WMS - NYSE

Hello, everyone and welcome to ADS's Fourth Quarter and Fiscal Year 2023 Financial Results Call. And thank you for standing by. My name is Daisy, and I'll be coordinating your call today. [Operator Instructions] I would now like to turn the call over to your host, Mr. Mike Higgins, Vice President of Corporate Strategy and Investor Relations. Sir, you may begin.

Thank you. Good morning, everyone. Thank you for being with us here today. I have Scott Barbour, our President and CEO; and Scott Cottrill, our CFO, with me. 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 that, I'll turn the call over to Scott Barbour.

Thank you, Mike. And I appreciate everyone joining us on today's call. Fiscal 2023 was ADS's sixth consecutive year of record revenue and profitability. Net sales grew 11%, to $3.1 billion and adjusted EBITDA increased 34%, to $904 million, resulting in an adjusted EBITDA margin of 29.4%. In addition, net income per diluted share was $6.08. I'd like to point out that over the last six record-producing years, net sales and adjusted EBITDA have increased at a CAGR of 16% and 29%, respectively, as a result of ADS's strong business model and long-term strategies to drive profitable sales growth above the market. Both ADS and Infiltrator executed these strategies well in a dynamic macro-economic environment over the past 12 months. Full year results came in above our guidance range as we executed well to close out the fourth quarter and the year despite overlapping demand weakness in our core non-residential and residential end-markets. We had a very strong start to the year with demand, shipping rates and pricing all favorable. Beginning in September, demand in the residential market weakened shortly followed by weakness in the non-residential markets. In response, we made the necessary adjustments to our operations and plan and executed well against them. Long-term, we remain confident in the non-residential and residential end-markets, but we expect the slower pace to continue through this calendar year due to the higher interest rates, inflation on building material cost and tightening lending standards, all of which impact the pace of construction and the customer. Despite the short-term weakness in demand, the need for water management solutions remains highly relevant. We are actively engaging with communities that are improving standards for stormwater and on-site septic waste water management, staying true to our brand promise to protect and manage water, the world's most precious resource, safeguarding our environment and communities. We have a runway for long-term growth in both the stormwater and on-site septic waste water markets, due to the value proposition, solutions package, conversion to plastic from traditional materials and unique sustainability position of ADS in water management and recycling. As one of the largest plastic recyclers in North America, we remain committed to finding innovative ways to increase the use of recycled plastics, thereby improving the circularity of the plastics economy and giving us additional scale to manage cost and financial performance. Last October, we broke ground on a world-class engineering and technology center, to expand our efforts to innovate with both recycled and virgin plastics, develop new products and develop technologies for manufacturing operations. Importantly, we are being recognized for our impact, effort and value proposition, as companies continue to choose our products for water management in large-scale development projects. While there is weakness in our core markets, the agriculture, infrastructure, and on-site septic markets have a more favorable outlook. The agricultural economy remains healthy and landowners continue to invest in field drainage as a high-return investment to improve crop yields. We are pursuing growth in new geographies where agriculture drainage is less widely accepted. In addition, the agricultural market team is actively cultivating relationships with Universities, Farming Groups and contractors to better understand technologies and opportunities for growth on a very local scale. Within infrastructure, I'd like to highlight secular growth trends around the Infrastructure Investment and Jobs Act funds that will come into play later this year, as well as onshoring projects and the Texas Department of Transportation's approval for the use of thermoplastic pipe last November. We are actively bidding on projects in each of these areas and tracking opportunities to be specified on project plans. This is a great example of ADS's proven market-share model that works. As shown on Slides 5 and 6, we had an excellent fourth quarter from a profitability standpoint, adjusted EBITDA margin increased to a new fourth quarter record of 27.8%, 300 basis points above the prior year, despite a 9% decrease in revenue. Favorable pricing and material cost offset inflationary cost pressure, lower relative Infiltrator volume and lower fixed-cost absorption, from the production adjustments made over the last two quarters. Non-residential and residential construction activity was resilient in areas like the Southeast Atlantic Coast and Southern United States where we have focused resources over the last five years as a part of our key states sales strategy. The Northeast, Midwest and Western United States, remain challenged. Notably, revenue in the infrastructure market increased 6% in the fourth quarter and remained a bright spot throughout the year with year-over-year increases in each quarter. From a product standpoint, ADS's HP pipe, Nyloplast catch basins and water quality solutions, all grew double-digit year-over-year. In addition, sales from Infiltrator tanks and Delta active treatment systems also increased this quarter compared to last year. There's no doubt that the demand environment we are facing today is challenging. The strength of the seasonal uptick and order activity was not as strong as we would normally see. We are cautious about the impact from interest rate increases and the effect that local banks tightening credit standards will have on the commercial construction market, which is all reflected in our fiscal 2024 guidance issued today. In the agricultural market, the heavy snowfall in the Great Plains region prevented contractors from installing field drainage, compressing the spring selling season. The underlying fundamentals, however, remained healthy in the market and we expect to see growth in that business in the fall. On our last earnings call, we announced several actions to right size the business for the current demand environment. We completed three plant closures and reduced headcount in manufacturing and transportation. We also increased the fleet utilization and reduced the usage of third-party logistics services, which resulted in better sequential transportation costs in the fourth quarter. The actions we took on plant closures and headcount will largely benefit fiscal 2024. We have taken the appropriate steps to level-set production and inventory levels, and we will continue to assess our cost and network to take action if necessary. Scott Cottrill is going to get into the specifics on fiscal 2024 guidance momentarily, but you will see, we remain committed to the adjusted EBITDA margin range of 28% to 29%. We will continue to invest in capacity for growth regions and new products, productivity, maintenance and automation in the organic business, because of the significant long-term opportunity and the stormwater and on-site septic wastewater markets. A strong balance sheet in combination with a strong cash flow generation profile give us the ability to continue investing in the business, preparing for the upturn that we know will occur in our markets. Finally, Roy Moore the President of Infiltrator is retiring at the end of May. Roy's 35-year career at Infiltrator is full of innovation and products, material science and manufacturing technology. His vision and leadership of Infiltrator is remarkable, and provided us with a tremendous foundation to continue building upon. As part of a planned succession, Craig Taylor will be taking over Roy's position. Craig joined the business in February 2020 and he's been a significant contributor in his relatively short-time with us. On behalf of the whole organization I want to take Roy for his contributions and wish him the best in his retirement. With that, I'll turn it over to Scott.

