Advanced Drainage Systems, Inc. (WMS) Earnings Call Transcript & Summary

We should probably give it just a second or 2 as we roll up on 8:35. Again, we really appreciate everyone making the effort to come down today. Once we get started, I'll introduce our team. I think there's a picture chart there with Lisa at the front, if you need that to kind of identify all of us. We brought a big team today, lots of presenters, but we're proud of what we've been doing over the last several years and really wanted to -- you all to see who's executing on that. All right, I guess it's 8:35 Apple time. So thank you for coming again today to the New York Stock Exchange. We've probably got 35, 40 people here in the room and another 100 people that are attending virtually. So we, again, appreciate your attendance and participation in this, our second ADS Investor Conference. We were -- did this in November of 2018. And through the pandemic and different things, we just kind of landed on doing this as a good time, a good inflection point for us again. We believe that we have a great story to tell, and we're going to tell that story to you today and kind of the key themes that we work on, the key pillars of how we execute in this business. Before we get started, I want to kind of introduce our team that is here. I'm Scott Barbour, I've been here 4.5 years as the President and CEO. Scott Cottrill, our CFO, is sitting beside me today. Darin Harvey, our Chief of Supply Chain; and Pat Coyle, who runs our Logistics and Supply Chain piece, will be speaking today. Brian King, who will do the sustainability pitch today and heads up our Product Marketing at ADS. Bob Klein, in the back, next to Bryan Coppes from Infiltrator, the Chief Engineer for Infiltrator. Bob Klein runs our Agriculture business, our Canadian business, which are highly aligned because of a big agriculture content in Canada, and then our initiative into our public space where we are planning on big share gains. Roy Moore, the President of Infiltrator. Kevin Talley, where is Kevin? Kevin is in the back, all the Ohio guys are trying to stay in the back. Mike Huebert, Senior VP of Sales. He's the one that's been running this big initiative that we've done over this year, particularly around these pricing. Tom Waun. Tom is in the back also. He has our International piece and then runs up our Engineering. Ron Brochu, that you will hear from today. Ron's here, who heads up VP -- he's the VP of Manufacturing for Infiltrator, based down in Kentucky. Dean Bruno, our Treasurer, and also heads up our business development efforts. Bryan Coppes, which I introduced before, but he's worth introducing twice, that heads up engineering at Infiltrator. Pat, I introduced. Craig Taylor. We cannot forget Craig, the VP of Finance at Infiltrator, joined us about -- during the pandemic, 2 years ago, almost exactly; and Carl Thompson. Carl's up here with us. He'll be presenting today. He's the Vice President of Sales and the General Manager of the Delta business unit at Infiltrator. Mike Higgins, you all know, strategic -- the VP of Strategic -- Strategy and Investor Relations. Allison Justice, who is also in our Investor Relations; and then Lisa Hallam, who you all met there at the -- you probably know Lisa and Allison better than me, many of you do. But I wanted to introduce our team. We did bring a big team, but they're doing a nice job. It's been a real roller coaster since 2018 when we were last together, and this team has come together and executed well as I think you'll see. All right. Here's what we'll talk about today. I'll go through a brief introduction and overview. Brian has a nice piece on our sustainability. We've really repositioned ourselves significantly. What was kind of something just we knew it was there and talked about, I think we've grabbed it and made it a part of how we communicate about ourselves and how we do our business. Then a deep dive, I promised you all, many of you, a deep dive on Infiltrator, and Roy and Carl and Ron will take you through that. We can't say enough about the impact that this company has had on ADS overall and vice versa. And we're very excited that they're here today to share that. I will do -- we'll take a break, and then we'll do a case study on agriculture. Again, something that I talked about with many of you over my first couple of years here about what to do with our agriculture business and what the heck was going on. And we're very proud of how we attack that, develop a new strategy. Mike Higgins and Bob Klein are neck deep in this with me. And now we've turned that business around. So we kind of use that as a way of how we go about doing our strategic initiatives. Achieving the full potential of the business and enabling growth through operational excellence, that's the core of the ADS business. It's the go to market and how we go to market. It's the operations that support that. And as you all know, you've seen me talk about this before, it can be a quite complex set of operations all the way from the material procurement through delivery and running that fleet. So a very good view into what we've done and then what we're doing in the future there. Then Scott will wrap up and really talk about the performance over the last several years, again, that we're quite proud of. The targets we have over the next 3-year plan that we'll get to you today and then our capital allocation thoughts, which we've worked quite hard on and I think much different picture of that today than where we were in 2018. So this is what we do every day: to protect and manage water, the world's most precious resource, safeguarding our environment and communities. We are a pure-play water company at both ADS and Infiltrator. This is what we do every single day. Now we believe this positioning gives us a very unique investment thesis relative to this kind of audience and what we do. And it's really built on these 4 pillars, and this is what we'll kind of organize the discussion around today: a material conversion strategy. Both companies, that's what we do, convert from traditional materials, primarily reinforced concrete or precast concrete structures, to plastic materials that have a lot of advantages. Driven by water and sustainability. You see that mission statement. We protect water. We manage water. We do this with this very high recycling content that we believe gives us a very unique sustainability message. Consistent performance. We've -- I think we've done a very nice job on this over the last 3 years of consistently performing, being pretty good communicators about what's going on and delivered. We take it seriously that we want to do what we say we're going to do. And it's not always easy, don't always occur on the exact time I think it will, but I think we know how to get it over the line. Effective capital deployment. Again, from where we were a couple of years ago, just kind of generating that cash flow, having optionality on what to do. I think we've done a nice job in taking our program to a next level. So you'll see all this. These are some of the themes: above market growth, the conversion I talked about, a pure-play water company, large recycler, going to 1 billion pounds over the next 10 years. Consistent performance at both companies. I think this is really a story of both companies overperforming over the last 3 years and exceeding our targets. We've put a lot more money into capital as you've seen us talk about. We've had pretty good distribution to shareholders, $482 million over the last 3 -- during this plan period. That's a lot. I think it was basically a dividend, and we bought back $7 million or $8 million worth prior to that, and now $482 million returned to shareholders. And then very aggressive, I think, in the terms of Infiltrator and executing on that acquisition, but an acquisition program that we've stood up. So I'll kind of march through these 4 pillars here. Material conversion, stormwater, onsite septic. Those are the market, that is our growth. I think this points out a couple of different things. In the stormwater market, we talked about this positioning we have in the nonresidential market, that horizontal, nonresidential construction, suburban and rural construction. I think that's where you see that we've separated ourselves out over the last several years. Mike will go through some of this in his pitch, but that's the conversion story. Onsite septic, that's basically residential housing or residential starts and how they have gone well past that with their conversion story, partly a geographic story also because they really have distribution in exactly the right places. But both of these outgrow the market, superior products, they install faster, they're less costly to get installed, including deliveries to the job site. Delivery and logistics is a big deal in these businesses. It's gotten an even bigger deal over the last couple of years. They're resilient, and they perform well. So that's kind of how the whole thing is built, is on this conversion story. Nice-sized markets. Again, stormwater, $6 billion. Mike pointed out the other day, this is before really the rapid rise in pricing in these industries. So think of these as kind of baseline that we think about right now. But $6 billion, stormwater. Onsite septic, $1 billion. This is the passive market where we're clearly the market leader at Infiltrator. Carl will talk to you about the active market, which is another $1 billion, not counted in here. And obviously, a place that we're going to try to grow through innovation, look at acquisitions, look at geographic -- geographies there. And then the other part of this story of water and sustainability is that recycling, where we've got this 10-year goal to be recycling 1 billion pounds. Why are these things an issue? Particularly with stormwater, it's these secular trends here. More impervious surface. Think of parking lots, roads, roof lines, any large, large building with acres of roof line like these distribution centers. Those are creating more stormwater that must be dealt with, which is coming up in more frequency and more, what I call, amplitude. These are the flooding events you see in the Southeastern, in Houston and places like that. So there's a -- there are lots of secular trends around our stormwater business. Many of you have seen this chart. We call it the life cycle of a raindrop to explain what we do at ADS and what our solutions package looks like. You can see it rains, we capture it, we convey it, that's the pipe. The storage, those are the Storm Tech products. They create basically underground ponds for the storage of water. We treat it, then we take sediment. We might take oils, we might filter it. There are biofiltration products that are growing quite rapidly. But that's a market that -- then those products kind of clean the water up and then it goes back into the watershed, a river, a stream, an aquifer something like that. And I think over many, many years, the company had a great strategy of building this solution set with not only the pipe or the conveyance but also these allied products. Onsite septic, another fantastic market that we're in, again, $1 billion. I mean I think everyone would agree that clean water and good sanitation or just public health necessities and fairly good regulations around this stuff. I think there are 2 key things that are happening, which we want everyone to understand. These onsite septic systems are really driven by these 2 factors. One, areas where municipal is not available. Think of your typical rural area or some very large home that has set -- waste set back from the road. It's just where it's not convenient or feasible economically to get centralized municipal out there. But we've also seen in that third bullet point, suburban, or kind of close in rural that are growing very rapidly in the city or the centralized municipal cannot get out there fast enough. They don't have funding in their municipality to get out there or in their county. We sometimes call these micropolitan growth, and we see that growing very rapidly also. And then the statistic that I think surprises people a lot is 1/3 of homes, new homes constructed every year use onsite septic. We studied this many, many times. Roy's smiling because through probably 30 years, there's been 3 or 4 major studies on that and it's a very consistent number. So we're very confident about how this business will continue to grow and these markets continue to grow. Now they'll go through this in a lot more detail, but essentially, these systems, wastewater comes out of the home, it goes into a tank, it settles in that tank. Effluent comes out of the tank. It goes into the leach field where it then leaches into the surrounding soils. And we make all of these products and have leading market positions in all these products and conversion opportunities. I'd add that both of these markets are pretty well regulated. There's local standards. There's national standards. I mean this is a good thing for us, that there is a fair amount of codes and regulations. And both Mike and Carl will talk about how we address that and take advantage of that. Consistent performance. And again, we're quite proud of this. You can see the targets. Sales growth, 4% to 6%; margin, 18% to 19%; free cash flow, 50% of EBITDA. That's what we set out with you in 2018. At the very bottom, you can see ADS legacy above those targets in both sales growth and margin expansion. But then when you add in the Infiltrator piece, it really accelerates the whole thing. That's a CAGR of 14.2% over the last 3 years, a 1,280 basis point expansion, which is a little hard for us to even believe sometimes, but a lot of great work going in and doing all that. And good free cash flow conversion, which we in turn have turned into, I would say, a pretty solid capital deployment. I'll start on the top left, the investments that we're making, the capital that we're investing. You see '18 and '19 were basically the ADS business. We acquired Infiltrator in the summer of 2019, which is our FY '20. We began to wrap up capital primarily there. You'll hear from Darin how he began to build up a manufacturing engineering department because we saw some of these things coming, not everything that we've seen come at us, but we knew we needed -- we were going to go on a much more aggressive organic investment at both companies. And so those first couple of years, we're ramping up in Infiltrator. That equipment is online and producing in many cases. And then that big tranche coming up is really as we've gotten the resources in place at ADS to begin to deploy that capital. So very, very important to us that we do this well over the next 3-year period of time. Acquisitions, obviously, over $1 billion spent on Infiltrator, and then a smaller acquisition with Jet Polymer, the recycler here just recently. But a very big activity that Dean and Scott, Mike, Brian, myself, were all quite involved in working on these. Share repurchase, we'd really not done much. We had some authorization but not had executed on that for a variety of reasons. We saw cash kind of building on the balance sheet earlier in this calendar year. We kind of saw that happening. We thought it was going to build. We did consume a lot of cash this year, but we had room to go out and do some more share repurchases. So we had $42 million available. We authorized another $250 million, and we executed that basically from May until September of this year. We also, just recently in our February when we announced our earnings, we announced another buyback. We'll do this over 2 to 3 years. We'll certainly toggle that back and forth as we have needs up on the top. But we feel pretty confident that we can go and execute that level over the next 2 or 3 years and do anything we need to do at the top. And then dividends, including the $75 million dividend that we paid in 2019, which, again, there was some excess cash and allowed us to make a very large allocation in the ESOP, and we kind of moved on from there. Very, very successful actions by the company to get that where we wanted it to be in terms of winding it down. So lots of work on this chart. And again, I think, quite different than what you saw several years ago. All right. We continue to focus -- I mean, nothing's changed since 2018 with respect to what we focus on, growing our business, expanding our margin at rates greater than we grow our sales. This year is a little different, but fundamentally, that's what we try to do. We want to generate good free cash flow when we do that because it gives us optionality on how we want to grow and execute the next phases of the business. And we think all 4 of these pillars contribute across the board here. It's the material conversion, that's what we do. We've done it for years. It's not new because I've been here. The water and the sustainability, that's exactly what we do. Brian will tell you, we didn't have to make this up. This is just what we do. We just had to repackage how we talked about ourselves. Consistent performance. I think we know how to manage this business. It's got a lot of different levers. It's more complicated than I thought it was going to be when I came 4.5 years ago, but I think we have a very good model, and you'll see that from the guys today how we go and operate the business. And then Scott, Dean, Tim, they've worked very nicely to kind of pull together, I would say, a much more mature and high-performing capital allocation strategy, discussion, set of actions that we can go out and execute. All right. I'll introduce Brian King. Brian, in addition to standing up our product management and kind of lifting our marketing to more just on trade, but also kind of at the corporate level, has responsibility for our sustainability efforts. So take it away.

