Advanced Drainage Systems Inc

NYSE:WMS

Earnings Call Transcript 2021-Q4

[Operator]

Good morning, ladies and gentlemen and welcome to Advanced Drainage Systems’ Fourth Quarter Fiscal 2021 Results Conference Call. My name is Crystal 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, Mr. Mike Higgins, Vice President of Corporate Strategy and Investor Relations. Sir, you may begin.

[Mike Higgins]

Good morning, everyone. Thanks for joining us today. With me here, I have Scott Barbour, our President and CEO and Scott Cottrill, our CFO.

I would like also 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 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.

I will now turn the call over to Scott Barbour.

[Scott Barbour, President and Chief Executive Officer]

Thanks Mike. Good morning everyone. Thank you for joining us on today’s call. We delivered another quarter of record financial performance in the fourth quarter of fiscal 2021. Sales grew 20% year-over-year, driven by 21% residential sales growth and 11% non-residential sales growth as we continued to execute at both ADS and Infiltrator in a favorable demand environment. The residential market remains strong. Both ADS and Infiltrator residential market sales grew over 20% in the fourth quarter driven by favorable dynamics in new home construction, repair/remodel and onsite septic, accelerated by our material conversion strategies at both businesses.

Residential market sales have increased to 39% of our domestic sales as compared to 23% prior to the Infiltrator acquisition. The market indicators show that homebuilders continue to acquire land for future development and that there is an overall shortage in available homes, which drives the front-end new community development sales at ADS and the onsite septic system sales in Infiltrator are driven during the home completion stage. In addition, the repair/remodel business remains rust. ADS, participates in the repair/remodel segment of the residential market through retail, which is about 40% of the legacy businesses residential sales. Infiltrator’s repair/remodel business and the residential on-site septic market accounts for roughly one-third of their business.

Growth in our non-residential end market was broad-based throughout the United States. We continue to benefit from growth in horizontal construction, such as warehouses, distribution centers, datacenters as well as the developments that follow the residential build-out. About two-thirds of our domestic allied product sales are in the non-residential market, where sales increased 13%, further giving us confidence in the underlying market strength.

Sales in the agricultural market increased 50% this quarter driven by strong demand as the spring selling season got off to a good start. The agriculture economy remains favorable and we continue to benefit from the programs we put in place around organizational changes, new product introductions and improving execution. We experienced strong demand in the Midwest region, particularly in Minnesota, Ohio, Iowa and Michigan. Further, we are expanding our presence in key strategic areas like Missouri and parts of the southeast to drive increased market share. International sales also increased 49% primarily driven by sales growth in our Canadian business, which nearly doubled compared to last year. Canada is doing well across both the construction and agriculture end-markets, with similar trends to the United States. Additionally, this quarter, we continued to leverage our pipe manufacturing facilities in Mexico to help service the strong demand we experienced in the United States.

Finally, Infiltrator continues to exceed expectations with 23% sales growth in the fourth quarter against a very tough comparison to the prior year and broad-based growth across the Infiltrator product portfolio. This includes double-digit growth in tanks and leachfield products, with strong growth in Florida, Tennessee, Alabama and Indiana, among other states. This was led by our material conversion strategy of displacing concrete septic tanks with plastic tanks and the economic advantages of septic chambers in leachfield systems. The Infiltrator business is benefiting from strong distribution presence in the Southeast and Midwest as well as rapidly growing micropolitan areas, which typically lacked the sewer infrastructure needed to support rapid housing development.

Moving to profitability, we achieved record fourth quarter adjusted EBITDA during the period. Adjusted EBITDA margin increased 190 basis points. The increase in profitability in both businesses was driven by leverage from the strong sales growth, favorable pricing as well as contributions from our operational productivity initiatives, which helped to offset inflationary costs. I am very proud of our employees and management team at both ADS and Infiltrator for bringing fiscal 2021 to a close with strong financial performance this quarter.

I would like to highlight our fiscal 2021 financial performance compared to the 2018 Investor Day plan now that we have finished out the year. We communicated a 3-year plan in November 2018, about a year after I got to ADS and I am very pleased to have exceeded the targets we laid out. The ADS legacy business grew sales at a 7.7% CAGR driven by the sales programs we laid out in November 2018. We continue to execute our proven market share model, converting traditional materials to our plastic pipe products in the stormwater market to drive this outperformance. Our sales team is going after the significant growth opportunity for large diameter HP Pipe, which has grown at a double-digit CAGR over the 3-year period. We are focused on key – on growth in key states namely Florida, Texas and California as well as additional priority states, where we find attractive market opportunities. We continue to penetrate the allied product market through our existing portfolio as well as through innovation and acquisitions. Allied product sales have also grown at a double-digit CAGR over the time period.

