Advanced Drainage Systems, Inc. (NYSE:WMS) Q1 2024 Earnings Call Transcript

Bryan Blair: Okay. Understood. That’s helpful color. How about Texas? The approval still kind of early stage in that, but you did note last quarter that activity had started to — anything to note there?

Scott Barbour: I think we’re getting on designs and plans at a pretty good rate. We continue to be encouraged by the awareness within the Texas DOT engineering community of our products and its approval. Once you get it, you got to go out and tell people about it. I think we’re still in that process of getting — winning bids. So they’re not really shipping yet, I guess, is the point. But it is developing probably a little faster than we thought from just bidding and winning perspective, but then as these things mature, and they’re going to spend a lot of money in Texas over the next five years. So where we continue to be encouraged by that — also I think this has helped us on the private side, where we’ve had — continue to have good uptake on our HP Pipe and Texas helped drive that growth that I mentioned in HP Pipe, which is our higher-performing polypropylene product.

Michael Higgins: Yes. I mean I would just add, like our order book that we’ve seen kind of in infrastructure where with this kind of Texas DOT approval would play is at good levels versus maybe the same time last year? So we’re seeing some things. It’s just as we’ve told you guys, the stuff ramps over time. And we’ll look back a year from now, it’ll be much better three years to five years is where you’ll really see kind of the impact of this approval and our ability to get that implemented and execute against it in the market.

Bryan Blair: Understood. That’s good to hear. One more quick one, if I may. Any comments you can offer on the deal environment. I know that you’re spending a lot of capital organically, it’s high return. The outlook is great on that front. Just curious what you’re seeing in terms of seller expectations, the availability of the assets, whether we may see a strategic deal come through in your fiscal ’24.

Scott Barbour: I know that you’ll see a huge strategic deal in ’24. There’s other things we’re working on that are smaller. I mean they’re all kind of strategic to us but I know what you’re talking about. Availability it’s not a huge space. So availability can be an issue. We have several ones where we are talking to and talking about and engaging, but it’s tough to get them in the boat. I would say seller expectations are still pretty high to tell you the truth.

Operator: And your next question comes from Jeff Hammond with KeyBanc Capital Markets Inc.

Jeff Hammond: Just a couple of follow-ups. So on these mega projects, can you just talk about price competition and mix and what your experience has been early on?

Scott Barbour: Well, we compete against reinforced concrete pipe there pretty much all the time. Every now and then we will run into one of our plastic pipe competitors. But I’d say on the big onshoring industrial ones, it’s concrete that we’re competing against. And what wins is our value proposition of fewer trucks to the site to make the deliveries, fewer joints, safety, less labor-intensive, less heavy equipment needed to kind of install versus those. It’s really those pieces of our value proposition that win the day because on those projects, unlike some other projects, time is really important to get those factories built and get that work starting to move from a supply chain perspective or a localization perspective, for these companies.