Thanks, Scott. Good morning.

Morning.

Since our last Investor Day, we've actually spent a lot of time thinking about what sustainability means for ADS and recognizing that many of you have an increasing interest in what sustainability actually means. And really, like Scott mentioned, it comes down to -- it's our core. It's what we do. We do it all day every day, and we've been doing it, frankly, for longer than it's been popular. We manage a precious resource, as Scott mentioned. Since we were last with you here, there's been greater than 50 events in the U.S., storm or weather related, that have caused $1 billion worth of damage. As a result of that, having a sustainable stormwater management solution is critical to providing great quality of life. Sustainability also is something that we do that drives financial return. So it's not just the good thing that a corporation has to do because you have to be sustainable. It actually creates value for the company. We are the second largest recycler of plastic in the U.S., 510 million pounds last year. We're on target to go to 1 billion pounds. And we're vertically integrated in that space. So it's not just a purchase of material. We also wash, shred, pelletize and make sure that we use recycling and the recycling of plastics as a way to drive better product yield, performance, and obviously, financials. The other thing I want to talk to is we're committed to that progress. So if you read our sustainability report, the third one which we published this year, we released our 10-year goals and we know that they're thoughtful, they're achievable and they're meaningful. Like I said, we published recently our third sustainability report, and I want to highlight a couple of things on here. For those of you that read it, I would imagine you're probably quite familiar with the left-hand side of the chart, so I'm not going to dig too much into that. But what I am going to highlight is just a little bit around our social and governance and some of our operational goals. Through some investments in both people, capital and equipment, we've made our safety better. We've increased or decreased our downtime, keeping our machines running. We've reduced our scrap. We've driven efficiency. We've driven continuous improvement and training within our plants. We're also starting to embark on a DE&I journey. I'll talk a little bit more about that in a minute, but we're starting to look at the social and governance pieces of the ESG portfolio, making sure that we did create an ESG Board subcommittee, and we've improved a lot of our governance practices within our Board. As Scott mentioned as well, we're everywhere. Everywhere you live, work, play, shop, drive, there's stormwater products. And you can see on this map here and you saw in the videos that we've been playing before we got to the session today, our products are absolutely everywhere. If you're not thinking about stormwater management or you're not seeing stormwater when it rains, our products are doing exactly what they're designed to do, capturing, conveying, store and treating stormwater solutions. There's a lot of talk about circular economy for plastics. A lot of talk about single use for plastics. And the good news is that at ADS, we actually drive the circular economy. We take good plastics, which have been post consumer and post industrial. And from a post-industrial perspective, we're actually sought out by companies to solve their problems from a waste perspective. A great example of that is with DuPont and Tyvek. This truly is a statement where one man's waste is another man's treasure. And we purchase that material and then reprocess it into our HDPE product and our HDPE pipes. Like I mentioned, this is something that we do. We're vertically integrated in this space. It's not just legacy ADS. It also is the IWT side of things, too, with polypropylene. And we believe that we have the ability to process. And like I said, we wash, we flake, we make into pellets and then we use those pellets in our processes, and we know that, that makes good consistent quality product. It broadens, frankly, our material opportunities for raw materials. So we're not beholden to virgin resin providers. We can also buy materials from a variety of different sources across the U.S. We think that, that really does differentiate ourselves. We are leaders in material science. We continue to make investments in this space with both talent and capabilities, and it allows us to blend and make significant improvements to the performance of our products. Half of the material that we use is recycled. And on average, you buy that material at probably a 10% to 15% discount versus a virgin product. So it's good for us. Sustainability makes us money. And like I mentioned, this is both at IWT and ADS. To accelerate our sustainability journey, we've made some pretty significant partnerships over the last couple of years. The first thing I wanted to touch on is the ADS Foundation, which we established in 2020. There's 3 pillars to that foundation. One is giving back to the communities in which we work and operate our plants and locations. Two is water or access to water. And three, obviously, is recycling. As a result of that, we are an active member of The Recycling Partnership. The Recycling Partnership is a 5013c (sic) [ 501(c)(3) ], which is actively encouraging more recycling in the U.S. We are involved with them with a polypropylene coalition, getting #5 polypropylene plastic, which currently most of it goes to a landfill. But it can obviously be used in our products and encouraging people to set up more recycling for #5 polypropylene plastic, which will help the IWT business and also our Storm Tech business. We also signed on to the Clean Sweep pledge. That's to keep plastic pellet pollution out of the environment and make sure that when we're using plastic pellets that it is actually used, contained and does not escape into the environment. And we also are a founding member of the Ohio State University's Sustainability Institute. Along with some other prominent companies in Central Ohio, we are a founding member of that. And one of the things that we're pretty excited with is part of that commitment is to increase diversity within the engineering field. As any of you or many of you know, the engineering field is very wide and very male, which brings us to DE&I. Like all business challenges, we have been focused on our DE&I story in a thoughtful and systemic approach because we believe that what a DE&I story will do will give us better access to talent. Better access to talent will give us better ideas. Better ideas will give us better performance. And ultimately, better performance provides more opportunities. We have a 4-point strategy that we've integrated through our business, and it's actually making changes. The first thing that we did was engage with our workforce and make sure that we're creating an inclusive environment for everybody within our organization. Training, thoughtful hiring have created some positive results. We have also supported communities outside of our building. We believe that to be a leader in DE&I, it can't just be within the 4 walls of ADS. It has to be within our industry. And so we have been working with influencing change, especially in the public sector, engaging with not just our customers, and you can see on here XBE business that we're doing. So that's a company that's either minority owned, female owned, veteran or disabled. We're also making sure that we're engaging with engineers, contractors and officials and making sure that ADS is a leader within our industry as it relates to DE&I. On the governance side of things, we've also made some pretty significant improvements. We established an ESG subcommittee. If you look at the bullet points in the middle here, we've implemented shareholder-friendly practices, and we've also added some diverse new talent to the Board with new capabilities, new skills and different thinking. As I mentioned also, we first published our 10-year goals, and they tie back to our reason. You can see our reason is water, and we, from a marketing perspective, put a reason down the side of this. Had to talk about marketing at some point, right, Scott? Anyway, I want to focus on 3 things up here. One is obviously the recycling. We've made a commitment that in 10 years, we'll be using 1 billion pounds of recycled plastic. We will, at the same time that we grow, and you'll see some pretty significant growth talked about today, we're going to do that while meeting our environmental impact reduction. So tying into the Paris Climate Accord and making sure that we actually meet the target of being in line with the 1.5C increase in global warming temperature, which is a pretty significant challenge for us, but we do believe over the 10-year period that it will be achievable. The other thing I want to focus on, too, is our focus on safety, underneath the operational excellence. We have invested significant amounts of capital. We've hired people, and we are committed to making sure that our environment and our workplace is safer and more effective for our employees. So what does that mean? Well, at ADS, sustainability really is what we do. And it's been a journey. We started out as a recycler. We've morphed our way into having a pretty good sustainability story. And I believe over the next few years, you'll see us become a leader in ESG within our space. It's what we do. We manage a precious resource. We do it profitably. We do it sustainably. And we're going to continue making a lot of money doing this. And with that, I'd like to invite Scott back to the podium.

Great. Thanks. As you can tell, we teased Brian a bit about being the marketing guy. He deserves it. But again, I reflect back to 3 years ago. And many of you, we've had these discussions with on how we talk about ourselves relative to sustainability and ESG. And like a lot of the things we tackled, I think we've tackled it thoughtfully. We've not tried to make it something that isn't. It has real substance behind it. Brian and Nicole Voss, our Director of Sustainability, have drove us to those science-based targets, not easy to do. What was the -- what we used to call the band of the willing is now really a management program where we're driving this every day through our business and organization. So now we'll talk about Infiltrator. I introduced Roy, Carl, Ron, who will speak today. Bryan and Craig are there in the back. We closed on this in 2019. So we've been at this about 2.5 years. Over $1 billion we paid for it. It's been worth every penny. I think you'll see why on this next chart here. And there are just so many outstanding complements to this business that I think we knew -- Roy and I knew, probably Roy knew more than me that the complements were going to be there. But this is what I think we've been able to do together. I mean, $60 million of synergies cumulatively over that 2.5 years. I mean, exceeded our target. I was telling the story last night that I think the day of the close, Roy called me with the first idea. I think we cut that PO that afternoon or the next day. And already, we were on working. But you'll find and you'll see Roy is a very, very smart negotiator because 2 days later, he called me and said, "Oh, by the way, we need to schedule this meeting with your Board because I got to start pouring capital into this business." Now we knew that. We knew that. There were next-generation products that needed to be invested in. I didn't quite expect $200 million, I have to be honest. But I mean, the returns on these programs are really outstanding. And as usual, pretty smart, the Infiltrator guys. Getting that going fast has allowed us to start producing on those assets really when we needed them as the demand really took off over the last couple of years. So it's been a good journey with this team, not only at kind of that top and that bottom, but obviously, well ahead of plan in our acquisition case. So with that, Roy, introduce you and your team.

Thank you, Scott. Good morning, everyone. As Scott said, I'm not a cheap date. Scott tells me this all the time. We do know how to spend capital. So anyway, glad to see you all here and glad to be here and talk to you about Infiltrator. Let's do a quick business overview of IWT. We're the leading manufacturer of leach fields and tanks for onsite systems. Onsite systems are known as decentralized wastewater systems. They're also known as septic systems. That's the most common terminology, septic systems. Looking at the first pie chart, sales by product category is depicted in this pie chart. Leach field systems represent the majority of our business and with septic tanks representing the highest growth portion of our business. Both of these product lines are considered passive and passive treatment of effluent is the primary methodology used for septic systems. We also have a relatively new part of our business, which is active treatment. And active treatment is where we improve the quality of the wastewater before we present it to the soil for dispersal. So both methods work very well. Passive treatment is more common. Active treatment is the growth segment of the market. Looking at the end market pie chart, our end market consists of 65% new construction for single-family homes and about 30% of our business is repairing a base of over 25 million homes with septic systems. So those systems, as Scott indicated in his slide, fail every 25 to 30, 40 years. So they have to be repaired. So it provides a very solid business base for us. So about 5% of our business is in commercial products, commercial applications, and that leaves 95% in the residential area for us. Looking at the bar charts, we have a track record of consistent growth and high growth, I might add. You can see in the bar chart the CAGR of 16% for the last 3 years. And moving over to the EBITDA CAGR at 26% for the same 3-year period. You can attribute the EBITDA CAGR being higher as we are a state-of-the-art manufacturer. We have efficient and very proprietary processes and high levels of automation. So that's what drives that EBITDA CAGR. IWT is the market leader in our industry. We've gained our market leadership in wastewater treatment through competing with innovative products, through our market solutions and with customer service. We market feature-rich, environmentally green solutions. Passive systems typically work by gravity. So there's no electricity involved, which is what makes it very green. And obviously, they're very environmentally friendly. You add in the use of recycled materials to this and you get a very green solution to take care of your wastewater. At IWT, we have the largest molding machines in the world. We have the largest molds in the world. We have the largest automation in the world. We mold the largest parts in the world, and they're primarily recycled plastics. We're world-class operators. And just to give you an idea how large one of our molds is, our 1,500 gallon tank, which makes half a tank, is 440,000 pounds. This is the equivalent of 5 empty Boeing 737s. So think about that one for a minute, that's big. As Scott indicated, it's surprising to an awful lot of people that 1/3 of all single-family new homes are on septic systems. So we have a great market and we're the clear leader in supplying this industry. Let's talk about how an onsite system or a septic system really works. Scott gave you a brief overview. We'll try and get in a little more detail here. Let's talk about passive systems first. Again, passive means that we're not doing anything to the effluent like we are in active treatment. We are presenting the effluent to the soil and letting it infiltrate into the soil and the soil does the work. So to start, the plumbing in your house obviously collects the effluent and it flows by gravity to the septic tank, which is located in your yard near your house. Now the septic tank is typically 1,000 to 1,500 gallons. And in the septic tank, you have solids, which sink to the bottom of the tank, and you have oils and greases, which float to the top of the tank. And that leaves this clarified effluent in the mid-body of the tank. And this clarified effluent flows out by gravity, typically, to the leach field. So now the leach field, which are usually installed in trenches, it holds the effluent. We -- in our engineering side of the business, a leach field trench and the product that goes in it, it's really, we describe it as who can make the best hole in the ground because that's really all you're doing when you are holding effluent in your leach field. You're creating a void space for the effluent to be while it infiltrates into the bottom of the tranche or through the sidewalls of the trench. So when this happens, the biological activity in the soil does a really, really wonderful job of removing contaminants and purifying the effluent, and this includes viruses, by the way, before it moves into the aquifer. About 85% of all systems are designed to be passive. In active treatment, we're doing things a little differently, right? So we're trying to modify the effluent, clean it up before it reaches the leach field. We may inject air. We may recirculate effluent. We may even build a structure to house biological colonies to consume the organic matter in the effluent. So we're actively cleaning up the effluent before we present it to the soil for that final purification. Why do we do this? Generally, these systems handle larger volumes like in a commercial application. And they need to operate in a smaller footprint. So if you clean the effluent beforehand, you can generally apply it to the leach field at a higher rate. So you wind up with a smaller system. Or we could be trying to address another particular problem such as nitrogen reduction in ecologically sensitive areas. About 15% of all onsite systems are active treatment, but it's a $1 billion market. So that's why we're very interested in this market. Let's talk about conversion for a minute. We've been very successful in driving conversion from traditional stone and pipe and concrete tanks into IWT products. There are several reasons for this. Scott touched on a few of them. So over 20% less total installed cost. We offer improved time efficiency. It's twice as fast to install IWT products. And most of our leach fields wind up being smaller than the traditional gravel and pipe leach fields. This means less labor, no gravel dump trucks. When we talk about IWT tanks, they're lightweight, they're durable. They go to the job site with the contractor. So you're not waiting on the concrete pre-caster to deliver that tank and then set it in the hole. So you're going to the job ready to go. We also feature enhanced performance. Our leach fields have increased soil contact area. So when you don't have stone in the trench, you've eliminated the stone which blocks off the pores of the soil. So taking the stone out gives you more soil interface area. So this allows for smaller systems. And really, this has been the key driver for our conversion over the 35 years of the company. Our tanks are, again, durable. They're water tight, and septic gases, which form, and septic tanks will degrade a concrete tank, but not a plastic tank. So on the next slide, you see a map of the southern crescent of the U.S. As I mentioned, and Scott mentioned, 1/3 of the new single-family homes built in the U.S. use onsite systems. In the southern crescent, though, this climbs to 35%-plus. And in the rest of the country, it's 28% or thereabouts. So 54% of all Infiltrator wastewater system sales are in the southern crescent of the U.S. So in the U.S., population is slowly migrating from urban to suburban and rural areas. We benefit from this migration trend with most of it occurring -- most of the migration coming to the southern crescent, where there is the higher septic utilization of 35%. So when we -- when these folks leave one area at a lower utilization rate for septic systems and move into the southern crescent with a higher utilization rate, we benefit from that. One of the keys to IWT's success over the years has been a very strong regulatory presence. All of our products are regulated, and we figured out very early on that we needed a team in place to help us manage this part of the business. We're approved in all states in the U.S. and Canada -- or all the provinces in Canada. And almost all the jurisdictions in the U.S. and the provinces in Canada allow our products with a smaller footprint. So again, in the leach field portion of the business, when you eliminate that stone, you can put in a smaller system, and most states or provinces give us credit for that. So we get to put it in a smaller system. So for example, if you had to put in 750 square feet for a gravel trench system, if you were in selling Infiltrator products, you might only be putting in 500 square feet of leach field. So it's a big difference. Our products are regulated at the state and county levels, and there are an awful lot of counties in this country and we spend a lot of time talking to these folks every single day. And each year, we also continue to enhance our approvals. We will go back to these regulators and we will ask them to accept new products that we have developed or we'll be looking for modifying the approval to allow more favorable installation conditions. So this drives conversion. The regulatory piece of this business is very important to driving conversion. But also, the Infrastructure Investment and Jobs Act that passed last year provides for $250 million to replace malfunctioning or nonexistent septic systems for those who can't afford to do so. $250 million in this over 5 years is not a lot of money. However, in my view, this is a big step for the industry as it really gets us up on the national stage, and that's very important. So now I'd like to present Carl Thompson, our VP of Sales, who is going to talk about growth and innovation.