Finally, our agriculture and Canada businesses performed above our expectations, both returning to strong growth. In the plan laid out in November 2018, we stated our intention to grow adjusted EBITDA margin to between 18% and 19%. The legacy ADS business finished fiscal 2021 with a margin of 24.3%, significantly outperforming our plan. The outperformance was driven by execution, top line growth, favorable material cost, fixed cost leverage as well as improved efficiency in our supply chain, operations and distribution. The improvement in profitability as well as execution of our working capital initiatives and the acquisition of the Infiltrator drove the improvement in free cash flow conversion to 66% of adjusted EBITDA, significantly better than the 45% in fiscal 2018 and above our target of at least 50%.

Our performance over the last 3 years, coupled with the acquisition of Infiltrator, changed the growth and financial profile of the company. The acquisition of Infiltrator was a great addition to our business. Through Infiltrator, we increased our exposure to the residential market, diversifying our end-market exposure and gained a very high-quality management team, set of engineers and operators who continue to execute the Infiltrator proven business model. We believe executing on the strategies and plans laid out in 2018 increases the value of our business as evidenced by the significant increase in our stock price since issuing this plan in 2018. We will continue to focus on driving top line growth, improving our profitability, incur inverting profitability to cash at a high rate, in turn creating additional value for our shareholders. We will continue to pursue these proven strategies and we will issue our next 3-year plan this fall at our next Investor Day.

In summary, we did a great job executing this quarter and fiscal year and are pleased to continue our track record of generating above-market growth across our key end markets. In the past, we have shown our growth relative to the market. However, market statistics are a bit distorted right now due to the pandemic, making it more difficult to measure. That said regardless of how you measure the market growth or decline, we handily outperformed the market giving us confidence that our material conversion story is intact or even accelerating.

Our success in growing above market is a function of our unique advantages. We continue to have success in gaining market and wallet share through our material conversion and water management strategies. We are more vectored to key states, where construction activity remains high and we are making focused bets in others, where we see opportunities for growth. We are benefiting from broader market trends, including rapid growth in micropolitan areas and higher exposure to suburban development. And since the acquisition of Infiltrator, we are more exposed to the residential construction market, which now represents nearly 40% of sales. And within the non-residential market, we are also benefiting from our outsized exposure to horizontal construction, which was far more healthy than vertical construction this past year. In other words, we are an evolving and a stronger ADS today than any point in our history and we look forward to the future.

As we look to fiscal 2022, we will build on our strong market position, execution and new levels of profitability. I want to thank our employees who are the bedrock of our success over this past year. We will stay focused on employee health and safety and on delivering the needs of our customers. We are well positioned to capitalize on market demand while continuing to generate above-market growth through the execution of our material conversion and water management solution strategies. We remain focused as always on disciplined execution.

With that, I will turn it over to Scott Cottrill to further discuss the financial results.

[Scott Cottrill, Chief Financial Officer]

Thanks, Scott. On Slide 7, we present our fourth quarter fiscal 2021 financial performance. I will be brief on this slide, as Scott covered a lot of the details already, but I do want to highlight a few key points.

Our strong top line revenue growth of 20% was driven by both volume and pricing, with strong growth across our ADS and Infiltrator businesses as well as in each of our segments, markets and product applications. The demand environment for our products remain attractive and we expect these dynamics to continue as we move forward into calendar 2021. The 31% growth in consolidated adjusted EBITDA was driven by strong top line growth in addition to favorable pricing, operational efficiency initiatives as well as our synergy programs. In addition, due to the strong results for fiscal 2021 and to reward the incredible service and dedication of our employees this past year, we have decided to pay a one-time bonus to employees who are not part of our annual incentive compensation plans, resulting in approximately $4 million of additional compensation expense in the quarter. Our ability to deliver in the face of a uniquely challenging year and a strong demand environment would not have been possible without their hard work and dedication.