Thanks, Scott. As shown on Slide 7, we generated $708 million of cash flow from operations in fiscal 2023, converting 78% of our adjusted EBITDA into cash. This is compared to $275 million in the prior year, an increase of $433 million. One of the most important attributes of ADS is our ability to generate significant cash flow, which allows us to fund our capital allocation priorities. Our trailing 12-month net debt to adjusted EBITDA ratio of 1.2 times, in addition to over $800 million in liquidity, gives us ample room to continue investing in the business at a high rate than -- higher rate than we have historically. Our investment initiatives are focused on growth in regions like Florida and the Southeast, and increasing investments in productivity, automation, as well as debottlenecking our recycling operations. We are also investing in a world-class engineering and technology center to increase our focus on material science, as well as accelerate product innovation as well as our manufacturing processes. In fiscal 2024, we expect capital expenditures to be between $200 million to $225 million as we invest in these initiatives, putting us on our front foot for when our core end-markets return to growth. In fiscal 2024, we will remain committed to our capital allocation priorities. Of in order, investing organically in the business, acquisitions, share repurchases and our quarterly dividend to shareholders. Importantly, today we announced a 17% increase in our annual dividend to $0.56 per share from $0.48 per share, in fiscal 2023. Moving to Slide 8, we present our fiscal 2024 guidance based on order activity, backlog and current market trends. We expect revenue to be in the range of $2.6 billion to $2.8 billion, in terms of phasing on a year-over-year basis, we expect revenue to be down 15% to 20%, in the first half of the year and flat-to-down 10% in the second half of the year. Adjusted EBITDA is expected to be in the range of $725 million to $825 million, resulting in adjusted EBITDA margin of between 27.9% to 29.4%, or flat-to-down 150 basis-points year-over-year. I'd now like to provide additional details on our expectations for next year. We expect normal seasonality during the year for revenue, with approximately 55% of expected revenue coming in the first half. We expect demand weakness in the non-residential and residential markets to continue with better end-market dynamics in the infrastructure, onshoring, agriculture, and active on-site septic businesses. We expect price mix materials to remain favorable year-over-year, driven by favorable material cost expectations. Over the last two fiscal years, price mix materials favorability has primarily been driven by our pricing actions. Manufacturing costs will be under pressure as demand softness will result in lower fixed-cost absorption. In addition, we continue to see inflationary cost pressures on labor and utility costs. Lastly, transportation is expected to be favorable, due to greater utilization of our fleet versus third-party carriers, as well as favorable trends in diesel and third-party logistic costs. Before turning the call back over to Scott, I'd like to point out that there are two slides in the appendix of today's presentation that I encourage you to look at. Based on market growth, inflation and the addition of the active onsite septic market, our total addressable market is now an estimated $15 billion. The details of which can be found on the slide. In addition, we provided a slide with details on the timing of commercial construction projects, giving context to when ADS products are involved in the project timeline. With that, I'll turn the call-back over to Scott.