Thanks, Roy. Over the next few minutes, I'll share some detail on our material conversion strategy, on how we've been converting the $1 billion passive system market from conventional septic systems to modern onsite systems. Roy mentioned this pool of potential systems continues to grow, both due to an underbuilt housing stock and the fact that people are moving to areas more prone to the use of septic systems. In addition to this billion $1 billion passive system market, we'll also talk about this complementary $1 billion active system market and how we're making investments in this space, and we're really excited about growth there. So at Infiltrator, our focus is conversion. And we do that by spending time in the field to make sure that septic system decision makers know how to reduce installation cost, improve time efficiency and enhance performance with our products. The improved time efficiency is a huge benefit, especially right now when septic system contractors are very busy and the labor supply is tight. Over the last 35 years, we've improved our market leadership position by continually innovating products to deliver increasing value to our customers. And I'll share some details on that in the next few slides. The third checkmark here about regulatory and legislative efforts highlights another key growth strategy for us. Quite simply, we change the regulatory game. Our regulatory team is skilled in changing regulations and passing new state laws, we've passed a dozen laws. These changes allow septic system contractors and designers to take full advantage of the products. And what that means is that the products can often be used in a smaller footprint or in more water-sensitive environments, taking up less land and speed and construction. Finally, we're supporting growth by adding engineering talent to create solutions necessary to further tap into the large active onsite treatment markets. Our market share model is based on execution in 4 areas to drive conversion in the onsite wastewater market: approvals. All septic systems are permanent. Products need to be approved to be used but we don't just get the products approved. We work with the government authorities to approve the products in a way that fully harnesses the power of the products. This results in smaller footprints, favorable siting and lower installed cost. This is a key driver of penetration. Acceptance. Our sales team members, they wear construction boots. They wear a Carhartt jacket. They lead the state and national industry groups. Most importantly, they demonstrate the use of our products in the trench with the contractors to show installers how to speed construction and make more money. Coverage. Infiltrator is the leader in the U.S. and Canada in solving problems for all on-site wastewater decision-makers. We speak fluent septic and we've become the go-to source for answers about the design, permitting, installation of onsite wastewater treatment systems. Delivery. Infiltrator products ship efficiently and are available near the job site from one of our 1,500-plus distribution points in the U.S. and Canada. So let's talk a little bit about how these products get to market. Infiltrator's specialized direct and inside sales force, these are the folks who speak fluent septic. They team with 1,500-plus top-tier distributors to solve septic -- to serve septic system installers and drive conversion. These distributors are typically different from the ADS waterworks distribution channel. The Infiltrator distributors are mostly plumbing wholesalers with expertise in sanitary systems. And these distributors want to work with us for several reasons, and these reasons allow us to effectively build a moat around our business, making it very difficult for a competitor to displace us. So here are some of the reasons why. Infiltrator is the leading brand. Contractors simply want to use Infiltrator. Number two, Infiltrator has just about all the products a distributor needs to fully service the septic market. And number three, our sales force works directly with the contractors, effectively pulling through business to these distributors. The culture of innovation is core to Infiltrator's DNA. All employees from the executive team to the manufacturing floor are focused on innovation. Superior innovation capabilities have resulted in weight reductions, faster cycle times, improved material blends and have increased the depth and strength of our product portfolio and allowed us to support growth into the 370,000 septic systems each year that use our products. Model innovations and acquisitions have led to Infiltrator offering the fullest basket of septic products, top to bottom, at the lowest installed cost. So in 1986, an invention in a garage in Old Saybrook, Connecticut became the world's first plastic leach field chamber. We're currently on generation 9 of this product. In 2003, we leveraged the septic chamber know-how to build the first Storm Tech stormwater chambers. In 2008, we added to the septic portfolio with a rotomolded triple-wall septic, this orange tank here. In 2009, we acquired EZflow, another septic leach field product, and opened up new geographies and choices to our customers. In 2011, we reinvented the septic tank with an injection-molded model that I'll tell you more about. And just a few weeks ago, we introduced another reinvention of the septic tank, the compression-molded model at the far end. Our recent acquisitions of Delta Environmental and Presby Environmental have formed the foundation of our Delta Advanced Strategic Business Unit that is accelerating our growth in the complementary $1 billion active wastewater treatment market. The chambers. Infiltrator invented the plastic chamber in 1986, and we've reinvented that chamber 8 times. And each subsequent generation of chamber, it became easier for the septic system contractors to use the product, easier to handle, faster to install, stronger, different shape to open up a new market or a new feature to improve performance of the septic system. All of these innovations led to increased market penetration. Engineered plastic drain fields are now used on most of the septic systems installations in the U.S. and Canada and Infiltrator provides the products on most of these systems. And by the way, each subsequent generation of these products, it became easier for us to manufacture the products with lighter weight, decreased cycle times and lower costs. And while our market share for chambers is strong, there is still significant room for share gain in this passive leach field market. So tanks. I mentioned we entered the market with an orange triple-walled, rotationally molded tank in 2008. Just 14 years later, Infiltrator is now the largest septic tank manufacturer in North America, and that's septic tanks of any type. We took a huge leap in market share when we introduced the 2-piece injection-molded tank in 2011, and that's the tank to the right of the orange tank. Distributors love the fact that the septic tank halves could be stacked on top of each other and shipped on pallets. So what that meant to them is that they could get 50 tanks on a truck instead of 12. Injection molding also allowed us to use injection-grade polymers, which are about 2x stronger than the rotomolded material. So this added strength and lower installed cost drove the conversion of contractors who were previously using the much heavier concrete tanks that have to be set in the hole with a crane. Thermoplastic septic tanks now make up about 30% of the septic tank installations in the U.S. and Canada, and Infiltrator provides most of these tanks. So about 70% of the septic tanks out there are still concrete. There is a significant conversion white space with our tanks. Just 2 weeks ago, we unveiled our third-generation compression-molded septic tank. Ron is going to tell you a lot about how we make this product. We introduced it at the nation's largest conference for septic system installers and service providers. So the contractors at this show were really excited about the look of this tank. They like the fact that the end was rounded, and you can see that in that top tank. They like the fact that the corrugations were deeper, and they saw that this is going to be an even stronger tank that is even easier for our distributors to assemble. Now contractors at the show also like the fact that this new compression-molded tank could be outfitted with advanced treatment equipment to serve the active treatment market. So active treatment, Roy teed this up. And over the last few years, we've really taken a much closer look at this complementary $1 billion active treatment space. And the recent acquisitions of Delta and Presby have formed a foundation for us here. And we're going to use this as a base for further innovation, and we do expect to see some additional consolidation opportunities over time. We'll bolt on additional active products and leverage our market share model. We will become the market leaders in active treatment using the same playbook we used to gain our leadership position in the passive wastewater treatment space. So the residential portion of the active treatment market Roy just told you was about 15% of all septic systems, that has a value of about $300 million a year, and it's growing as regulations in sensitive areas, often close to water bodies, are requiring active treatment more often. For example, this is going to be a very significant part of the Florida market in the next decade. Most residential active systems are manufactured from concrete. So this is a prime conversion opportunity for us. We're converting the concrete active systems to plastic Infiltrator active systems just in the same way that we're converting concrete tanks to plastic Infiltrator tanks. Now the larger part of this market, and that's represented by this treatment system in the lower right is the commercial market. So these systems treat the wastewater from camp grounds, rest stops, shopping centers, schools, anywhere where commercial development is taking place that's not served by a central sewer. An example of this type of commercial active system is a wastewater treatment plant that we recently installed for a brewery in Texas. Now innovation is going to be the key to our success in both the residential and commercial active wastewater treatment markets as we're going to add differentiated wastewater treatment products that are easier for our customers to choose. We are currently developing and testing new higher-performing active treatment systems that will allow us to further penetrate this $1 billion complementary market. So now I'd like to introduce Ron Brochu, our VP of Manufacturing, who leads the team that makes all these good products.

Okay. Thank you, Carl. Good morning, everyone. My name is Ron Brochu and I'm Vice President of Manufacturing at Infiltrator. You heard Roy and Carl discuss how Infiltrator competes on innovation. Our culture of innovation runs through every part of our business, including our manufacturing operations. From a manufacturing perspective, all operations -- our operations do not shy away from technical challenges, and we're consistently seeking better ways to produce our current products and support our new product development activities. So our industry leadership is underpinned by several key enablers, which differentiate us in the marketplace. This starts with our centralized production, which allows us to consolidate our talent and our experience, expertise while gaining synergies through collaboration. We are also a leader in advanced manufacturing. This is more than just having the best machines, it's leveraging these machines in combination with our scale and our expertise to develop the best products. For example, our world-class in-house engineering capabilities enabled us to codevelop a significant number of first-of-its-kind manufacturing equipment, even when we've been told by experts, this is not possible. We've done it, done many times over. Automation is a cornerstone of our operation today. Our molding process was once 100% manual operation. Today, our machines are 97% converted to automation. We will continue to expand automation throughout our manufacturing operations to generate a safer environment, increase efficiency and help address the growing nationwide issue of labor shortage we've all been facing. Lastly, recycling has been a core of our business from the day we started and will continue to drive our success into the future. Today, we blend over 150 million pounds of plastic annually and is growing rapidly. I'm not going to walk you through these key differentiators in more detail. Okay. Our Winchester manufacturing campus has 1 million square feet on the roof, another 1 million square feet of paved surface storage outside and roughly 200 acres of land available for continued expansion. Our centralized campus allows us the talent, to drive efficiency and improve communications over our entire manufacturing line. If you look at the picture on the lower right, this is our manufacturing campus. I'm going to walk you through the operations, starting on the lower left and going kind of clockwise through the operation. Building #1 is molding operation, producing septic tanks and stormwater -- septic chambers and stormwater chambers. Building #2 is a material processing operation that delivers material transferred into building 1 to support manufacturing -- molding manufacturing. Building #3 is our grind operations. Building #4 is a material warehouse as well as a transfer capability to move material to buildings #5 and building #7, which are molding operation. Building 5 has chamber manufacturing, tank manufacturing and Storm Tech manufacturing capabilities and houses 3 of the largest molding machines in the world today. Building #7 represents our latest investments and houses the newest presses for capacity and new manufacturing capabilities and efficiencies. Our central location, investments and manufacturing efficiencies over the last 10 years have enabled our sales per head count to double to a staggering $900,000 per employee. Infiltrator has the world's largest injection molding machines and the world's largest compression molding machine. Pictured on this slide is our new 8,200-ton injection molding machine that represents our movement towards no touch operations. They run safer and more cost effectively. We have a second identical machine to this one being produced right now to handle additional Storm Tech chamber production requirements. Note the technician in the lower right of this photo, just to give you a scale of how big this machine really is. It's a big machine. Our industry-leading position in advanced manufacturing is secured by a robust portfolio of 190 patents and that number is surely going to grow as we continue to innovate moving forward. Okay. in this slide, I'd like to walk you through a case study of our tank journey. So pictured on the left is our first compression molding machine and it's the largest of its kind and the only one in the market leveraging this tech. We are the only one in the market leveraging this technology at a scale and a level of automation that this press represents today. By comparison, our competitors still largely use rotomolding as a means of production, which is significantly less efficient. For example, rotomolding cycle time takes over 1 hour to produce a single tank. By comparison, our compression molding process takes only 3 minutes, representing a 95% reduction in cycle time efficiency. Not only do our compression molding machines create faster cycle times, but they also enable us to significantly improve our labor efficiency, lower our shipping cost as we can actually stack parts together and put 50 units on a truck instead of 12 and reduce our weight while simultaneously enhancing the product structure, allowing us to access more sites for more installation opportunities. We are achieving these types of efficiency gains through our entire manufacturing process. I'm going to show you 3 videos that will give evidence of the automation operation. These 3 videos give you an impression of current capabilities and scope of automation at Infiltrator. The first video will show a 16,000-ton compression mold, making our latest generation tank that Carl alluded to, and it will be producing 1,000-gallon tanks in this video. It's also the world's largest compression molding machine by far. So it's not obvious by looking at this photo, but you can see there are 2 tanks in operation at any one time, just sequencing left, right, left, right, left, right. [Presentation]