Moving to Slide 8, we present our full year results. Revenue this year increased 19% to $1.983 billion, coming in above the high-end of our guidance range. This was the result of strong demand we experienced this year growing double-digits in both the domestic and international businesses. Our adjusted EBITDA increased $205 million to $567 million driven by strong volume growth in both pipe and allied products, favorable pricing and material costs, and operational efficiency initiatives that offset inflationary cost pressures. Infiltrator contributed an additional $88 million, driven by strong volume growth, favorable price-cost performance as well as continued benefits from our synergy programs. We also had the benefit of owning Infiltrator for the full year as compared to 8 months in fiscal 2020. Finally, our adjusted EBITDA margin increased 700 basis points to 28.6%, a company record.

Moving to Slide 9, our year-to-date free cash flow increased $134 million to $373 million as compared to $239 million in the prior year. These impressive free cash flow results were driven by our strong sales growth and profitability as well as execution on our working capital initiatives. Our working capital decreased to approximately 18% of sales, down from 21% of sales last year. Further, our trailing 12-month leverage ratio is now 1.1x. We ended the quarter in a favorable, very favorable liquidity position with $195 million of cash and $339 million available under our revolving credit facility, bringing our total liquidity to $534 million.

And finally, on Slide 10, we have our fiscal 2022 guidance. Based on our performance to-date, order activity, backlog and current market trends, we currently expect net sales to be in the range of $2.22 billion to $2.3 billion representing growth of 12% to 16% over this past year and adjusted EBITDA to be in the range of $635 million to $665 million representing growth of 12% to 17% over this past year. As we look to the fiscal 2022, we are confident in the demand environment across our end markets. In our largest domestic market, non-residential, forward-looking indicators are robust and our backlog of open orders are at the highest levels in recent memory. Our residential end market growth is also expected to remain strong, particularly in those key Southern Crescent states we are focused on, including Florida and Texas.

In addition, our agricultural market remains robust with strength in crop pricing, driving investments in land productivity through better field drainage. And finally, the international outlook is turning more favorable, driven by our business in Canada, which is our largest international market. Our Mexican business has stabilized, and we will continue to leverage our Mexican manufacturing assets to help service the strong demand coming from the U.S. Lastly, the exports business is expected to rebound as COVID-19 restrictions continued to ease. This strong demand outlook gives us confidence in our revenue guidance. We have also executed several price increases since our third quarter call across all of our end markets at both ADS and Infiltrator. To-date, our pricing actions are flowing through. And we will continue to closely monitor the situation to ensure we stay ahead of inflationary cost pressures.

On the cost side, we are seeing inflationary pressure in materials, labor and transportation, as well as some issues with labor availability. Within transportation, the third-party market availability is tight, and there is inflationary cost pressure on diesel, wages and common carrier rates. In this type of inflationary cost environment, we are also able to control our transportation costs better than most due to our large internal fleet. And we are working to leverage such to offset the rising costs we are seeing through payload efficiency, route planning and other programs to more efficiently serve our customers. While we expect EBITDA margins to be flat to slightly up this year, it is important to highlight that we expect the most pressure on our price-cost spreads to occur during the first half of our fiscal year. Bottom line, we believe our long-term growth and margin expansion ability remains intact despite the near-term inflationary cost environment, we will be dealing with this year.

Given our strong balance sheet and leverage position, strategic capital deployment remains one of our top priorities. We will continue to execute a balanced and disciplined capital deployment strategy, focusing on organic investments as our highest return, lowest risk option. In fiscal 2022, we plan to spend between $130 million and $150 million on capital expenditures to support growth, recycling, innovation, productivity and safety initiatives at both ADS and Infiltrator, basically doubling our commitment to CapEx year-over-year.

In addition to organic investments, we continue to actively explore M&A opportunities that are aligned with our strategic vision. We are extremely excited about the M&A opportunities we are pursuing, and see this as a key component of our capital deployment strategy in both the near-term and longer term. In addition to investing in the business, through deploying capital organically and through M&A, we today announced a 22% increase in our quarterly dividend as well as a $250 million increase in our share repurchase program. We previously had $42 million available under this program and the increase announced today brings the total authorization to $292 million.

With that, I will open the call for questions. Operator, please open the line.

[Operator]

[Operator Instructions] Your first question comes from the line of Mike Halloran with R. W. Baird.

[Mike Halloran, R. W. Baird]

Hey, good morning everyone. So let’s start on the pricing, the inflation side. So, at the end there, Scott, you mentioned a handful of price increases across all your product categories. How are you seeing that layer in as you look through the year? How should we think about price costs by quarter, probably a little tougher in the front half of the fiscal year, a little more balanced, maybe even slightly positive in the back? And how you are cumulatively thinking about what price cost looks like for the year?