Thanks, Scott. A couple of key items I want to highlight before we open it up for questions. First, and I know its top-of-mind, April results on a consolidated basis were marginally better than expected, against this guidance that we spoke to today. Second, as demonstrated in the guidance we issued today, we remain committed to the 28% to 29% adjusted EBITDA target through fiscal 2025. We will continue to manage our cost of production to meet these commitments, but importantly, we want to be able to service our customers as the upturn comes about. And we'll always keep that in mind. Last, there is still significant opportunity for both ADS and Infiltrator to increase share in our end markets, the proven market-share model gives us confidence in these increased capital investments we have planned for fiscal 2024. We will use this period of slower demand to invest in this capacity in important regions, some new products, automation, safety improvements and maintenance to ensure that when the market ramps up, we have good service and the right capacity to be the partner of choice in our markets. The ADS value proposition, solutions package, conversion strategy and unique sustainability position in water and recycling remain highly relevant and we're committed to being the leader in these sustainable water management solutions. So with that, let's open it up for questions.

Thank you. [Operator Instructions] Our first question today comes from Michael Halloran from Baird. Michael, please go ahead, your line is open.

Hey, good morning everyone.

Hey Michael.

And congrats to Roy as well. So a couple of things here. So, when you think about the upper end of the guidance range and the lower end of the guidance range. Could you just talk loosely to what that environment entails and I am not looking for something numeric, I am more thinking about what type of landscape we are in on the resi, non-resi side at the high-end and the low-end. And how do you think that compares to where the bottom might look like from an end-market perspective?

Okay. Roy is a pretty happy guy, Mike. I have to admit. And we had a nice send off with him and with our Board [indiscernible] evening. And we will miss him. So, I would say the upper end of the guidance, if I get your question correctly, what set of events would have to occur to get to that upper-end? And then what set of events would have to get occurred to get to that lower-end? And I think at the upper-end, we certainly have to see a quicker upturn in the demand environment, which is weak, we're probably in the worst part of the demand environment. Right now, as our markets weaknesses are overlapping between residential and non-residential. And I would say, to get to that upper end of the guidance would require a quicker upturn than the plan and a continued favorable price and material environment. Now, we're working the price really well. Right now, the material environment is pretty good, but if there were some extraordinary event that took it down. That would be getting us towards the upper end of the guidance, let's say. The lower end of the guidance clearly would be more non -- in particular non-residential weakness. If you ask me what keeps me up at night, it's the effect of tightening credit standards on local and regional banks, which are the lifeblood of those construction projects that were out there. It's kind of our meat and potatoes stuff. Now, the infrastructure, the onshoring that offset some of it, but not all of that meat and potatoes. So, the lower end of the guide would be governed by kind of the opposite effects. This worst non-residential market and then if there was some extraordinary event around materials that took them the wrong way. And -- or the pricing plan, we think we have a very good handle on the pricing plan. But thinking about those things we can't control, that would worry me on the lower end of that guidance.

That makes a lot of sense. When you think about the customer, the interactions and what they're saying. Are you sensing that a lot of -- there's just hesitance given some of these, the credit tightening standards? Is there a pent-up demand, anywhere in the market? And maybe the better way to ask the question is, also give some context on some of the pockets in the non-res space, where you're seeing a little bit more strength, where you're seeing a little bit more weakness in the market as we sit here?

I smiled, because some of our sales leadership has described as the demand is out there, there's just no financing for the demand. Particularly in the non-residential, there is hesitancy in some regions to move forward with projects, either because of increased kind of equity requirements around those real-estate projects, or worry about vacancy rates in that area. There's other -- things are pretty robust. We always talk about the Atlantic Coast, Southeast, Texas where we are in Central Ohio, very robust, but we do go to other places, particularly out west, not so robust much more hesitancy to pull the trigger. The Northeast, lot more hesitancy to pull the trigger on new projects. And that's where we see the most weakness.