Okay. This next video is going to show our 8,200-ton molding machine that's producing the largest Storm Tech chamber in their product line. [Presentation]

This machine is one of the largest in the world right now and a second machine is currently under construction to, again, continue to support the sales growth we're seeing. And this last video is going to show our new 2,200-ton injection molding cell that's just started up this month. And we're very excited about this particular segment as it's going to show automatic part trimming, which is the next stage of our complete automation reaching towards a 0 touch manufacturing process. [Presentation]

Okay. With the expansion of the manufacturing process, Infiltrator blends more than 150 million pounds of recycled plastic annually. We have a very sophisticated lab with extraordinary test capabilities that allow us to blend recycled resins using proprietary recipes. Infiltrator recently completed the acquisition of Jet Polymers, an example of our continued pursuit to acquire additional recycling material. And we are actively expanding our current post-consumer activities to include processing curbside-collected, post-consumer bales, again, to further increase our raw material supply. And finally, moving forward, our focus is to continue to add capacity to meet growing demand that Carl and Mike will be speaking about; continually increase automation to improve operational efficiency and safety at higher levels of capacity; and lastly, we'll continue to add additional material feed streams to improve on our sustainability profile. Okay. Thank you. I'd like to turn the presentation back over to Roy Moore.

Okay. So let's wrap up the IWT section here by summarizing our 4 themes we're looking at today. Number one, our material conversion strategy is working. We gained share through increased features and benefits due to our consistent development of new products. We are driven by water and sustainability. We're excited about our move into active effluent treatment, another avenue for growth for us in a $1 billion market. And we'll continue to gain share in larger systems and environmentally sensitive areas like the Chesapeake Bay Area, for instance. We consistently deliver performance at Infiltrator. We always think about serving our customers. We give them new products before they know that they want them or that they need them. And if they have problems with their products, we're always there to help. The local regulators are really happy when we show up to the problem site. And finally, we continue to invest in the business. We're developing and using equipment no one else in the world has. We're also focused on consuming higher and higher levels of recycled materials. We're part of the solution. If you ever get the chance to see our facilities, I think you'll understand why we call the latest facility the advanced molding facility. I think it's beyond state of the art. So that concludes the Infiltrator section for today. And we have a break coming up here. So we'll be on break for 15 minutes. Thanks, everyone. [Break]

So I appreciate all of the great comments about the Infiltrator piece. I promised you a deep dive. And I think you got the full boat there from Roy's overview to Carl talking about what we do in this business and how we go about doing it and some of those key themes of that market share model, the conversion strategy, the regulatory presence and influence on that. Both companies very focused in that area for many, many years. The great distribution -- the sales force that speaks septic, -- is that correct? We're going to be -- I'm going to be with them in a couple of weeks here. So I'll have to try to test that out. I don't remember -- last time it be that much, but we'll do it. And then Ron, great job showing what is a fantastic campus there in Winchester in Kentucky. And if you can imagine this, Roy, Carl and Ron kind of undersold a little bit what they really do there and what goes on at that campus. And he kind of went through this quickly that the revenue per person on that campus has doubled over the last several years. And what they've done is as they automate, they kind of keep the headcount relatively flat. That really nice growth rate you saw, I think it was 16% CAGR and they've been in double digit since I've been around and familiar with them. That's how they've been able to do that. So that automation is a continuous cycle of innovation and the engineering capability to go and get that installed, to coordinate that with their other activities -- the other manufacturing activities down there along with that recycling. So I think, Allison, we're up. Everyone is virtually back with us. So thank you for coming back. Case study on ADS, agriculture business. So 2018, with a lot of you, our investors, our Board members as well. We had a lot of questions about this business within ADS. And I put this in here because again, I wanted to demonstrate how we approach these issues, these strategic issues we have, how we develop a plan and get going. Because it was not good in 2018, you can see that it has been going down, I think this business had peaked in around 2011 or 2012, somewhere around there, and it's just been steadily going down. Really, I would say, a lack of focus on it. We really weren't doing investments. We had some quality issues. We really hadn't introduced any new products. And Bob Klein in the back, Michael Higgins and I, we began to focus on this business. We now had the time to go in and look at it. It was that part of the sequence of when I arrived at the company to kind of make sure the commercial was going correctly, and we began to focus on the international and the agriculture piece. We hired a new young lady, Darla Huff, to kind of come in and work with us to be our manager of this business, really marketing manager. We made some changes in our sales force also -- but really what we did really worked after some tough meetings is getting everyone aligned in the business that this -- the agriculture piece was important to us. It had a place in growing our overall business, but we had to commit to it and get to work. A lot of work on products, including some introduction of new products, working in our manufacturing, improving our quality. You'll hear Darin speak about moving from [ flight ] material to pelletized material. That was not done solely, but in large part to fix some things that were going on in this particular business. We developed a strategy with Darla and some other resources. Went through a big presentation of that with our Board of Directors to get all aligned. It was recommitting and accelerating growth in those core Midwest row crop markets, entering attractive adjacent markets, particularly geographic markets where we had good capacity. We had availability of product. We just had to get feet on the street and that target accounts. And we sell more accounts there than we thought were there at the beginning, and then developed a solutions package. Much like the life cycle of a rain drop, we also have that in this particular business, too. There's a set of solutions out there that we can bring. And we really set this vision of being the agriculture water management experts. There's lots that goes on, not only draining the fields, but the management of runoff, the management of fertilizers and other things that go on there, the irrigation of these fields has a lot of different formats in it. It moves around as you look at different crops in different parts of the country. But that team, Bob's team, Bob Klein's team and Darla Huff, and Ryan Carter have done a wonderful job of kind of going through and executing this, and we're with them every month, as we go through that. And I think we were 2 weeks ago or was it last week, we had the whole sales team together in Nashville. And if that -- if your team speaks septic, these people speak agriculture. There's no doubt about that. And we're going to go be with them on Friday tomorrow [indiscernible] show in New Orleans. But really, this is about thinking differently recommitting and getting aligned, and I think we did this pretty well. I'm going to show you a video of a problem -- again, a problem we had in this. It was around safety. It was around delivery. This is a very high-touch service part of our business, and we've made some, I think, really nice investments in this. [Presentation]

So we can all kind of smile and look at that. But in our world, this is a big deal. The injuries that we had of our drivers moving these coils off of our traditional equipment the inability to put these coils exactly where they want them or have a tiling cutter go out. And he literally says, "I need it here." He sends us a pin drop, and we can integrate that into our system. So that our driver can look at is telematics and drop it right there, get out of the cab safely using 3 points of contact. Go and do that without -- load that exactly at the right place without ever having to touch the coil. I mean we can smile, I see [ Maria. Maria ] is from Ohio and knows this very well from Darke County in Ohio. I mean, this is a big deal. And we had the money -- we had the engineering and Pat's team took this on to go and do that. But we not only had the engineering expertise and the money, but the ability to kind of go in and execute this. And we'll be investing in these as we go over through these next couple of years. I think we have 10 on order right now for delivery this summer. Well, we recommitted to this. We spent some money. We aligned on it as -- from top to bottom. We are very engaged in working with this team to keep the improvements. You can see what's happened now up 93%, none of us dreamed it would grow back like this. When this business grows, it really changes our growth profile, we can grow nicely at a 5% or 6% in that pipe business commercially. But when this thing takes off and grows at 7, 8, 10, 12 or more or like that in that first period there, it changes our growth profile dramatically as a company. So we like it, it loads our factories. It consumes a lot of the recycled material and gives us scale there. We've introduced new products and the sales strategies that the team is executing $30 million in equipment and logistics. It's not just these trailers that you saw, but it's also in the factories, primarily in the Midwest. We've added some nice capacity in this business, it's executing well. These adjacent geographies, I kidded, where we thought there might be 3 or 4 customers as we put boots on the ground, we started really managing hard in there. We found 6, 8, 10 and we opened up some additional distribution that we were able to get also up in the Northern Midwest portions. And what's really -- what I never saw coming, I never saw this coming, but there is a whole culture of progressive farmers and influencers that really drive kind of the front edge of what goes on in farming. And we have engaged with them. We've aligned with them. We'll be with some of them tomorrow. Darla has done a great job of marketing to these people. She's done a fantastic job. This is 1 of her videos there. What I told her when she came on board I said, "Make us loud." Make people know that we're in the market that we're a market leader, and she's done a wonderful job at that. And I think that just we've learned so much through this and it's begun to grow again, these guys walk with a bounce in their step. So we're quite proud and excited of what we've accomplished in this agriculture business. And obviously, a lot of ownership for myself and Bob and Mike in this because we were in the trench with them from the very beginning. All right, achieving the full potential of the business. And Mike Huebert is going to take us through this presentation. Mike's our Senior Vice President of Sales. About 1.5 years ago, Bob Klein, who had run sales for many, many years and really formed our sales culture, and clearly, the biggest part of the company I've told many of you, we go to market like nobody else on that ADS -- on the ADS side. Bob took on really full time to agriculture in the Canadian business, which is about half agriculture and really aligned with that. And oh, by the way, is growing double digit, expanded margins 1,000 basis points. I mean really killed it over the last 3.5 years. Very proud of what they've done. He's also the tip of the sphere in running our entry into the public space and the infrastructure space. Now I wish I could have told you I would have known that, that legislation would have been passed in November, and I was ahead of that, but not really. But I knew we had a lot of opportunity there. So Bob is heading that up, as Mike takes on running that sales force we have, which is really quite an army. Our value proposition and what we are kind of doing every day in the market -- in this market it starts with those products, and we'll go through this. You've seen a bit of this in the past, but this is a very service-dependent business. It really starts with this fleet, our model of delivering to the trade, delivering to agriculture sites. We take that burden off of the distribution. Think about that from a working capital standpoint of our distributors, we're carrying most of the inventory. We have the assets that are doing the delivery, these products aren't easy to kind of have in store or on your site. They carry the receivable, but it makes us a very attractive product from a distributor standpoint because it's relatively working capital light because of that service we provide there. And it's a big service. And you've heard me say, we need to be adequately paid for these products and these services that we deliver, and Mike and his team have done a great job. But it's also big in this customer support. Pat will show you, this is a transaction-intensive business. Some of it has a lot of complexity for order management and delivery to construction sites of multiple products at a time. I would also put into this, not only kind of the delivery and the order management piece, but also the design tools that we provide. We provide some wonderful design tools, and Mike will talk a little bit about this where customers, engineers can go and really do site design work all the way, sometimes 95%, then they hand it over to us for some help at the end. But these are great tools that create tremendous stickiness for our product lines. And again, versus our competitors, we have the resources, capabilities, the money to go and invest in those and keep up that stickiness. So I kind of talked through a couple of my slides here. You've seen this. These are the products -- we also, in treatment have some of the Infiltrator products over there, but it's really the life cycle of a rain drop in the Allied product set that Michael will be talking through. So very, very comprehensive suite of products. And then how we go to the market. You've seen this. I would add to this, not only our field people and the distribution that we do with our manufacturing and these distribution centers very -- I think an area -- a lot of potential for us to continue to do a great job for our customers there. The company-owned fleet, but I would also add in there the design tools that we provide and have really taken a step change. Then good distribution, very similar story, not the same distributors as Carl talked about with Infiltrator, but I would say a similar story in that very strong relationships with our distributors, very strong suite of products that we provide to them. And in the case of ADS also this asset-light where we do most of the delivery and carry the inventory. But at the top, you see the national guys, Ferguson and Core & Main. There's 4 in line, I would call them as super regional, very important that [indiscernible] wholesale would be kind of a super regional. That next layer very good independents kind of through the middle there, SiteOne, [indiscernible]. We sell a lot to the irrigation type of guys, also. And then at the bottom, these retailers, Pat will talk a lot about that and the challenges that presented to us in delivering to them and how we've changed the game on that. But again, have a place in what we do, and we work hard to kind of service that whole thing. But you get a sense of the complexity of what we're doing there when you look at all that different types of distribution and how they might be receiving our products or redistributing them. All right. Michael?