[Scott Cottrill, Chief Financial Officer]

Yes, Michael, it’s Scott here. So, you are thinking about the right way. So, our revenue guidance range up 12% to 16%. Think about that as more pricing than volume is the way I would talk to that for the full year. The other part on the phasing, I think, is really important for folks to understand based on kind of what we are seeing – have seen over the last couple of months and recently. We look at the first half as being kind of that more narrow price-cost spread environment. We will stay in front of it on a dollar perspective. But as we talk margins, we see that as kind of the tightest period. And then when you get to the second half, then that obviously eases up and leads us to our guidance of flat to up 30 basis points from a margin perspective for the year. So, the first half will be the tightest part for us of our fiscal year.

[Mike Halloran, R. W. Baird]

And then the follow-up is, could you put that then in the context of how you think about margins over time here? It certainly felt like from Scott’s original prepared remarks that this is the new baseline that you think you can expand margins off of over time. Just help understand the levers as we sit here, even if inflation or the cost of the inputs remains at an elevated level?

[Scott Barbour, President and Chief Executive Officer]

Mike, this is Scott Barbour. And I think the way we are thinking and working this is, the game has changed a bit on us this year, with this really high inflation environment. So, it’s now about getting pricing, getting productivity, but mainly pricing to offset those kind of – that inflation. And it becomes a dollar gain, get enough dollars to offset that, we will try to get some SG&A leverage. And that will be the game and the dials that we work here until the kind of a rapid rise of inflation levels out or begins to go back the other way. And then over the long-term, the programs we have been working on around productivity, capital investment, operating the businesses better, are still intact. And they are still going on underneath all of this messiness of inflation. And then we will begin to be on this margin expansion again, once the environment, I would say, kind of returns to normal or we get all the right things in place. And we feel very confident about that. That’s also driving a lot of the capital spending that we are doing. And we spend a lot of our time and energy making sure we got the right resources to execute on that kind of expansion.

[Mike Halloran, R. W. Baird]

Thanks Scott. Thanks Scott. Thank you.

[Scott Barbour, President and Chief Executive Officer]

Alright. Thank you.

[Operator]

And your next question comes from the line of Matthew Bouley with Barclays.

[Matthew Bouley, Barclays]

Good morning. Congrats on the results. Thanks for taking the questions. I wanted to ask actually on that last point there, Scott. Just the CapEx and the big uptick this year, you guys have sort of day-lighted the past couple of quarters around potential growth investment to come and clearly coming to fruition here. Could you just outline a little more of the specifics around where you are investing? What of your product categories need additional capacity? And just maybe any elaboration around the amount of company you are adding in dollar terms or however you want to frame that? Thank you.

[Scott Cottrill, Chief Financial Officer]

Hey Matt, it’s Scott Cottrill here. Yes, I would say when you look at the two businesses right now, break it down between ADS and Infiltrator. We have talked about Infiltrator kind of in that reinvestment cycle, if you will, that they go through every 3 years to 5 years. I will start with demand. The demand that we are seeing across both businesses is significant. So as you look through the acceleration in investments, it’s the same front of that, right. It’s not that we are out of capacity or that we can’t handle the growth, is to make sure we can handle it efficiently and serve our customers as best we can and get our inventory health where it needs to be. So, a lot of what you see on the Infiltrator side is to support growth. By and large, that’s the bulk of what we are spending on that side. On the ADS side of the house, again, it’s still a big piece of the increase that we are seeing year-over-year is to support that demand that’s coming our way. Now we are doing it, but lead times are moving out on us, and we need to kind of continue to stay in front of it and better serve our customers. So, it’s capacity and to support that demand and that growth that’s coming our way. But I would say also on our side, and we have talked about it. We have got a lot of productivity initiatives that are in flight, right. Our excellence initiatives a lot of those are still early innings. And we got to invest in tooling and molds and so forth to get those assets where they need to be to be more efficient as we move product around the network or to start reducing the amount of moving around the network that our product does before it gets to the customer. So, you have got that. And then automation, we have talked about it, but that downstream automation, if you will, is key within our businesses. And again, you know our network, have 48 plants in the U.S., a lot of opportunity to get more efficient, make it a safer place for our employees. So, a lot of things that we are doing there. And again, we spent close to $80 million this past year, a big increase year-over-year. So, we are getting in front of it. And then the $150 million is not insignificant, but it is the best use and top priority of our capital deployment options, and we know that. So, a big effort there. And we are also investing in internal resources to make sure that we can deploy and accelerate that CapEx organically.