Onshoring is been strong.

Onshoring has been strong, pursuing a lot of projects in the onshoring. Scott makes a good point. We've -- we're actually actively shipping to get some better battery and electric vehicle related, we're in pursuit of many projects on that, the business development platform that we developed to pursue residential homebuilders and the warehouses and the datacenters has been a perfect vehicle for us to plot this type of activity on. And as you all know there’s probably -- there's different engineering firms, sometimes different contractors, different relationships, but we've made that pivot over the last kind of six nine months, pretty well I think.

Great. Really appreciate the time everyone. Thank you.

All right. Thank you.

Thank you. Our next question today comes from Matthew Bouley from Barclays. Matthew, please go ahead, your line is open.

Good morning everyone. Thank you for taking the questions. So just a question on kind of the longer-term margins. Obviously, you're guiding to a margin in fiscal 2024 that is effectively in line with your 2025 Investor Day outlook, as you mentioned. So should we think that -- look, if you're able to do that type of margin in a year that's clearly pressured by volumes in the end-markets. I'm not necessarily looking for guidance, but how do you think about what the kind of structural profitability of this business can look like, assuming we have a recovery in those end markets? Thank you.

Okay, Matt, that's it's kind of the eternal question of what's the ultimate profitability level of the company. And we're pretty pleased that we got to the long-term -- the three-year Investor Day target in the first year, actually went a little bit past it, and we have a lot of confidence to be able to stay in that range. And as we look at kind of that next plan, there's probably another leg-up in that 150 basis-point type of range, where we can get in that next three year plan. So as you kind of lookout, we don't think that we've topped out in market share, or in our ability to drive increased profitability in the business. As you know, there's kind of three or four really big factors in that, price, material cost, the mix of Infiltrator and Allied products, that drive a lot of gross margin improvements in that. We've added to that the ability to -- it's not been easy, but in the pipe business, trying to get our arms around some of the conversion costs in that through the automation, couple of plant closures and things. So the four tools remain there price, mix, materials, all of that stuff. These other ones that we will add to the -- have been adding and will continue to add to the mix will be important tools. So I don't think we're done yet. I guess, that would be my summary.

The only thing I'd add to Scott's point, we talked about the fact we're still really investing in the business. So, when you look at it on the restructuring side, so that our cost structure is more reflective, that adds to when demand comes back to the ability to leverage the enterprise better. And then the investments we're making in debottlenecking our recycling and the engineering technology center, in growth in areas like Florida, in the Southeast, in productivity and automation and refurbing and tooling and maintenance that we need to get caught up. We've been talking about the last two years, we haven't been able -- we've been running everything we got, we haven't been able to take care of the equipment as best we want. And now, we're investing in that. So, I think that profitability part Scott mentioned, not only the growth piece, but that profitability piece lends itself really well to our margin story as we go forward.

We're not done yet.

We're not done yet.

Got it. Well said. Thank you for that. And then I guess, the second one, I wanted to ask on the residential side, obviously, you're seeing some signs of particularly in the new resi side, some early signs of improvement in construction activity. I guess the question is, obviously, you guys have direct exposure there on the land development and septic side. So, number one, I mean how is residential contemplated within your full year outlook? And number two, what would the kind of knock-on effects be to your non-residential business, if you do see this continuing trend? Thank you.

So, the -- we see all those same things that you just mentioned in land development, the onsite septic. I'd say, kind of right now, we're waiting for some of those things to develop and impact us. We hear the talk, we see some activity, but it hasn't really manifested itself in orders and demand for us. So it's kind of, Matt, I think, not this quarter, if it's going to happen, it's going to happen to the back end. I will -- our customers in some of these spaces are certainly feel better today than they did in November.

Yeah, Matt, this is Mike Higgins. I would agree with what Scott said. I think we will know more as -- when we get to September.

It is too early to call right now.

Much too early to call, kind of, call it, six-weeks into our fiscal year. I think Scott mentioned April results were marginally better than kind of the plan that we laid out in front of you today, but we'll know more as we go through the summer. Clearly, there's some good positive commentary around residential, right now, but again, kind of where we play in the space, it's going to take some time for that to work through, right?