Very good. Thank you very much, Scott. Good morning, everybody. So I'm going to give a quick update today a little bit on sales and engineering, tell you a little bit about who we are and what we have done. But more importantly, where we're going in the future. So today, I'm going to talk a little bit about our proven market share model and our conversion strategy. That really is the foundation of who we are and what we do. I'm going to go ahead and talk about how we're going to grow our Allied Products. Talk about how we're going to grow in our underpenetrated markets, which would be the residential and the infrastructure market. Dig into the details of how we're going to grow in large diameter, 30-inch through 60-inch pipe in the conveyance side of the business. And then really talk a lot about where we're focused, where our priorities are. We have very specific states where we know there's high population growth, there's lots of construction activity, and we want to make sure we point all of our resources and have all the right strategies in the right place. So the first thing I'm going to talk about, must spend a lot of time on this slide because this really tees up our entire go-to-market strategy. This is what we call our market share model. It's very repeatable. It's do it, [ rents ], repeat. When we take a look at this, it's over approvals, acceptance, coverage and win rate. And so what we wind up doing is we've got a very large team out there of 300 professional sales reps and engineers in the marketplace every day. We've got a group of engineers that works on DOT approvals, municipal approvals. So when we look at this, we figure out how do we divide and conquer. So from an approval standpoint, do we have a DOT approval? Do we have a state approval? Do we have a municipal approval? Are we allowed to play? Once we understand that, then we work the specification game and we work with the civil engineering community out there. Get engineered, get specified, get on plans. When you get on plans, you have a higher win rate. And then what we'll also talk about, which we'll dig into when I talk about Allied is once we get on plans with our leading product lines, there's a lot of other products out there. You heard Scott talk about in 1 of his previous slides, the baseline of $6 billion in the stormwater management solution package out there. There is a lot of tread left on that tire. We have a ton of business to go get. Our conversion strategy is what's going to get us there. And then from a coverage perspective, I talked a lot about our field sales organization, engineering organization. Scott just showed you a slide about our 3,000 distributors that we partner with. This is 1 of the things that we don't rely on other people to bring in order to us. We go to the top, and we call on owners. We call on agencies. We call on engineers, distributors, contractors, we want to control every part of that chain to fully understand what's taking place so we can go ahead and secure that project, optimize pricing and win a project. So as we look at this market share model, we take this down all the way to the granular level at the sales rep level across the entire United States. And what we do is we segment this and we want to understand nonresidential versus residential versus municipal versus DOT. What is ADS' position in the marketplace in each 1 of those end market segments. And then ultimately, how are we going to grow? Because if the economy is going to give us X, we need to grow 200 to 300 basis points above the economy every year at a minimum. So what we do is we look and reflect in the mirror about what our true position in the marketplace is. And then what we do is, for instance, if it was the residential market, we understand who are the homebuilders that are out there, who are the design engineers that are designing these? Who are the contractors, the generals, the subs. And so based on that with our team, we load all that data into our CRM. And every single rep understands who the right targets are to call on because you can wake up and work hard every day, but are you waking up doing the right things and incrementally grabbing share. And that's the responsibility we have to all of our shareholders, and that's the expectation we put on our team in the marketplace. Talk about Allied Products. Allied Products really, this is what allows us to be a full water management solution package. And I think when you look at the results here, and you see double-digit growth here consistently every year. This is the differentiator in the marketplace. This allows us to be the preferred supplier to our contractors, to our distribution, to our engineers, when they're designing plans. So this enables us to go out, leverage our technical expertise. We have the biggest sales and engineering organization in the marketplace. We want to be that resource. We want to create that value. So the things we're going to continue to do, and I'll walk into the details on this a little bit, is we want to continue to understand opportunities to innovate and through acquisition as well. And when you look at this and you see the solution of capture, [ conveyed ] or treat. And then you take a look at the end markets as well and understand nonresidential versus residential versus public, you can see we're very, very heavy right here in the nonresidential. And you've seen the theme, and we talk about this a lot, with low-rise horizontal construction. So as you take a look a little on capture, convey, store, treat, I'll talk a little bit more in detail on each 1 of these. But when you think about the capture side, that's how you collect the water, redirect the water through conveyance. We have our PVC Nyloplast structure that competes against precast structures in the marketplace. As you convey that product, it gets into store. This is our [ lent ] product, right. This is Storm Tech, where it's our staple, it's our leading Allied product. You store the water, you infiltrate the water, you recharge the system, okay? We compete against corrugated metal pipe, we compete against structures. We compete against crates. We compete against other plastic chambers and pipe as well. And then once you get into the water quality side, this is where you're going to go ahead and remove trash, debris, pollutants before it's reintroduced back into the watershed. This could be separators, could be filters, could be biofiltration. You heard Scott talk about that a little bit as well. So Nyloplast, we're excited with where we're headed with Nyloplast, this is an opportunity right now to where it's a PVC structure, we predominantly sell it in the nonresidential market. It's in the 12-inch through 36-inch diameter. It competes very, very well against precast structures. It's lightweight. It's easy to install. It's safe, it installs faster, it's customizable. It's got a superior joint. So when we're out in the marketplace right now, and we talk to engineers, we're selling resiliency. We're selling the values of what this brings. And our ability to go ahead and turn a customizable product around in a very fast period of time. And then get out into the trenches as Carl talked about with his sales organization. After we specify it with engineers, we're out in the field working with contractors who maybe had been resistant to this in the past to show them how to install it, how it can improve safety, how it can improve their time. And as you take a look at a very, very strong demand environment and tight supply, having the ability to have them understand a total install cost and get through this quicker and move on to the next project, that's a tremendous opportunity we have for the next several years moving forward. We continue to take a look at geographically how we're going to grow this. We understand where we need to specify it. And then where we also need to go ahead and work with the contractors as well. That market share model I talked about on the conveyance side, we do the same thing with a group of specialists and our field sales team that goes out and targets, not just maintenance of business, but how do you grow the business? Capitalize on our market leading position with Storm Tech. This is the 1 we're unbelievably excited about. And when you think about this, and Scott said it earlier, this is like a big gigantic pond underneath the parking lot. And when you think about maximizing land use and value of that land and think about go down the street in your local town, where they're developing some property, do you want to have 25 parking spots or 100 parking spots. This gives people the opportunity to maximize high-priced land to go ahead and leverage their business challenge and strategy of what they need to accomplish. As we look at this, this is a great opportunity once again, where we have a back-office team of 40-plus folks that are working on designs every day, providing that service to the civil engineering community. Scott talked about technology and tools and our ability to invest capital. This is something years ago, we realized you just can't have people churning out plans. You need technology. You need to make it intuitive, you need to make it easy to use, accessible. And what we've been able to do is design a tool and most importantly, enhance this tool every year as we continue to hear feedback. But now we have civil engineers and think about how the pandemic has changed things. You have a lot of folks that are working remote. So our ability to go see people, call on people and be in the office with them. We don't have that opportunity every day. So what we've been able to do is now leverage a tool as well that we can do a Microsoft Team's call. We can go ahead and show them and walk them through this. The first several times they use it. And then they can use this to [ tool ] on their time line to design and take advantage and put out a quality product for their clients. You saw a little bit about -- Ron Brochu talked about, and you saw the videos. Unbelievably impressive machines, the capabilities of producing these type of chambers. And once again, I always talk about this. Think about where we play very, very well. And we're playing in that low-rise horizontal construction activity that is booming right now, the warehouse work. That's not drying up. I've got a couple of slides on this, and we're going to talk about e-commerce and where this is going. We are unbelievably optimistic about this, and that's why the investment that Scott and the team made was press #1, another press coming on the way. The great thing about this is, and as I walk you through the market share model, we have a very good understanding of what activity looks like. We just don't hope and wait for an order, we understand when we identify a project, we put it in our CRM. We can track it. We know where it's at. We know what phase of the design, all the way to bidding, all the way to a ward it's at. So then we can work with our forecast and work with the operations team and really leverage that and look into the future, understanding the aging of once you specify to an order to a ship. And so that allows us to get ahead of everything we're doing. But once again, looking at the Storm Tech side of the house, we are unbelievably bullish, optimistic. And once again, when I get into the e-commerce, I think you'll see a little bit more about that. Take a look at water quality, great opportunity here. This is one of those ones where as I talked about, removing the traction the debris before it enters the watershed, this is a very local market. And from a regulatory standpoint, it could be at a state level, it could be at a city level. There's different products that you have to consider, and I briefly touched on this, it could be a separator, it could be a filter, could be biofiltration. So from our side is, we see an opportunity to penetrate this market and look at new products and so forth. We're going to continue to push our team understanding where you can fish, where you can hunt, how to chase this business with the products we have, drive the specs, understand the geographies, talked a lot about the technology and the installation tool for Storm Tech, we have another robust pool on the water quality side as well. And as we've rolled that out, the civil engineering community has completely embraced where we're headed with that. Nonresidential, so as we take a look and you think through this and look at the chart here, we've grown at 7%. And the market retracted 3% through the pandemic. And so as I share what our performance has been versus what the market, but more importantly, where we're going, I always revert back to that playbook of what I talked about. We understand this is our sweet spot. This is where we play in that horizontal low rise, and I keep repeating that because this is where construction activity is and where it's moving. And this is really where we leverage that market share model that's highly repeatable. And as we continue to work through that process, that positions ourselves extremely well. I would say the Allied side of this, this is where once again, with the Allied Products, as we work with the engineers and sometimes you'll hear the word attachment. And what does attachment really mean? So as we lead with [ Piper ], we lead with Storm Tech, some of our key products that get out there and get it on the engineering design firm plans, the engineers are designing a whole lot of other products. So I'll revert back to Scott's comment on a $6 billion market. There's a whole lot of other products that are getting designed out there. So what we wind up doing is, we talk to the engineers and what we're trying to do is pull the rest of ADS' water management solutions with the specified products. And the great thing about this is we have the ability to understand what we're specified on versus what we're quoting as an alternate. So we can go back to each civil engineer and really understand the data through our CRM of our quotation and project tracking. So we can go back and really try to influence once again, the future projects of designing a full water management solution. So I talked a little bit about warehouse. This is where it gets really exciting. So you think about this. Everybody in this room probably orders a lot of things on Amazon, or any of other e-commerce sites that are out there or your family does. And when you take a look at e-commerce, where it was 10 years ago, to where it's going to be within the next 3 to 4 years. And then you take a look at this, think about this, all those trucks that are moving in and out of your neighborhood, you need to have warehouses for that. You need to have logistics centers. You need to have data centers. You need to have all this infrastructure to support all that. And so through some of the sources, this could be as much as an additional 5,300 warehouses out there between now and calendar year 2025, and a $200 million market. And so as we put a team on this that wakes up every day with finite focus of understanding where the developments are taking place, who the owners are, who the general contractors are, who the subs are, who the engineers are that are developing it, then working closely with our team and then all the channels that we work through, we are very, very optimistic that this is going to put us in a good place moving forward. And once again, we talked a lot about Allied attachment. This is a great opportunity to maximize our opportunity for a complete water management solution with this growing warehouse market. This slide is extremely exciting. And if you take a look at the green bars on this, take a look at the suburbs and the rural growing at 10% greater clip. This is right in our sweet spot. Everything that I have been talking about. And once again, as I share our playbook of who we are and what we do, I share that because that activity is what drives results. We don't hope for results. We control our destiny with activity. And when we know things like this and then you understand geographically where to go, that activity then gives us the results that we need to go ahead and provide. Residential. This is one of the ones that you take a look at, and I talked a little bit how we've grown greater than what the market did in non-res. In residential, we grew at 22% versus a market of 5%. If you take a look at the left of the chart. If you look at the bottom right, and you'll take a look at where our market share was at 8% to 19%. So we could be excited that we're at 19% or you could be excited that there's 81% out there to go chase. I'm excited about the 81%. That's what we're going to continue to focus on with our team. And that's why we wake up, I mean that's the rearview mirror. We look out the front windshield. And so when we understand the dynamics of what's going on and the development that's taking place and the low inventory of housing, all those things position us unbelievably well. Then this goes back to, once again, leveraging the market share model, approvals, acceptance, coverage win rate, putting us in that position to go tackle and get growth. And then from the multifamily side, we're extremely excited about that because that's an area where the water management solution package, you sell a lot of Storm Tech, a lot of Nyloplast, water quality, geotextiles, and CertainTeed fittings, conveyance pipe, you get the whole package with that. So one of the key focuses we've done is, we've really worked hard to improve our relationships and build new relationships with homebuilders. And like I said before, we don't want to rely on hoping an order comes to us. We want to control that destiny. And so as we understand and can build these relationships, we want to understand what's important to the homebuilders. What value can we bring to the table? Can't just be great for ADS. It needs to bring value to them as well. So we've been out traveling the country, and we've put a team in place with the gentleman back at our corporate office running it, putting business development managers underneath him. And then what we're doing is we're going out and seeing these folks and talking to them. We've been able to get 5 programs with 20 of the top homebuilders out there. And we're having conversations with everybody else. So we're going to hit this top down at the corporate level. And then what we do is we hit a bottom up. That market share model I talked about, every territory across the United States has every homebuilder in their territory. And then we have data to understand where the subdivision development is and where it's going. And then that's where we go ahead and apply that time once again on who to call on and understand who's resistant. Like I said, we have 81% to tackle. There's a lot of concrete pipe out there. This is our opportunity right now. And you heard Scott talk about it, Roy talk about it, Carl talk about it. What is ADS' value proposition? When you can install pipe 2 to 3x faster, our plastic pipe versus concrete pipe. It's 20-foot sections versus 8-foot sections. There's less joints, it's safer, it's lighter, so when we talk to everybody, we have to make sure we can explain and articulate that value proposition of a total installed cost. And so as you're looking at this, and we talk about labor challenges and some of the headwinds that everybody is up against right now, this is where you can ask questions of understanding, hey, are you having a tough time with labor? How do you get around your book? Here's an opportunity to where you can use our product, install it faster and drive cost out of the overall development. Infrastructure. So I went ahead and talk about a couple of areas where we outpaced the market. This is an area right here where we grew at 2% versus a market growing at 6%. So we're fully aware of this. Now the good news is, is when you take a look at our priority states, we grew at 8% and our other states actually retracted 4%. So we understand where we want to focus, what approvals we want to work on, but this is also the opportunity to say, "Hey, where you're underpenetrated, and Scott talked about this and with some of the change in leadership with Bob Klein, heading up where we're headed in the infrastructure market, we know our position and most importantly now, what playbook do you put in place, what resources do you put in place? And then how do you go execute that so we can grow our share?" So this right here is really where we want to build. We want to build from the foundation up. Talked about Bob. He's put folks in place. We have somebody that's running the municipal side of our business. We have somebody that's running the DOT side of the business. Somebody that's focused exclusively leading a team on approvals. So as we're working through all that, now it's prioritizing the right approvals we want to get, then it's going out and saying, with the approvals we do have, how do we do a better job executing on what we already have in our basket, then it's driving engineering acceptance, understanding geographically where to go. And it's prioritization. Once again, you can wake up and work hard or you can work unbelievably smart with the right plan that puts us in a position to go grab that share. You heard Roy talk a little bit about the infrastructure bill in the Jobs Act. This is going to infuse $550 billion back into the marketplace. One of the things that we're looking at is, we're excited because we've got a lot of opportunity to grow with just what we already play in and get better at that. And then you get this incremental funding coming in. So what we've done with Bob and his team is fully understanding where is the funding going by state. And then by each subcategory, where is that going? Is it going into the infrastructure? Or is it going into the DOT work? Is it going into airports, rail, transit? So by having that understanding and then being able to go out and talk to people, talk to customers, talk to, like, anybody in that stakeholder channel that I talked about and get feedback from them, it helps validate what we're doing and where we want to go. This slide right here is a great slide, and we talk about prioritizing and focusing on the right things. So if you think about this and look at Florida, to Texas, to California, most importantly, approvals where we have gotten approvals and then understanding where population is, Florida now we're able to participate with our existing approvals, especially the new ones we've got 60% of the population. Texas, 50% of the population, California, 45% of the population. So what does that do? That puts pressure back on us now saying, guess what, the door is open. Now what are you going to do with that? And that's why I go back and I have a broken record, but the activity within that market share model of prioritization and divide-and-conquer across our vast team of 300-plus people, everybody understands when you line up, when the ball snapped, where do you go? What's your position on the team? And how do you play the game? How do we win? So from a pipe growth perspective, it's grown at 8%. And I think what's exciting is, and you heard Scott talk about this, and he shared this in his agricultural update, you can see where ag has grown at 11%. I said on the bottom right, what really excites us is HP Pipe, which is our gray high-performance polypropylene pipe, and roughly 2009, 2010, when we introduced that pipe in the marketplace, we needed to have a product where there was -- due to resistance in the marketplace at either the approval level, engineering level, contractor, whatever it might have been. This is a more stiff rigid product with a superior joint that allows us to go out there and take market share. So as we look at this and kind of understand and you can kind of look at the pie charts of where the sales are from '18 to '21. You can see the N-12 has retracted a little bit and where we've grown a little bit, it's been in that HP area. Now what I'd say here, taking a look at really the large diameter, it's another area where people have been hesitant, they wanted to use a lot the RCP, Reinforced Concrete Pipe and 30 inch or 60 inch, this has been a top priority of ours. So as we're out talking to people, this HP product line, what it's really done is it's positioned us very well. When you take a look at the right side of the page right there, it's positioned us in the residential market and the infrastructure market and think about this. What I shared earlier was, where do we have the biggest opportunity to take share and penetrate? It's in those markets. So you've got to have the right tools with the right strategies, and this puts us in a very, very favorable position to go do that. Winning in priority states. As we looked at this and when Scott came on board and we kind of took a step back and said, "Hey, look, trying to be everything to everybody. We're going to continue to sell across all 50 states, but where is the development? Where is the population? Where are we underpenetrated? How do we leverage our team to go get that business?" As you look at this, you can see the Eastern seaboard, started up at New Jersey and work your way through Virginia through the Atlantic Coast into the Southeast that opportunities in Tennessee and Kentucky and then up through Indiana, Michigan, Wisconsin, then you take a look and you've got Oklahoma, you've got Texas and you've got California, Colorado and Utah. So we have a very good understanding of what to do, where to go, how to do it. Now it's our responsibility. As you've seen, we've had the ability to exceed and grow faster than the market, right team, right strategy, puts us in the position to accelerate this even further. I think a couple of key stats here that I want to point out was you look at 60% of the construction activity in the U.S. represents 55% of non-res activity, 70% of overall housing starts streets and highway activity. And then the bottom statement, that's a big one right there. Construction activity forecast to grow at 7% CAGR between '21 and '25. So everything I've walked all of you through of activity to awareness to what's taking place in the marketplace was construction funding, we are positioned very well to go run our playbook. So as I talked a little bit about Florida, Texas and California. We've grown Florida at 15%. And as I look at this, we're going to continue to work on our contractor and municipal acceptance, I think we've got some water quality opportunities that we're going to continue to build on and continue to look at approvals, continue to add resources where we need them. When we're doing well in a state, we don't just say we're doing well in a state. We take it all the way down to a metro market or a county level to truly understand how we're participating and what our share is across all the various solutions, which then feeds right back to where we're going and how we play the game. Texas, a big opportunity here. The team has been working extremely hard, Scott, Bob, the team in terms of working on the TxDOT approval, we've gained nice approvals that's unlocking opportunities for us in Dallas, where we've been underpenetrated. As we continue to look at this from a low maturity standpoint. And as we look at the contractor acceptance, the engineering acceptance. We've added a lot of resources that everybody is positioned, whether they're on the engineering side, the specialist side or the sales side, that can go ahead and allow this. And then we're going to continue to work through things such as our streamlining the pre and post order because what I really want to say on that point was, as we go ahead and do the activity and identify a project, quote a project, ultimately get a purchase order, then we want the sales team rent to repeat, go back and do this again. And then you'll see Darin and Pat's presentation where they'll talk about the things they're working on, on improving this side of our business that then enable sales to go out and grab that much more. The California side of the house, this is once again, low maturity, under-penetrated, growing at 7%. And the approvals we've gotten are opening up a lot of opportunities. It takes some time once you get an approval to grab acceptance and influence in the marketplace. But this is an area right here where it's a big opportunity. And it's not just on the pipe side. This is across our whole solution package. It's a promising water quality biofiltration market. We need to continue to capitalize. We've got a CalTrans approval. We need to continue to capitalize on that when people drive around and see product on highways, that opens up more opportunity for you in other, whether it's residential or commercial because now all of a sudden, you're getting even greater visibility for what's taking place in the market. And we're going to continue to work on service in California. It's a big state. It's a long state population of 40-plus million people. Scott and I have been out there several times. And we just go to a simple little part of Southern California, it feels like we drive around for 6 hours. But you need to be able to service the customers. And as we go out there and provide that package and when we create that value and we deliver and meet their expectations, that's another reason why they want to do business with ADS. So that's very important for what we're going to continue to focus on. So in conclusion, we're extremely excited about what the future holds. So we wake up every day. This is what we do, the team hears it, they know it. They understand that this is our playbook. And when we do this and we do this well and we execute that as you take a look at these Investor Day themes of material conversion, water sustainability, consistent performance, effective capital deployment, we check every box across those lines. And so we're going to grow 200 to 300 basis points greater than market. We're going to leverage the infrastructure bill. We're going to drive approvals. I spent a lot of time talking about the conversion side of the house. And then we're going to invest. The tools that Scott briefly touched on and I talked about a little bit, this is going to continue to enhance what Brian King and team are working on of. We've got a team out in the field, we're going to have back office from a marketing perspective, from a technology and tool perspective, and we're going to hit this from numerous angles to go out there and achieve what we need to achieve. So thank you for your time today. I appreciate the opportunity. Scott. I'll hand it back to you.

