi, good morning.

Scott Barbour, President and CEO

Good morning.

Trey Grooms, Analyst

I would like to revisit the margin improvement for Orenco. Now that you have had ownership for a while, you previously mentioned in the last call that profitability was in the mid-teens. Can you provide any updates on this and how things are progressing?

Scott Barbour, President and CEO

So Scott Barbour here, Trey. We were out on the West Coast earlier this quarter, spending a week there. We visited Orenco for about a day and a half, and it was a great experience. Our insights about the business and its potential remain strong, particularly after Craig Taylor and his team dedicated considerable time there over the past quarter. We still see the opportunity to grow from the mid-teens to above 20%, although we anticipate that this will take some time. It won't happen in just one quarter. I'm pleased to say that we are exceeding our third-quarter forecast slightly, and we have established a solid execution rhythm with the team in Oregon. The initiatives we are implementing in the market have received positive feedback from our distribution partners and customers. All of these factors are aligning as we expected. However, this growth won't occur within a year or even six months; it's going to be a gradual process, though not overly slow, and we believe we will be pleased with the outcomes. As we've mentioned and will elaborate on during our Investor Day, the combination of our organic investments in new products for the Advanced Treatment segment, particularly at Infiltrator, alongside the strength of the Orenco business, marks a great start to the strategy we've been pursuing for about three years now. We're excited about this, and we'll discuss it in detail in June at Investor Day.

Trey Grooms, Analyst

Great. Well, that's all I had. Thanks for answering the question, Scott. Super helpful and looking forward to the Analyst Day. Thank you.

Scott Barbour, President and CEO

Yes, it will be fine. We'll get you to Ohio. How is that?

Operator, Operator

Your next question comes from the line of Ryan Connors of Northcoast Research Partners. Your line is open.

Ryan Connors, Analyst

Good morning. Thank you for taking my question. I wanted to revisit the pricing aspect as it's where we're receiving the most inquiries. You mentioned how you set prices to meet specific local objectives. While the overall company price remains steady, what is the range of variability in local markets? Are they generally close to that flat line, maybe increasing by 1% or 2%, or is there more fluctuation with some markets performing exceptionally well while others face challenges?

Scott Barbour, President and CEO

This is Scott Barbour. Some markets are definitely more challenging than others, and this can vary by geography, such as between the northern and southern parts of the state, which exhibit very different behaviors. While we do see some variability throughout the year, that variability has generally lessened. The tougher markets remain challenging, while the other markets remain consistent. Overall, there isn’t a significant amount of variability within the current market range. We are not facing unexpected fluctuations that require daily reactions. Such occurrences happen, but they are not as frequent or severe as they were earlier in the year.

Ryan Connors, Analyst

Sure. No, that is very helpful to hear that tightened up. And then my other one is just sort of related, but pricing has been rational. You mentioned several times. Can you say the same thing about actual and planned capacity additions? I mean, is there anything you see out there on the horizon that could be disruptive to the supply and demand dynamics or is everything pretty well staged in with where the demand lies in the markets?

Scott Barbour, President and CEO

I don't believe there have been any unexpected investments announced by us or our competitors at this time. We have a clear understanding of what regional capacity is likely to be. Our planning is centered around maintaining competitiveness based on our overall market observations, and we have a solid grasp of the pacing and production volumes of these investments. We will plan accordingly. As we consider our future strategies for remaining cost-competitive, we focus on capacity, pricing levels, and the various competitive advantages we might leverage in terms of service or tools. ADS offers a comprehensive value proposition that extends beyond just our product line and truck availability; it encompasses all the services and significant investments we've made to support that. We take all these factors into account as we compete in the market.

Ryan Connors, Analyst

Got it. Well, I appreciate the comprehensive response and thanks for the time.

Scott Barbour, President and CEO

You're welcome.

Operator, Operator

That concludes our Q&A session. I will now turn the conference back over to Scott Barbour for closing remarks.

Scott Barbour, President and CEO

Thank you for your questions and insights. We appreciate the time you've spent preparing for today's call and your ongoing engagement with us. We'll likely have a few follow-up calls later today, but overall, we believe we were on track this quarter despite needing to make some adjustments. The guidance range is broader this time due to the variability in demand influenced by the weather. We are adapting to these factors and continuing to perform well. Infiltrator has had an excellent year, with substantial improvements and progress stemming from our capital investments in the ADS business, which we will showcase at the upcoming Investor Day. We look forward to connecting again in May. That wraps up our call for today. Thank you, and talk to you later.

Operator, Operator

This concludes today's conference call. You may now disconnect.