And that would be beneficial to our non-res business. I mean, that would signal to us, Matt, that, let's say, we get to September and we feel much more positive about the residential, that would signal to us that the non-res will follow in four to six months for sure, and that would be a nice day at ADS.

Got it. All right. Well, thank you gentlemen and good luck, guys.

All right. Thank you.

Thanks, Matt.

Thank you. Our next question is from John Lovallo from UBS. John, please go ahead, your line is open.

Hey guys, good morning. Thank you for the questions. This is actually, Spencer Kaufman on for John. First one, I think you guys had mentioned seeing a pullback in material costs, as well as transportation. How sustainable do you think your current pricing is if those costs continue to come down? And what would need to happen for WMS to have some price [get backs] (ph)?

Yeah. I mean, Spencer the way we always talk to it is the fact that we hold on to most of our pricing that we've got even when resin comes off, and we're seeing resin come off [indiscernible] as well. It's because of the value prop, it’s because of the inflationary cost pressures we're still seeing on labor and utility costs and others. But again, you look at the pricing we've got over the last couple of years, we will hold onto the majority of that.

Okay, got it. And just on the CapEx. I mean, you guys talked about some of the projects that you're investing in this year, but maybe just longer-term, how should we think about CapEx sort of exiting the year? Is it fair to assume some type of normalization here? And really the reason I'm asking is because if we just look at your CapEx guide in your Investor Day outlook versus what is probably going to happen. I would imagine you guys are probably going to go a little bit higher than that. So I'm just curious how you guys are thinking about that moving forward?

Yeah. I would say, taking kind of $167 million of the CapEx this prior year, the $200 million to $225 million range that we're talking about here in fiscal 2024, I would say we're going to have at least another year or two of accelerated spend at these levels based on our current trajectory. There are just so many opportunities to invest in the business in North America water right now, and in our owned business, it's the highest-return lowest-risk use of our capital. And right now, based on the cash flow generation, that conversion ratio that we mentioned earlier of our cash flow from operations to adjusted EBITDA and our leverage, again, we ended last year fiscal 2023 at 1.2 times our guardrails, our target leverage is 1.5 times. And we want to put that balance sheet to use. So we will, and then if our forecast comes to be and we have excess cash to hit that kind of leverage target, then we'll return that cash to our shareholders through the share repurchase program that we've got, and continue to optimize our capital allocation, capital deployment that way. So we're very much committed to it. We very much know that being flexible and optimizing capital allocation and deployment priorities is a significant strategic lever that we have, and will fully plan on taking advantage of it here over the next couple of years.

Got it. Appreciate the color, Scott. Thanks. Good luck guys.

Thank you.

Thank you. Our next question is from Joe Ahlersmeyer from Deutsche Bank. Joe, please go ahead, your line is open.

Hey, good morning, everyone and nice finish to the year.

Thank you.

Thanks, Joe.

Yes. So you talked qualitatively now about the deflation. Would you mind maybe just dimensionalizing that a bit more, what's baked into your range today from what I would I guess call it gross materials number relative to gross price-mix number? Does that really only at this point in the year represent the favorability you see either on the balance sheet at this point or in your PO's for further resin purchases in the near term? And I'm just trying to understand if we kind of see spot prices hang out where they are today, is there additional favorability to the range that you provided for EBITDA?

Yes. So the way I would talk to it Joe is, the EBITDA bridge and waterfall chart we present in our management presentations quarterly and at the end-of-the-year. It does a good job of showing that price-cost bar. And if you look over the last couple of years, that bar has been green and we commit to that bar to be green as we move forward and as we've generated or performed historically, but the last couple of years, it's been no secret, it's been largely, if not, entirely driven by our pricing actions. And when you look at going forward into our 2024 guide, it's very much going to be a story of material cost deflation, to your point. We talked about holding onto the majority of the price increases we've gotten over the last two years and that is our commitment. That being said, we'll be very smart about that locally like we always are. We have competition like everybody does. So we'll be smart about that and look at that. We also have end-market, which is a little bit -- we don't have the conversion story in agriculture that we got to be sensitive to competition there, that's a little bit more of a commodity-based business. So those are things that will -- that are represented and reflected in our guide. And obviously, if things change during the year, then we'll pivot and adjust. Right now, as we've talked in the past, 70% plus of our quoting and pricing is project based. So, if we see things happen either in on the resin side, in our labor cost side, utility or energy cost side, any of those types of things that go in a way differently than what we expect. We've got the ability to pivot and make that happen and our sales guys do a great job of keeping that in front of them and making sure that we adjust accordingly.