[Matthew Bouley, Barclays]

Great. That’s really helpful color there. Second one, I wanted to ask on non-res because, obviously, for the past two quarters here, I think your own non-res performance has been relatively decoupled from, I think, what a lot of us see is kind of the underlying non-res market. I’m curious what, if any, areas of your own business, do you think there was some negative impact from the sluggish market over the past year? Because the question is going forward as we think about non-residential indicators inflecting positively, are there still areas of your own business that have yet to sort of rebound with the rest of the non-res market? Thank you.

[Scott Barbour, President and Chief Executive Officer]

So this is Scott Barbour. And I would answer that more geographically than product line – lines because we certainly had geographies, the Northeast and Northwest are good examples of that, that we’re not robust at all in the nonresidential over the past 12 months. That said, they are rebounding pretty rapidly right now. So you’re getting that pent-up demand impact from those regions, which are big regions for the ADS piece of the business. We might have had one allied product line that grew a little less than the others because it was a little tougher for us to get in front of people in kind of a high-touch sales environment there. So we could see that in a couple of them. Now it’s rebounded here as the pent-up demand in non-residential has popped, and we’ve been able to get out and see people and do that high-touch again. But I believe we had some pockets. We definitely had some pockets, but not many, not many. It was a pretty good year.

[Operator]

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

[Garik Shmois, Loop Capital Markets]

Thank you. Just to piggyback on the non-res question. Just curious, just with respect to your observation that you’ve got record backlogs and it seems like the backlogs have increased. Is the backlog something that you started to see really accelerate in the fourth quarter or was it a function of being high coming into COVID? And then maybe you had a delay in servicing some projects or some regions? And then we’re just kind of seeing a catch-up so any color on the – how the backlog has been evolved would be helpful?

[Scott Barbour, President and Chief Executive Officer]

Scott Barbour, again, and our backlog did accelerate at both businesses over the past 3 months, both pretty robust. As Scott Cottrill said, our lead times have gone out a bit across our businesses because of that backlog increase, that rapid backlog increase. In certain regions, it’s pent-up demand, a catch-up. I would put the Northeast and Northwest in that category. I think in other areas that – like the Crescent, the Sunbelt, that kept going through the year. They are continuing to grow pretty rapidly. And I contributed to that backlog increase. And I think it’s all the same things you’ve been hearing. People move into the Sunbelt, people making the choices to live in different areas that more favorable to these micropolitans or suburbans and you get that kind of spread. We are seeing all those trends. And I think have been at the forefront of those. We are also seeing some catch-up in Texas, by the way, which has had a heck of a year. Hurricanes last fall, the winter Apocalips in February. It’s raining like heck down there in the last 2 days. So I mean, big COVID outbreak in Houston, which is a big market. So it’s trying to bounce back pretty good also. And when a place like Texas gets going, it runs pretty hard. So, all those factors are at play right now in kind of that acceleration of the backlog that you were hearing about and seeing in us.

[Garik Shmois, Loop Capital Markets]

Great. Thanks for that. My follow-up question is, I was hoping you could unpack some of the underlying assumptions behind your sales guidance a little bit more or whether it’s a little bit more granularity on price/mix or expectations by segment and end markets? And then also just around the seasonality. I think last year, sales were a little bit closer to 50-50 front half versus back half. And I think historically, you’ve had maybe about 55% or 57% sales in the front half of the year. So anything that we should be paying attention to as we model out the front half back half?

[Scott Barbour, President and Chief Executive Officer]

Yes. I think seasonality, Garik, will be about where it’s historically been. I wouldn’t think about any significantly different than that this year as you go into it. I think that might be getting too exact, if you will, if you go through it. I think on the revenue guidance, we’re not going to give it any more granularity than kind of where we’re at. Obviously, we will kind of as we go through the year, kind of revise that as we see kind of where all the pricing ends up and everything else. But based on where we have line of sight today, this is kind of where we’re at. That 12% to 16% up on the top line. Again, just think about it as more on that pricing side than on the volume side is kind of the best way to talk to it right now.