Thanks, Mike. So it's something that I wanted to say after Mike's piece and Carl's also. Many of you've heard me say this several times, there is an intensely local nature to both of these businesses. And that's because our products are applied differently in New York or Connecticut, or New Jersey versus Arizona or Florida, because the water tables are different, and the regulations are different because of this, the topography is different. So that's -- I think that's a very nice characteristic about the business and gives us some of that, I would call, momentum or a moat is you've got to be very local in these businesses. You've got to have great distribution. You got to have that service model. And these -- both of these sales organizations have that, but then use really sophisticated tools and strategies. Mike talked about the CRM that we use well before I was here, they were standing that up. I can tell you, we wouldn't have gotten through the pandemic without it or been able to manage how we were going to the market or pursuing jobs, the types of things that we could do with that information. These are very data-driven sales organizations if you didn't get that from Mike's piece there, how he's driving that army every day. All right. So growth through operational excellence. And Darin and Pat will come up and go through this. But I wanted to just, again, tie it back a bit to what we talked about in 2018. Darin had just started the week before. I think Pat started the week of our investor conference several years ago. But at that meeting, we talked about this business model at ADS and what ADS really does. And it starts really with the raw material procurement, procuring virgin resin that more through grew into the recycling activity. That was a primary lever of the company along with the sales and the go-to-market that Mike and Bob Klein talked about, and we just went through there. And again, very, very good at both of these. I mean, clearly, had created a lot of value over time. But there in the middle, this conversion of material into pipe, the distribution and logistics activity, not only of the pipe, but these allied products and these, what we call distribution yards or distribution centers of these products. And then there's trade delivery. And it says trade today. I think I used to just say delivery, but really understanding how we use those assets. We run a pretty good sized fleet. And how do we use that in the right way, what is it intended for and how it drives the most value. And I would say, in 2018, I had a lot of ideas some motion in many of these areas, particularly around the conversion piece. But I think you'll see we've done a tremendous amount of work in here through this middle part. And it's now a really I would say, highly contributing piece of the company because it's allowing us to deliver better, to deliver smarter, to use our assets in the right way. We got 30% more -- 33% more capacity out of that conversion network by doing the things that Pat -- I mean that Darin and Pat are going to talk about. So a lot of work here, but still a lot more work to go. I think we would all say that. So there -- this -- and we've used this chart with our Board. We used this chart internally, really how to separate out these activities. And Darin is going to talk about the 3 on the left, the capacity expansion that we're doing, executing on that, the engineering necessary to do that, the capital appropriations to do that. And we spent a lot of time over the last 4 years on capital appropriations and how to do those correctly, the automation. And this is a very focused automation on where our problems are. And by the way, to staff up engineers to go and execute those first 2 boxes. Ron had -- they didn't really mention it, but obviously, long-standing, very high-performing manufacturing engineering work executed in Winchester to do the types of things they're doing. By the way, you reorganized, you've expanded your activity over the last couple of years. And we've had to start kind of from scratch to build up the kind of activity that we can execute on that capacity expansion and automation. First, we started in that continuous improvement in environmental health and safety. And thank goodness we did. We got a lot out of that. The continuous improvement, the scrap reduction, the changeover improvements. If Chakeyla Anderson had not joined us back in 2018, late 2018, 2019, along with Darin, I think it was your first -- the first hire you had because we knew we needed to get on top of our safety program. We would have never made it through that pandemic without her contributions to managing the business over those 2 years. Now Darin will talk about the left, the right. Really, both of them are complex. I don't think we understood how complex the right side was with this order management and we've gotten a lot of productivity out of this production planning, customer service, the order automation investments and progress we've made. This is a very transaction-intensive business, kind of surprising to me when I got here the intensity of it. But to get our arms around that and to get a good program driving that has been important to our performance over the last couple of years and will contribute mightily in the future. And then the last piece is logistics and transportation. I mean it's a big complicated fleet, lots of different assets moving around. And I think we've got a very good handle on how to kind of manage that fleet going forward. There's tools that we're adding to it, along with the planning you have to do around the driver shortages there. So lots going on here that we're working. But really what you saw in both of these, call it, modules, the Infiltrator one and now the ADS one. 90% of what we do are encapsulated in sales and then these operations pieces. That's where most of our people are in those activities. It's what our customers count on us to do and it's part of our -- like I said, this value proposition, particularly that service element. So Darin, I'll hand it over to you.

