Participants

Michael Higgins; VP of Corporate Strategy & Investor Relations; Advanced Drainage Systems Inc

D. Scott Barbour; President, Chief Executive Officer, Director; Advanced Drainage Systems Inc

Scott Cottrill; Chief Financial Officer, Executive Vice President, Secretary; Advanced Drainage Systems Inc

Matthew Bouley; Analyst; Barclays Bank PLC

Bryan Blair; Analyst; Oppenheimer & Co. Inc.

Mike Halloran; Analyst; Robert W. Baird & Co. Inc.

John Lovallo; Analyst; UBS Securities LLC

Garik Shmois; Analyst; Loop Capital Markets LLC

David Tarantino; Analyst; KeyBanc Capital Markets

Trey Grooms; Analyst; Stephens Inc.

Ryan Connors; Analyst; Northcoast Research Partners LLC

Presentation

Operator

Good morning, ladies and gentlemen, and welcome to Advanced Drainage Systems third quarter of fiscal year 2025 results conference call. My name is Gail, and I'm your conference operator today. (Operator Instructions)
I would now like to turn the presentation over to your host for today's call, Michael Higgins, Vice President of Investor Relations and Corporate Strategy. Sir, you may begin.

Michael Higgins

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.

D. Scott Barbour

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' overall use of recycled plastic and 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 the 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 US. Orenco contributed $25 million of sales in the period, slightly ahead of expectations.
Sales in the infrastructure markets 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 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 to 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 trend shown on slide 5 that these large-scale storm events are increasing in frequency over time. In 2024, the National Oceanic and Amospheric 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 our 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 showed 60% of Americans are concerned about the stormwater infrastructure in their communities, a notable increase from 51% in 2023.
In addition, nearly two-third 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 concern is 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 US, 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 and 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' 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 90,000 gallons of a 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 give 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 7, we highlight three of Orenco product categories where we are most excited about. The AdvanTex, advanced treatment systems were complementary to the Infiltrator products and increase our exposure to commercial systems as well as residential systems where Infiltrator is already used today. There is 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 in the Controls business are incremental due 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're very excited about bringing Orenco to the Infiltrator business 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' 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 will discuss our financial results.

Scott Cottrill

Thanks, Scott. The third quarter adjusted EBITDA decreased 6% year-over-year to $191 million. Favorable volume in the period was offset by unfavorable 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 cost 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 9, 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 1 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.

Question and Answer Session

Operator

(Operator Instructions)
Matthew Bouley, Barclays.

Matthew Bouley

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.

Scott Cottrill

Yeah, 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 in 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 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

Okay. And then I guess you just touched on price and cost. So I'll let someone else ask on that in more detail. So I'll ask on the nonresidential 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?

Michael Higgins

Mike Higgins. I would say all of those things you mentioned, we feel are part of that, right? There's clearly -- we think our conversion story remains strong, is intact. And then you guys have heard us talk a lot about our focus geographically in the South and the Southeast. And we're seeing good activity there, and we're well positioned to take advantage of that opportunity. And those markets also, too, allow the largest opportunity for share gain. They tend to be less mature than some of our more mature markets in the Midwest and the Northeast.

D. Scott Barbour

Matt, Scott Barbour here. The only thing I would add to that is the Allied Products piece. Came back a bit over the last quarter, leaning in very hard on Allied Products and sales initiatives and programs around that. The new products there have been a nice piece of that, particularly in the water quality, I mentioned that biofiltration product. We're also launching a great new separator product here in the next weeks. So a big focus on us -- from us on Allied Products, that's non-residential primarily. That's part of this story in addition to the geographic.

Operator

Bryan Blair, Oppenheimer.

Bryan Blair

I was offered the opportunity to dig in more on price/costs. I'm going to take it. The spread narrowed a bit in fiscal Q3, you're saying that pricing was stable again sequentially. Input costs have become a little more accommodative. Within the Q4 guide, are we -- is it fair to assume that you're approaching neutral price/cost?

Scott Cottrill

No. Again, that -- when you're talking year-over-year, you're going to see a little bit of continuation of the trends 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 costs. 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

Okay. Understood. And that does provide kind of a bit of a segue to fiscal '26 discussion. 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, looking across non-res, resi, infrastructure, construction markets, along with ag and maybe overlay the potential pricing upside looking to the new year?

