Advanced Drainage : Annual Report Fiscal Year 2021

Fiscal Year 2021

Annual Report

Drainage Systems, Inc.

www.adspipe.com

A Letter from our CEO

Dear Fellow Shareholders,

Advanced Drainage Systems achieved another year of record financial performance in Fiscal 2021. When confronted with a challenging operating environment, our employees adapted well to the new health and safety measures we implemented and remained focused on executing the plan. This enabled us to not only exceed guidance for the year, but also to surpass the financial targets set at our November 2018 Investor Day.

The accomplishments during the past year, combined with the proven growth strategies at both ADS and Infiltrator, give me confidence that the best years are yet to come.

Emerging Stronger than Before

We leveraged the period of COVID-19 as an opportunity to rethink certain processes and ways to do business. We developed better strategies to continue delivering to and serving our customers in a safe manner, organizing work differently to be productive yet socially distant. In the face of market uncertainty, we maintained a strong footing. Importantly, the lessons we learned this past year made us stronger and will continue to serve us well going forward.

Fiscal 2021 Results

We ended Fiscal 2021 with $1.98 billion in revenue and $567 million of Adjusted EBITDA, up 18.5% and 56.7% year-over-year, respectively. Our growth was primarily driven by the continued success of our material conversion and water management solutions strategies in a favorable demand environment. From a profitability perspective, our Adjusted EBITDA margin expanded by 700 basis points to 28.6%, driven by strong sales growth, favorable pricing and material costs, as well as contributions from our operational productivity initiatives and full year synergy program impact from the Infiltrator acquisition.

Our focus on expanding in key states where construction growth remained active proved successful. Approximately 75% of the ADS Legacy business'

domestic top-line growth originated from key states, including those along the lower crescent of the United States. We took advantage of attractive growth in the horizontal non-residential and residential construction markets, to which ADS is favorably exposed. Infiltrator Water Technologies continued to grow due to their strong presence in the residential onsite-septic market. Infiltrator remains highly relevant in the residential market due to their product offerings, distribution relationships and geographic footprint. The ADS agriculture business also outperformed the market through customer service orientation, planning initiatives, new products and execution.

Realizing our Mission, Vision and Values

Over the last year, we modernized the ADS brand to better reflect our position as the premier water management solutions provider. The resulting update to the vision and mission will serve as ADS' guide going forward. This brand modernization effort is focused on values that provide a foundational formula for success: People + Process = Performance.

We added new leadership positions to drive the business forward, hiring talented senior leaders in two critical areas - product management and engineer- ing, as well as manufacturing technology and capital

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deployment. These new leaders will drive innovation, new product development, continuous improvement and capital investment to further drive our manufacturing excellence.

We also continued to elevate the visibility of our Di- versity, Equity & Inclusion and Sustainability efforts, both of which are germane to our story, In Fiscal 2021, we welcomed senior leaders in these areas and continued to advance our sustainability goals. In this report, we highlight the significant progress we made on some of our sustainability initiatives, including

a 6% reduction in our greenhouse gas emissions intensity, decreases in both scrap rate and machine downtime rate, and hiring more diverse candidates throughout our organization. We look forward to sharing more information on this front when we release our 2021 Sustainability Report later this year.

Building Shareholder Value

Growth, coupled with margin expansion initiatives and the Infiltrator acquisition, resulted in over 300% total shareholder return over the three years ending March 31, 2021 - significantly exceeding the total market return over the same period. Above market growth, prudent financial discipline and the strategic deployment of capital are significant contributors to our value creation story, and we will continue to focus on these aspects to build shareholder value going forward.

Our balanced approach to capital deployment starts with organically investing in the growth at both ADS and Infiltrator, where investments are needed to support future capacity needs. This also includes improvements in safety, four-wall manufacturing and our logistics and fleet. Beyond organic investments in the business, we will continue to work our disciplined acquisition strategy, paying our increased quarterly dividend and evaluating share repurchases under our recently increased authorization.

Looking Ahead

As we look ahead to Fiscal 2022, we anticipate underlying customer demand to remain favorable, with ADS and Infiltrator well positioned to capitalize on

future growth opportunities. We will build success in Fiscal 2022 through close execution of production, labor and material resources, as well as execution on capital deployment priorities. Building upon the success of the three-year targets we set at our 2018 Investor Day, we will provide updated targets later this year at the next Investor Day in November.

On behalf of the entire ADS leadership team, I would like to thank our employees for their hard work and unwavering commitment to operational excellence in the face of the unique circumstances of the past year, and we look forward to another strong year for ADS in Fiscal 2022.

Sincerely,

D. Scott Barbour

President and CEO

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A Letter from our Chairman

Dear Fellow Shareholders,

On behalf of the board, I would like to thank ADS' employees for their efforts and commitment to customer service in the face of the COVID-19 pandemic. The management team quickly established enhanced health and safety protocols to keep our employees and our customers safe while ADS continued to operate as an essential business, resulting in the strong results reported for Fiscal 2021.

The strong financial performance provides the flexibility to invest in the growth of both the ADS and Infiltrator businesses. COVID-19 posed a stress test for our business continuity abilities, and we are stronger for it. The Board continues to work alongside the management team to strategically deploy capital, evaluate and execute strategic acquisitions, and ultimately drive shareholder returns. Importantly, we increased our dividend by 8¢ to $0.44 per share annually, and the Board approved a $250 million increase in the existing stock repurchase program. Management is now authorized to repurchase up to $292 million in shares of ADS' common stock, inclusive of the $42 million previously available for repurchase under the program.

The Board continues to focus on adding experienced, diverse and independent directors as evidenced by the addition of Anesa Chaibi at the last annual shareholder meeting. Anesa brings more than 30 years of leadership experience across several busines functions as our 11th member of the board, and our abilities are enhanced by her presence. The board is also proposing that shareholders approve a new director, Anil Seetharam, at the July 2021 annual shareholder meeting. Anil has broad financial expertise with public companies in capital markets, investor relations and acquisitions as well as driving sustainability programs as a Managing Director at Stockbridge Investments. The capabilities of the board are strengthened with these two leaders.

A year ago, the Board announced material changes to strengthen ADS' governance and corporate responsibility efforts. Proposals to declassify the Board

and eliminate the supermajority vote requirement for charter and bylaw changes were approved at the July 2020 annual shareholder meeting. Further, the Environmental, Social and Governance (ESG) subcommittee of the Board, led by Michael Coleman, was established. The sub-committee provides strategic counsel and oversight as ADS builds and refines its ESG program. Over the course of the year, the subcommittee engaged with ADS' management to build a company more focused and execution oriented on sustainability performance metrics. We are confident that we will continue making progress on our ESG initiatives going forward, as evidenced by the important resources added around Sustainability and Diversity, Equity and Inclusion in Fiscal 2021.

During the year, the Company also moved forward with inaugural funding for The ADS Foundation, established to continue ADS' support for local community efforts and programs that enhance the companies' water management and recycling efforts. We look forward to sharing more information about our ESG initiatives in the upcoming sustainability report for Fiscal 2021, released later this year.

We will continue working with ADS' management team to drive the business forward, developing our corporate responsibility programs, and generating value for our shareholders.

C. Robert Kidder

Chairman of the Board of Directors

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Our Vision

Advancing quality of life through sustainable solutions to water management challenges.

Our Mission

Provide clean water management solutions to communities and deliver unparalleled service to our customers.

Company Highlights

$2 billion	510 million
FY21 Revenue	pounds

of plastic recycled in FY21

$4 million	5,000
spent on	Total number
Environmental, Health	of Employees
and Safety Projects

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