Thank you, Scott. So I'm going to start off. I'm going to call I'm also going to focus on the manufacturing operations, today. I'm going to talk a little bit about where we've come from and how we're thinking about the future in our manufacturing operations. So to start off here, if you remember the last investor meeting, Scott covered a lot of our manufacturing initiatives that we were doing to optimize our supply chain and add and bring more value to our manufacturing operations. Since that 2018 meeting, we have achieved record production levels each and every year. Now what's really exciting to me about that is we've been able to do that with 18% less plans and very minimal investments in new capacity. We have achieved this by getting more out of our assets through continuous improvement in lean techniques that have significantly reduced downtime and scrap. We've improved our planning process and optimized our network based on what and where we make product that has really driven much better asset utilization in our network. We have also executed a SKU rationalization strategy and centralize our production planning process that has simplified our operations and driven much longer production runs and less changeovers. So all these initiatives over the last three years have driven, as Scott mentioned, 30-plus percent capacity into our network. Now going forward, we have now implemented a very disciplined capital deployment strategy that will continue to drive -- enable growth through capacity expansion supported by automation that will help mitigate both labor challenges and make our plants much safer. So as you can see here, we now have $150 million approved in ADS manufacturing to put -- that we will spend over the next 18 to 24 months. To put this in perspective, we averaged over the last 10 years, between $35 million and $40 million of capital deployment. So this is a significant step change in deploying capital. So when we talked to you last time, we knew this capital was going to be needed to continue to enable growth in the business. And we knew automation was going to be essential to both mitigate labor challenges and continue to drive better safety into our operations. That said, over the last 3 years, we have built out an extremely capable, very experienced manufacturing engineering and automation team to enable us to execute these step changes in capital much more successfully. These investments include new production lines, additional -- new production lines, along with improving current assets, along with automation to support the mitigation of the labor. Also, we are also adding additional tooling into our network that will both simplify our operations and make our scheduling much more easy. We've added ancillary equipment such as material handling systems, of which will both give us better productivity, and we will move some of this material out of our factories, which will enable space to add more production and increase productivity as our material travels through these factors. We're also debottlenecking our raw material operations to support these additional capacity improvements. This is a look at our first phase of new capacity. As you can see, is very much focused on both the South or the Southeast, in the Midwest, which is aligned with Mike Huebert talked about as our priority states. This started in January, and we've had lines now going in starting in January and being installed at this very moment. As you can see, the first phase of these investments -- we're going to get an additional 10% capacity -- total capacity from these new production lines. The next phase of investments will be in both the Northeast and the South Central, as you see here, which we are basically supporting out from our international operations today. So over the last 24 months, given the strong demand we have seen, our international operations have become a very effective way to both support the growth in these 2 regions the Northeast and the South Central, along with reducing lead times and improving our customer delivery. They have also helped us mitigate the U.S. labor challenge that we've been dealing with over the last 18 months. It's also important to note that we are the only storm water manufacturer in North America that can leverage international operations during these periods of high demand. This strategy has also improved our conversion costs in these international operations by driving more volume and improving utilization of those assets. So we are also investing in our current network of assets to both -- to improve safety, increase productivity and long-term reliability. We are upgrading controls. We're adding sensors to our equipment to pull information out of this to improve our maintenance, moving us from more of a reactive to a more predictive maintenance program, which will allow more uptime in our manufacturing facilities. We are standardizing equipment in processes to reduce complexity, simplify training and simplify training of our associates. Now in support of all this capacity expansion, we have to do something with our raw material. We talked about -- Scott and Brian both talked about our 500 million pounds of recycled material that we're doing currently and our commitment to take this to 1 billion pounds. This 1 billion pounds both supports our sustainability goals, but it also gives us lever to both manage and control cost. If you recall, that in the winter storm last year, this was also a key component of how we kept our manufacturing operations running. While these res -- 60% of these resin producers were shut down for an extended period of time, our ability to both convert and process these recycled materials insulated us from some of the material challenges that our competition had to deal with over that time. So now only does the control cost is going to give us additional continuity of supply for long-term capacity expansion. Now this is a very big goal going from 500 million pounds to 1 billion pounds. So all of these levers are going to be necessary to get there. So you can see we've -- I've already talked about we're going to -- we're debottlenecking our current recycling facilities to get additional production capacity. You've also probably heard about our acquisition of Jet Polymers in recent months. We will continue to do more acquisitions in this space. Our procurement team has been on the road for the last year, creating deals with large resin suppliers that will continue to secure supply for this growth as we go forward. We have built out an extremely strong material science team pool of material -- subject matter experts that will continue to widen what we can buy, which will also enable better cost and additional feedstock for our facilities. And last but not least, we are looking to invest in new organic capacity, which consists of both new upgraded facilities with new technology and possibly a new greenfield, brownfield facility -- state-of-the-art facility. Scott talked a little bit about this in our last presentation, we talked about the flake to pelletize material. Now if you weren't in that presentation, I'll just give you a quick reminder. We used to use a lot of flake in our facilities, mostly in these ag facilities that we talked about. This flake material creates a lot of variation in these facilities. And when you run them in multiple manufacturing facilities, that can be a very big problem both with quality and with productivity. What we found moving this flake material to pelletized material as we get a 7% to 10% productivity improvement. Our quality is much better controlled because when we take it out of our manufacturing facilities and the blending process and moved into a recycling facility we can control in one place. What this has done has enabled us to send this material in the same format and reduce the variation. So each time they run it, they can run it at the rates that we're expecting on the machines, and they can expect the same quality each and every time. This is enabled -- this is one of the pieces that has enabled us to grow that ag business that Scott talked about earlier. And as you can see, the progress that we have made on this. In 2018, when we spoke, you can see that the green bar here in the middle represents that fleet material. We were producing, I think we're utilizing maybe 160-plus million pounds of that. We have since then reduced that by over 2/3 with a goal to get to 0 by the end of 2025. You can also see by this chart that our recycled material is continuing to grow at double rates versus our virgin material, which will continue to contribute to that 1 billion pounds that we talked about earlier. So automation, very important piece of our strategy here. Of the $150 million that we have approved for capital that I showed earlier in the deck, $30 million of this is earmarked for automation. And this is the initial piece. We will continue to invest in this automation. Just to give you an idea of what we are focusing on is our downstream equipment. This is our highest labor activities. It represents 75% of our workforce inside of our 4 walls. It represents 90% of our turnover, over 35% of our injuries. And finally, these can be areas that bottleneck our operations. So by automating these areas, we're going to get much better productivity, we'll mitigate these labor challenges and will considerably improve the safety of our plants. This automation is currently being installed at our plants. We've had this stuff on order for 18 to 24 months, and we will continue to do this over the next few years. We have a large number of plants. So this will be a longer term, unlike Infiltrator who's pretty much fully automated today, this is going to take us much more time to get into the plants and get up and running. But I can tell you this, we're seeing quite a bit of improvements with what we've put in there so far. So to give you an example of our automation. This is a downstream stick pipe process. As you can see, there are multiple touch points in here, okay? These touch points all have high risk of both laceration strains and springs. We have removed -- this automation will remove these touch points, allowing us to both reduce the amount of safety incidents we have, and it will allow us to repurpose that labor into other areas of our operation. This is a new cooler that was just recently installed in one of our plants. So if you were here at the last Investor Meeting, if you go back and look at that presentation, you will see back in that time, this was just a concept. Well, this is now a reality. We have these now being installed into our plants and much more coming as we go forward. This is also the second largest piece of our business, and this is the most labor-intensive part downstream operation we have in any of our plants. So our goal is to outfit all of our plans for these types of automation going forward, which will help mitigate that labor again and help us continue to drive more productivity, remove bottlenecks and continue to expand on that capacity. So we talked about the automation, but that's not enough. As I told you, this is going to take a period of time to do and that's not nearly enough. We have to do more now to mitigate these labor challenges that we've seen over the last 12 to 18 months. So other things that we are doing is we are focused on updating our equipment, engineering out high-risk areas to improve our safety. We are upgrading the work environment in our plants. And what I mean by that is we are upgrading our facilities to both improve things like restrooms, break rooms, parking lots, the things that are really important to our employee based on our manufacturing facility. We are -- we have invested quite a bit of money in educational and training programs for our leadership and for our skilled employees that is driving much better visibility and career path for them. We have simplified our process, as I spoke about earlier, making it much easier for them to do their jobs. And Brian talked a little bit about DE and I earlier. This is something, too, I think that our supply chain leadership has really embraced. So as I travel around the country to our manufacturing plants, it's obvious to me that we've really embraced this, and it's really starting to drive much better -- we've been able to attract and retain much better talent since we've started this, and it's also making us a much better partner in these communities that we work in. So when I first started here in 2018, the one thing that was evident to me is we have a large number of plants throughout the United States. We have a lot of very hard-working people, I mean, extremely hard working people with a lot of good ideas. The one thing we were really missing was a way to capture those and institutionalize those in a process so that we could create standard work, drive best practices across facilities, and we could also drive continuous improvement. So what we were kind of missing was a way to pull all of that together and be able to continually use that to drive more and better processes within our systems. So you may have heard of Danaher's business system or Toyota's production system, both of which I've worked with in the past. These are businesses -- these business systems or what they is a foundation of how these companies drive value in their operations year-over-year. So as we looked at this, we decided in 2019 that we need to continue to make our continuous improvement, standard work in all of these different innovative ideas, part -- or make this part of our DNA. So we started building out our own operating system. Over the last 3 years, we have built a very, very effective and experienced continuous improvement team that have been building out this green line operating system. The best part of this story is we're in the very early innings. I mean very early innings. And we are already seeing these types of improvements in just 18 to 24 months, 20% reduction in downtime. 30% reduction in scrap rate. An 8% increase in productivity. 33% reduction in injury rate. And remember, we've done this in these very labor and challenged environment with very high turnover. So this is really working, right? And we still have a lot of runway to go here. So we've also reduced our SKUs by 75%. And as you can see, this is kind of what bridges that 33% of additional capacity that Scott talked about earlier in his presentation. So, we have a long way to go. We're very early in this. So as we continue to invest in this capacity and get it online, we continue with these continuous improvements. We see a significant amount of value in our operations. They're going to continue to contribute, enable our growth and contribute to the bottom line. So with that, I will give you Pat Coyle, and he will talk a little bit about our planning and logistics.

Thanks, Darin. Good morning everyone. I'm excited to talk to you a little bit about our order to delivery process and some of the challenges that we face on a day-to-day basis. I'm going to start with our order management group. Now order management group, Scott talked a little bit about the complexity that these folks handle on a day-to-day basis. We have 120 customer service representatives. They transact over 400,000 orders per year, 2.5 million line items. That's a tremendous amount of complexity that these folks deal with. And I'm excited to share some of the programs that we've just started to implement that's trying to help them and simplify the work that they do. The second group, and Darin talked a little bit about it, is our production planning group. We have over 1,500 SKUs and 48 factories that we planned. And we've just invested in a brand-new, state of the art planning system that will help us get even better at maximizing our assets. This program will make sure that we have the right product at the right place at the right time. And finally, our logistics organization, ADS is very unique. We operate a large trucking company. We have nearly 2,000 assets within our portfolio. These assets are specifically designed to handle pipe and be able to deliver to the harsh environments that our customers demand and that Mike talked about earlier. So I'm going to start with our order management group. Now I talked about the 120 customer service representatives, the 400,000 orders, the 2.5 million line items that these folks handle on a day-to-day basis. And we've just recently started a new software system that utilizes AI and optical character recognition. Now this software helps us get an order, route that order, put it into our ERP system so that our CSR can process it. This has reduced our processing time by 48%, but most importantly, it gives our CSRs the ability to spend more time with our customers solving different challenges that they have. Now our logistics organization. Now I talked about the nearly 2,000 assets that we have in our portfolio. And 3 years ago, when we were all here together, we said we're going to go back and assess that fleet. And what we realized is that we can't be everything to everyone, and we really needed to focus our assets on what they're built to do, and that's handle our trade fleet, our trade deliveries. So we went out and we started a managed maintenance program. This managed maintenance program was designed to get our assets on the road and keep them on the road. We also started a centralized common carrier program. This control tower was -- allowed us to pull all of our common carrier spend to get better than market rates and most importantly, in these harsh environments, be able to secure the capacity needed to continue to grow. And finally, I'm proud to say that in 2020, we became a smart way transportation partner. This gave us the ability to pull our data with large and small public and private transportation providers to help us with our 10-year sustainability goals. And we're not done yet. I'm proud to say that the initiatives are working. Our payload efficiency is up 9%. That's pounds over miles. Our pounds per driver is up 11%. And we've done that with more volume and less trucks than we've ever had before. And we've got a lot more to go. Now I mentioned that we can't be everything to everyone. And as we do the assessment of our fleet we realized that a big part of it that was holding us back was our retail business. Now we're a little bit different and unique ADS, we deliver directly to retail stores. These retail stores are very difficult to get to. They're in urban areas. They're in -- scattered throughout the United States. The stop counts are large on these. So it takes a lot of activity in order to get these things right. So we realized we had to do something different. So we started a program where we opened 2 distribution centers on the East Coast. These distribution centers are specifically designed to handle our retail bar freight. And what did we find? Our delivery performance went up 23% while our payload efficiency went up 8% and our error rates came down by 56%. Those are extraordinary numbers. And it wasn't just for our retail customers. It was for all of our customers. We got better with our trade and we got better with our retail customers. I'm proud to say that we're going to open another facility in Denton, Texas later this year. That facility will capture the very important South Central region for us that Mike talked about earlier. Most importantly, when we finish this program, we're going to get 100 drivers back into our fleet. Those drivers will be focused on that very important trade that we've talked about here several times today. Now we've also looked at our portfolio of assets, and we are going to invest in over 250 tractors over the next 3 years. These tractors are going to have state-of-the-art safety and in-cab technology to keep our drivers safe and also be able to help us recruit the driver of the future. We're also going to improve our trade trailers. These trade trailers are going to help us be able to improve our loading and offloading of our material, and we're going to get about 200 of those over the next 3 years. And Scott talked a little bit about our agricultural trailers and that new generation to be able to help us with our delivery and continue that effort going forward. And finally, we're no different than anyone else. We're dealing with the same workforce challenges that everyone else is, but we're getting ahead of it. We started a driver daily management program where we're using advanced analytical tools to make sure that the drivers that we have are going to where the demand is. We'll move drivers around the country to make sure that we're servicing the growth that we're seeing in the particular states. We're also utilizing flex fleets and these are third-party fleets that we've developed to be able to pop up wherever the demand comes. This allows us to be very flexible as we see changes in the demand environment. We've also spent a lot of time with our recruiting program. We've partnered with a world-class 3PL that is helping us bring more candidates so that we get more folks into the cab. And finally, we started educational programs. These educational programs were going straight to CDL schools, where we're finding and hiring drivers right out of the CDL schools and putting them into our cabs. And finally, we have our doctor driver program, where we're partnering with the manufacturing team, and we're bringing folks all the way from the manufacturing floor our distribution centers, and we're sponsoring them for a CDL ownership. This is really helping us be able to leverage what we need from a driver and being able to get more folks in cab. All of this is around being able to support the growth that Mike and others have talked about here today and to keep us competitive in our pricing. And with that, I'll hand it back to Darin Harvey.