Michael Higgins

Yeah. 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 -- sorry, on the commentary to lead off this 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 nonresidential, 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 Southeast, Texas, places like that remain pretty good, and it's kind of pockets of strength, pockets of weaknesses 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 -- geopolitical --

D. Scott Barbour

And natural things that are happening --

Michael Higgins

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

D. Scott Barbour

Yeah. 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, the -- just -- all that stuff is 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 think that we'll work our way through that.

Operator

Mike Halloran, Baird.

Mike Halloran

Just to simplify things a little bit, when you take a step back, acknowledging the weather headwinds in some of those things you just referenced, has much changed with the customer conversations? Or how are you 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?

D. Scott Barbour

Mike, this is Scott Barbour. My view in how these customers are talking has not changed over the last -- since last quarter. And I think they all, across the country, remained a bit unsettled on exactly directionally and pace of direction. And things are different around different parts of the country, like we've been saying, but no one is jumping up and down that it's going to be high up into the right. For their -- these guys, they're thinking three, six months out. At this time of the year, they might be looking at bigger projects that might come up this year, but most of our kind of thinking three to six months.

Mike Halloran

That helps. And then just kind of a broader question on how you're thinking about the competitive and pricing the landscape. So stable pricing seems to be the theme for what, nine, 12 months now on a sequential basis. What are you seeing from competitors out there? Any change in the competitive dynamics? Obviously, things are a little choppier, competition is a little higher. It doesn't seem that different versus history. But I'd be curious if you're seeing that same -- see that same thought process?

D. Scott Barbour

So Scott Barbour, again. And I would say that very steady behavior, no new behavior going on seven, eight, nine months now. We continue to make decisions around pricing as our competitors do to try to achieve very local objectives. I want this job. I want to get in with this contractor. I want to grow with this particular distributor. And that behavior by both -- all of us, I think, has been very consistent going on seven, eight, nine months right now. And I think that's reflective in what you see in our comments and our bridges in our -- any way you want to calculate it kind of on pricing.

Operator

John Lovallo, UBS.

John Lovallo

Maybe I'll just focus a couple on the outlook. 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?

D. Scott Barbour

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

Scott Cottrill

I think, John, as you look at it, part of it is kind of what we've seen. We've talked about price/cost a lot. Manufacturing costs, 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 in inventory and what's going to be coming off. And again, most of it, we talked 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 margin. 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 will 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

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

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

Garik Shmois, Loop Capital Markets.

Garik Shmois

Just wanted to follow up on the manufacturing and transportation line. It's pretty much in parity this quarter, but I think that's coming off of 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?

Scott Cottrill

Again, we continue to see on the transportation side, it's efficiency is not only on our third-party sales, but it's also our interplant. And it's another -- it's a fancy way of saying the cost that it -- we incurred to move pipe around the network. So again, we put that on the balance sheet. That's part of our inventory book cost. It's visibility there. So again, continued efficiency as we look through that.
And then as well, we've gotten more efficient in our network, in our operations. You heard me talk about consolidating one of our pipe manufacturing plants and two of our distribution centers. So we're continuing looking at how we optimize it and get more efficient. And we also talked about how we're using the balance sheet and the investments that the management team and the Board has made those investments in efficiency and productivity, those are items that we see as well that are all embedded in the performance you saw in the third quarter.

Garik Shmois

Okay. 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?

Scott Cottrill

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.

Operator

David Tarantino, KeyBanc Capital Markets.

David Tarantino

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

Yeah. 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 improves, and that's in that guidance.

David Tarantino

Okay. Great. And then maybe just on infrastructure, could you give us more color around the declines here? Is it mostly just timing? I know we kind of have a renewed focus here. So -- and then maybe just your thoughts on if there's any risk around the stimulus with the new administration?

D. Scott Barbour

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 and 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'll 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 tech airport. I think there were 33 or 35 active airport projects a year ago. So that money, FAA-controlled, but more federally controlled than kind of money that flew -- that flows to the states. I mean a lot of that came out pretty quickly, and there was a benefit in that. Those can be lumpy, the airport jobs. But the road and highway stuff, we think it will be pretty consistent over the next couple of years. So I don't think we're really alarmed that, that down drafted a bit right now. we still have a pretty good effort at building backlog and jobs in that segment.

Michael Higgins

And I think when you look at the quarter performance, as we've said, we tend to 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 as 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.