Okay, great. Thanks for that color. And I hate to be the April guy, but if I could just dig in on the comment about it coming in better than sort of what you had outlooked for the first half down 15% to 20%, maybe just contextualize that comment a little more, whether it was driven, I guess more by non-res or res at this point? And maybe to that point on the 15% to 20%, does that sort of look the same res versus non-res? Or is non-res down more than 15% to 20% relative to res?

So the -- I would say that the outperformance was led by residential more than non-residential. The kind of sales revenue and total kind of came out about where we thought it would, in line with this guidance. But there was slightly better mix and slightly better price and material performance and transportation than we anticipated as we were putting together the plans for the month. The word we like to use, hey, we had a decent month, right? It's not a data point to extract for the whole year. It's -- had a good month. We knew people would want to know, we're slightly ahead of plan, May's looking okay. It's the, plan we're executing against that plan. What I'd like to kind of say is, it's early in the year. This uncertainty around non-residential in the lending standards is real and affects how people go and start construction projects. And as you all know and it's in the chart, we're at the front end of the construction process in the ADS business. So if this stuff gets -- waivers a little bit. I mean, that impacts us. And we just do not want to overestimate what that could be to us, and that's what we put in this guidance. Had a good start, you'd like to have a good start to the year and the quarter and that's what we did and we'll keep working it.

Understood. Obviously, appreciate the additional detail. Good luck on the quarter guys.

Thank you.

Thanks, Joe.

Thank you. [Operator Instructions] Our next question comes from Jeff Stevenson from Loop Capital. Jeff, please go ahead, your line is open.

Hey, thanks for taking my questions today. So infrastructure growth looks like it accelerated during the quarter, and wondering how much of that are share gains versus overall market growth? And then are you seeing any meaningful flow-through yet in IIJA funding or is that more of a back-half of the calendar year story?

So, Scott Barbour here, Jeff. I would say for us in infrastructure, the year we had where each quarter showed some improvement or each quarter showed some growth and improvement, it's probably minimal share gain. I think the real share gain will be coming in the future as we get specified on projects in Texas, as we get specified on projects in the East Coast or the Southeast, and in Florida, where we know our share gains. But probably minimal share gains last year in that performance, it was more just money beginning to flow from that IIJA. That said, our I wouldn't call IIJA funds flow to date, what does that been two years now since that was approved probably?

Roughly.

I wouldn't say all of it has been flowing in our kind of direction yet, a lot of that money is our guys are out in the field. It's been on repair and replaced, asphalts, bridges, services, design. So the capacity adds of roads and highways, which is really where we play is I think yet to come in that's in those spending packages.

Yes, Jeff. Mike Higgins. Again, just kind of reiterate what Scott said. Go back, I think the growth really has been over the past year in kind of our traditional states where we have much more mature approvals and activity was pretty good there. The Texas thing is starting to ramp. We're seeing pretty good success there, but real early not material amounts of sales. What the feedback we get from our guys in the fields and our teams is very close to the infrastructure market is just what Scott said, probably about 50% or so of the funds that has been kind of out there have really gone to repairing and reconstruction work which can be mobilized on pretty quickly. So that's repaving of roads, maintenance, et cetera, like that. The stuff where we will play, new construction, capacity expansion for transportation is really still on the come. And kind of the best knowledge now is, that stuff you'll start to see kind of release and flow in through the back-half of the year.

Back half over the next year.

Yes. I mean, we knew that this is a multi-year program. I don't think you're going to see, at least for us, you won't see one big spike in volume or activity. We'll look back on this four or five years from now and we'll say, hey, our share and our volume of what we're selling is some decent amount better than where we are today.

Very helpful color. And then my second question is just [Multiple Speakers]. Sure.

Could you repeat your question, I'm sorry. I'll add my thing in if repeat your question. I apologize.

Yes. No worries. Just on kind of how you view inventories right now, and is the destocking over?