[Scott Cottrill, Chief Financial Officer]

Yes. I think, Garik, if you think about the seasonality and that kind of shift this year, the factors that we don’t think will take place. If you go back to Q3, remember, lots of the country kind of restricted from COVID as we got into our Q3, that opens up right, and that kind of phenomenon probably isn’t going to happen again. And then Q4 tends to be heavily reliant on weather, and it was pretty favorable this year.

[Scott Barbour, President and Chief Executive Officer]

It’s very favorable, yes.

[Scott Cottrill, Chief Financial Officer]

Who knows what’s going to happen next year, but from a weather standpoint in quarter.

[Garik Shmois, Loop Capital Markets]

Yes. No, makes sense. Thanks for the help. Best of luck.

[Scott Barbour, President and Chief Executive Officer]

Thanks.

[Operator]

[Operator Instructions] Your next question comes from the line of Josh Pokrzywinski from Morgan Stanley.

[Josh Pokrzywinski, Morgan Stanley]

Hi, good morning, guys.

[Scott Barbour, President and Chief Executive Officer]

Good morning.

[Josh Pokrzywinski, Morgan Stanley]

Just to dig in a little bit on price cost here, or I guess, kind of the commodity complex in general. Are you guys seeing anything on the availability side that has given you concern? I know that shortages are kind of the center square and bingo these days. Residents get called out from time to time. Anything that you guys would flag there on that front?

[Scott Barbour, President and Chief Executive Officer]

Yes and yes. We are – I think the best way to describe it, Josh, is in February and early March, probably was – our most impact. It gets better all the time. And I would say we’re down to managing very isolated, but real resin problems on occasion. It’s very material and supplier specific right now versus pervasive in February and through March. But essentially, the winter populates hit the Gulf, it took 4 to 6 weeks by the time those plants started back up, the transportation got cleared, and then we were kind of then puts us in the mode of managing bad stuff. And now as they try to catch up, and restock their inventory and supply chains, you end up managing what would be spot shortages, not pervasive things where you can’t run for 3 or 4 days. Now through that and kind of running on my answer here, we pivoted to running more recycled in February and March, so that we could keep production going, not always exclude the mix of products we wanted, but we thought that was the right thing to do because we would – could go back and adjust our production schedules. And we’re still doing some of that, but not near as much as we were in February. But I bring it up to high highlight this really nice advantage we have with these recycling operations we have, our visibility into that supply base of bails and recycled material. And it’s both at ADS and Infiltrator that this happens. So a big work item for us to keep our eye on that Sucker.

[Josh Pokrzywinski, Morgan Stanley]

Got it. And then just given that so much of the top line is sort of price-driven. Clearly, you guys have good pricing power. I understand a lot of goes in offsetting that even on a dollar basis. But to the extent that a lot of what you just mentioned, seen more supply-related than necessarily just demand-related. Presumably, at some point in the not-too-distant future, we get a little bit of a relief on the resin side, do you think you hold that price? Do you think you’d give it back on a sort of a dollar-for-dollar basis? Like how does that evolve on the other side? I would imagine you guys are able to retain most of it outside of maybe some particularly acute situations?

[Scott Barbour, President and Chief Executive Officer]

Yes, we will work to retain. We will definitely work to retain and thread the needle on continuing our market share gains and conversion from traditional materials to plastic materials at both Infiltrator and ADS. So we will – that’s how we will do it. And we have a good history of doing it that way and we will continue to kind of work it along that strategy.

[Josh Pokrzywinski, Morgan Stanley]

Great. Thanks for the color. That’s all guys.

[Scott Barbour, President and Chief Executive Officer]

Alright. Thank you.

[Operator]

At this time, I would like to turn the call back over to Chief Executive Officer, Scott Barbour, for closing remarks.

[Scott Barbour, President and Chief Executive Officer]

Alright. Thank you for your questions. We really appreciate them, and thank everyone for joining us today. We will continue to focus on our health and safety of employees as well as providing the essential storm water management and on-site septic wastewater solutions to our customers and the communities they serve. As we ramp up our fiscal 2022, we’re focused on production, to meet the strong demand across both the ADS and Infiltrator businesses. We will continue executing our strategies in these fast-growing states throughout the Southern Crescent of the U.S. as well as mitigating inflationary pressure through favorable pricing and productivity initiatives. Thank you again to all our employees for their hard work. And again, thanks, everyone, for joining the call today. Operator, that concludes our call.

[Operator]

Ladies and gentlemen, this concludes today’s conference call. Thank you for participating. You may now disconnect.