Operator

Trey Grooms, Stephens.

Trey Grooms

So I guess first one, most of the questions have been asked. But I guess on the margin ramp here for Orenco, that's one I wanted to touch on, if you could. Now that you've kind of had the ownership here for a bit, you had talked about on the last call, profitability was kind of in the mid-teens. Any update there that you could give us and how that's progressing?

D. Scott Barbour

So Scott Barbour here, Trey. And we were out there earlier this quarter. We spent a week out on the West Coast. We were at Orenco for a day, 1.5 days. And a great visit the things that we thought about the business and its potential are certainly there, as Craig Taylor and his team have spent a lot of time out there over the last quarter.
So yes, we believe there's still the potential to move from the mid-teens up above 20%. We -- that's going to take a while to happen. If that doesn't not happen in one quarter, I think it's great that we're hitting our forecast, actually exceeding it a bit in the third quarter. Our forecast is by a little bit. We run a very nice execution cadence with them, the team out there in Oregon. And the things that we're doing in the market are well endorsed by our distribution and our customers.
So I think that's all kind of pointing towards the way we thought it would. It's not going to happen in one year or six months, but this will be a slow build over time. Not that slow, but it will be a build over time, and I think we'll really like the results. We said it and we'll talk about this a lot at our Investor Day. But between the organic investments in new products for this advanced treatment segment done at Infiltrator, and the strength of this Orenco business, we combine those two things and we really, I think, got a great start in that strategy that we've been working on now for -- I think our third full year kind of implementing this. So that's pretty exciting for us, and we'll talk about it a lot in June at the Investor Day.

Trey Grooms

Looking forward to the Analyst Day.

D. Scott Barbour

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

Operator

Ryan Connors, Northcoast Research Partners.

Ryan Connors

I wanted to kind of -- I'm sorry, to beat the drum on the price side, but I wanted to revisit that a little bit. It's kind of where we're getting the most questions. And you mentioned how you price to achieve very local objectives. So you have price flat sequentially for the company as a whole, but what kind of range of variability is there around that in the local markets? Are they all kind of hugging that line, that flat line or up 1%, 2%? Or is there more volatility and there are some markets that are really, really good and some that are a little tougher?

D. Scott Barbour

This is Scott Barbour, Ryan. There are always some markets that are tougher than others. And those can be certainly geographic. It might be between the north part of the state, in the south part of the state, wildly different behavior. I would say while there can be a lot of variability there, as we work through the year, that variability has kind of decreased. And what I mean by that is the more difficult markets continue to be the more difficult. The other markets continue to be the other markets.
But we're in a range there. It's not a lot of variability within that range of a market today, if that is helpful. And we're not seeing kind of wild swings out of left field that we got to go react to every day. Those always occur, but they're not like they were earlier in the year.

Ryan Connors

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?

D. Scott Barbour

Well, I don't think there are any investments announced by either us or our competitors that are unanticipated at this point. We think we know we're all -- we think we have a very good idea of what regional capacity would look like. We make plans around being competitive according to what we see in our overall environment, and I think what we have a very good handle on what those pace and production volume of those investments are going to be. And we plan accordingly as we think about our future plans around the cost competitive, having the right capacities what those pricing levels are, what are the different competitive advantages that we might have in terms of service or tools.
We got a wide value proposition at ADS. It's just not the product line, the availability and the trucks. It's all the services and investments we've made behind that, and they're significant. So we put that whole thing on the table as we're competing out there.

Operator

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

D. Scott Barbour

All right. Thank you very much, and we appreciate the quality of the questions and insights from everyone and the time spent not only on today's call, but your preparation and your modeling and you reaching out to us.
So I think we'll have probably a few follow-up calls today, but we are -- I think, we look at the quarter and after having to make some adjustments, we were on plan. It is a bit of a wide range for the guidance. But this is a highly variable quarter for us in terms of demand because of the weather, in particular, and how that can kind of play out. So we're playing through all that and continue to operate pretty well.
I think the year the Infiltrator business had has been a fantastic year. We've made a lot of improvements and made a lot of progress with the capital investments made in the ADS business. We'll show a lot of that at the Investor Day that's going on from that, and we look forward to that as well as getting together with you guys again in May.
So that's it. We'll wrap up, and we'll talk to you later. Bye-bye.

Operator

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