Yes, destocking is over. No doubt about that. And we -- it primarily occurred in Infiltrator, it exclusively occurred really in Infiltrator. We've worked through that, we talk a lot about that would Roy, Craig, and the team and we feel very confident that's kind of done. And their pace of order intake and ship is right back to where it was pre-pandemic. It's a pretty quick turnaround business. And what I was going to add, I apologize for like tacking something onto Mike's thing, I think the most important thing is that about the kind of that multi-year program on infrastructure is that, we've made the investment organizationally in sales talent, in pursuit to make that happen. We're not waiting for all those -- the exact right time when the bid package comes out. Starting two years ago, or plus two years ago when we did some reorganization stuff and knew that public was a big place where we could gain share. Before the IIJA was even approved we knew that was a share gain thing, we started making those investments in sales talent and business development talent, and those guys are doing a very nice job. We know a ton more about those states and those markets than we did 2.5 years ago. We're really proud of what Bob Klein and that team are doing and Jon Sickels. That helped drive the Texas approval, all those efforts. So we have the capability and scale to go make those investments 2.5 years ago. That does take some time to go and pay off. We understand that about our business and when we talk about the resiliency of our business, that’s one of the things that I always mean is, we have that size and scale to make long-term investments in organization and people, because it's a long-cycle business. And we're able to go and do that. And I don't think -- I think that's really different about us, versus many of our competitors that I see in this business. So I just took a little time there to really -- that's the important part of this whole thing I think.

Great, thank you. Thank you.

Thank you. Our next question is from Bryan Blair from Oppenheimer. Brian, please go ahead, your line is open.

Thank you. Good morning, everyone.

Good morning.

Good morning.

To further frame your [stat] (ph) of going into fiscal 2024/ I apologize, I missed this detail. How is your backlog and order run-rate look relative to pre-pandemic levels?

Okay. So I would -- let's take backlogs first. This is Scott Barbour, Bryan welcome. Backlog and backlog behavior and let's just take Infiltrator as an example, is more reflective of pre-pandemic, where we would have, what, $7 million, $8 million through -- two or three days where the backlog in Infiltrator and it's a very fast cycle business, you get an order, it ships out within a day -- one to three days. The ADS behavior is a little different, it's more of a 30 day to 60 day maturity of that backlog and it is now kind of down to levels that were pre-pandemic, think of them as 2019 type of levels. Which again tells us that we've got any overstocking flushed out of the channel, it kind of tells us back to we've absorbed all the hits on that and it looks at the ADS side and says, well, there were bubble in some areas, we kind of thought that, we're back to these kind of pre-pandemic levels in many areas, somewhat below them in some areas, in some regions of the country. As you know, it's a very regional business. And you have to look at it in that way.

Book-to-bill staying above one.

The book-to-bill is above one. It's just -- the demand is down over those kind of bubble periods I believe.

I think at the peak on the ADS business, we were tracking kind of 75 days to 90 days of sales and backlog, which is extremely high. And now we're closer to tracking kind of roughly one month of sales or a little bit above that in the backlog. So as Scott mentioned, that shows us that there was a lot of demand that came at us there was difficulty in meeting the supply-chain, being able to deliver that on-time, because you know you're outstripping your capacity and that's kind of worked through, and we're now at a level where we’re much more accustomed to…

I'd say that's been the case since January.

Yes.

I think the November -- clearly October, November, December, there were adjustments going on in our markets and we were making adjustments also, that really started in September in residential, hard and then it began in non-res early November-December. Since those adjustments, January, February, March, April had been very customary types of behavior in the shipment behavior.

And I think the other part of your question is as far as order trends. I would go back to the order kind of activity that we're seeing matches up well with the guidance that we've issued today.

Understood. Very helpful detail. And following up on infrastructure and your teams multi-year runway there. Are there any other metrics you can offer to help us think of the scale of that opportunity overall? Anything on the bidding pipeline or project funnel would be very helpful.

Yes, we haven't really detailed kind of the incremental impact to that. I mean, what I would caution people on is, you're talking very large numbers. There is are a lot of kinds of -- a lot of projects and types of work in that. We're really going to play in kind of the roads and highways and streets. And so, you've got to kind of look at what is that and then we -- our product is typically on a standard highway construction or street construction. Let's just call it rough order of magnitude somewhere of kind of 1% to 3% of the project value. So that will give you an idea of the kind of the -- what's the real opportunity for us, right?

Very helpful. Thanks again.

Thank you.

Thank you. This is all the questions we have today. So I'd like to hand it back to the management team for any closing remarks.

All right. We really appreciate the participation in today's call and the questions, very good questions and we're glad to answer them. We look forward to talking to several of you later today and over the next couple of days. And have a good day and a good weekend. Thank you.