So in summary, we will continue to execute on our material conversion strategy through strategic capital investments supported by continuous improvement aligned with our sustainability programs. We will deliver consistent performance through status processes and integrated systems institutionalized by the green line operating systems I talked about earlier. And we will have an effective capital deployment strategy focused on high-return projects that continue to reduce labor challenges and improve productivity, all in support of growth of the company. With that, please welcome our Chief Financial Officer, Scott Cottrill.

Thanks, Darin. Good morning, everybody. I'm smiling only because at least half of this room has come up to me at some point this morning and said, where are the targets? Where are the financials? Did you guys forget them? Are you going to talk to them? I promise you we are, and I'm proud and excited to be the guy that gets to do that because they're good results. So I will tell you that I've heard this pitch, I've been through these initiatives with all these guys, it is an exciting time to be part of ADS and where we're going. So I'm excited for the team, the company, our shareholders, our Board, everybody. So -- and again, it's exciting for me to go through our financial targets, and the talk and correlate those targets back to how we believe we're going to continue to create significant shareholder value and shareholder returns as we move forward. Before we do that, I like Scott's slide that he started the day with. So let's go full circle. Let's go back to that. This is what we've done, right? We've executed. It's a strong culture of execution. We make commitments. We hit the commitments. So what's not on this slide is that fourth leg of that shareholder value stool, which is capital deployment, capital allocation, very important. It's one of the fourth pillars of our themes today. We understand how significant that is driving shareholder value. I'm going to spend a lot of time on it. But the reason I bring it up is these are consolidated numbers. This includes Infiltrator, and it should because that is what we get paid to do to deploy that capital to optimize shareholder returns, shareholder value. So really good returns versus those targets. But to be honest and not disingenuous, those targets were based on an organic profile. So we will talk organically. And even on an organic basis, we took those 2018 targets and we outperformed significantly. So it's nice to start there, but it's also important to understand how did we perform relative to our peers. So again, really strong execution, we think really strong performance, but how did our peer group do? At ADS, we look at our peers in a couple of different buckets. We have our water peers. We have our building products peers. And then we have our conversion peers, so -- that are a lot like ADS, where they're converting traditional minerals and products into their materials and products, taking share above-market every year. So again, we're very pleased with our performance, exceptional performance, not only versus our targets we committed and communicated in '18, but also related to our peer group. Total shareholder return. This is the optimal -- or ultimate scorecard, right? We can talk about all the driver measures you want, this is one of the key results measures. So on a total shareholder return basis, going back to fiscal year '18, all the way through February of this year. And again, versus our peer group, significant shareholder return shareholder value. So translating financial results -- first, translating initiatives to financial result and then financial results into total shareholder return and value, really important that those all string together. And for everybody here and listening in, for this team, that's extremely important that these all correlate and tie together. So here are the targets. So I promised Scott I would go slow on this since we didn't provide them to you ahead of time. So we see going forward, over the next 3 years, a 10% plus CAGR on the top line. Again, driven by the strength, diversity of our end markets. The above-market growth. You've heard several of the folks and presenters today talk about the fact that we do grow 2 to 3x or percentage points above our end markets, really a strong testament to that conversion story. That will continue. Growth CapEx, a couple of slides that are in here related to capital allocation, capital deployment, and specifically starting with internal uses of that through CapEx. We are going to prioritize growth CapEx over the next 3 years, followed by productivity, automation and those initiatives as well, which are very important. But right now, it's on growth CapEx. That's in fiscal '22 and as well as '23, '24, '25. And we'll talk about how that high level of investment organically in that growth and productivity, we're going to keep that spend at that level here as we move forward. You heard Infiltrator talk innovation. You heard several of the ADS legacy folks talk innovation. It's really important to what we're doing. So that innovation, new product introduction, also very important as we look over the next 3 years. On a margin basis, a very big issue for everybody as we talked through the performance we've had through '21, what we've seen in '22 with the inflationary cost pressures and margins. 400 to 500 basis points is our target. That would take us to 20 -- somewhere between 28% and 29% by the end of fiscal year '25. And again, it starts with the first column, and it starts with volume. And that volume when you think mix, think highly profitable, high-growth segments such as Infiltrator, Allied Products. So that's where we start. You also see that top line growing -- and the EBITDA growing greater than that top line. That's the leverage that we'll also get on our fixed costs as we look there. That second bullet really important. It's paid off significantly this past year, something that will keep in front of us. We've told you all numerous times that our pricing paradigm really changed over the last 5 years to that value proposition and how we think about pricing. But pricing above inflationary cost pressures, that will remain, that will stay, that's in our DNA and an important part of that margin expansion story as we move forward. I talked about volume, but the use of recycled materials. Again, it's recycling capacity, but its capability. And it's a nuance, but in the Infiltrator presentation, you heard the word blending. That's really important because that blending prowess knowledge and engineering allows us to open up that material feed streams to a much wider aperture, and if you can blend that well into the resin types you need to run your machines and get the properties and your products to perform, that's a really leveraging benefit for the company as we move forward. Continuous improvement, lean transformation, all part of our DNA. Darin talked about the business and operating system that he's rolled out there. CI Lean is in there. It's continued to be in there for the last 3 to 5 years. This year, it gets worked a little bit because of all the inflationary cost pressures, but definitely something that we're continuing to work on as well. Again, left to right. That then translates into a 45% to 50% conversion of our adjusted EBITDA to free cash flow. We're going to continue to spend at extremely, I'll call them, high levels relative to our historical performance on CapEx. We look at investing in growth CapEx, organic CapEx as our highest return, lowest risk option and we will continue to do that. We'll talk here in a minute about the firepower or the allocable capital that this type of profile performance execution generates, and it's extremely powerful. And the flexibility and optionality, it gives the management team and our Board of Directors as we look down and down to the next 3 years. So everybody good? Everybody wrote down everything? Okay. All right. I don't want to go too fast. But we're excited about the opportunities and where we're going to go. So again, I talked about a lot of my presentation is going to be on capital allocation because I really do believe, and we've shown over the last 3 years, you have a balanced disciplined way of allocating your capital. It can be extremely leveraging and lead to extremely good shareholder returns and value. And we've seen that, and we'll continue to do that. Scott hit on this in a couple of his slides as we went through it, but I'll let you look at that pie chart. That is really a balanced use of capital, right? We're always going to prioritize kind of those value creation levers, the CapEx, the M&A, the organic initiatives. But those value distribution, that return of capital to our shareholders, that's important. Return on capital, absolutely first. Return of capital is something that we keep in our thinking all the time. So dividends, really big piece of what we do. We'll continue to grow those. We had the special dividend as well that is in that $180 million indicated. Share repurchases, Scott already covered, But again, we've committed to a $1 billion share repurchase program we just announced. So again, we understand the cash flow that this business can and will generate, and we're laying out for you all kind of how we intend to deploy that here as we move forward. The key for that share buyback program is we are not sacrificing any growth opportunities to go do that. So we'll always focus on those value creation growth opportunities first. Return on invested capital on the left, the only reason it went down is because of Infiltrator, no defense guys. But when you buy a company, you pay fair value and a premium, that's what happens. But then you see what goes on when you got a business that performs that well, generates and drive those synergies that those guys covered. And they're so outperforming the numbers we had in our acquisition model. So again, that will move northeast, continue to move northeast as we move through the next 3-year period of time. So return on invested capital, I don't want to go too fast through that metric. We really like that metric. It means a lot to us, right? It's not only sales growth and margins and free cash flow, it is. But returning -- return on our invested capital and how we deploy that is really important to us and something that we're going to keep in front of us here as we move forward. Allocable capital. Again, that $2.4 billion to $3.4 billion range or number that you see on there that's available for M&A., share buybacks, any optionality that we choose to maximize shareholder value, it's significant. And that's after, and I'll talk to, $400 million to $500 million of CapEx that we're going to commit to over the next 3 years. So significant firepower available to us. It could be an organic investment that comes up for growth CapEx that we're not thinking of today, but a year from now, we should and we will. And again, it's the optionality, it's the flexibility that the cash flow generation, the balance sheet, our leverage profile allows us that we can pivot, and we can toggle. If that means that instead of basically moving it from over in this bucket, and we've got a better opportunity to invest it over here to support growth, recycling or one of the other initiatives, then we've got the firepower to do that, and we will do that because that by far is our #1 priority. Allocable capital, again, capital expenditures, $400 million to $500 million. I'll talk about that on the next slide. The last 3 years, this is a baseline. It was $190 million. So a significant increase in our spend. Growth CapEx, again, followed by productivity. Share repurchases, the $292 million, important. I think the $1 billion share buyback program that we just announced, again, shows the commitment and the belief of the company, the management team and our Board as to where the company will go from a shareholder value perspective here over the next 2 to 3 years. And then again, I'll keep hitting it, but it's very important. This performance provides us with significant capital and flexibility as we move forward. So here's the CapEx slide. On the left, you see that, again, we spent $190 million over the last 3 years. A lot of that was in growth and productivity followed by IT and other. Again, we will leave that kind of focus and prioritization thereof, but look at the absolute dollar amounts. That's the key, right? So we're going from $190 million over the last 3 years to $400 million to $500 million as we move forward. So that innovation, automation, all of those are really, really key. And again, recycling, we talk to recycling and the use of recycled material being 15% to 20% cheaper than it is to use virgin resin. So as we look at those kind of returns and the returns we've had, we are vertically integrated in providing and producing our own recycled resin today. As we look at the returns that those businesses have given us and we've done our look backs, we know what kind of returns are in store for us, and we will continue to prioritize that. Acquisitions. We've made significant strides on the acquisition side. We've made significant investments. Dean Bruno is here with us, who leads that business development effort. Couple of folks that we've added under his team, and we'll continue to look to potentially expand that here as we move forward. But very happy, very proud with how that group has really become proactive, front foot. ADS Infiltrator have had and still have today great reputations in our respective industries. So we always got the calls. If somebody was looking to monetize an investment, sell an investment, second or third generation family was looking to get out. Now we are doing not only that, but we're being proactive on our front foot, target identification, target pursuit. So I think very effective, we very much like the funnel, we're going to stay close to the core as we talk to that. But as we look at our themes of water, sustainability conversion, we're going to open the aperture. We're going to look at those and see if there might be another avenue for how the platform for how we look at the growth. You look at on-site septic, and that's only 2.5 years ago, that adjacency that we've gone down. You look at what Infiltrator's doing, going down the active instead of the passive treatment approach and the market that's there. These different adjacencies or platforms provide us for opportunities for growth that when you look at storm, you might be saying, isn't necessarily there. There are a lot of opportunities out there, and we are opening the aperture to look at those. That being said, we're still going to stay North American focused. That's where we be right now. And again, we'll look at those opportunities to potentially expand on the water sustainability and conversion theme. Disciplined process. I talked about $2.4 billion to $3.4 billion of allocable capital it's really important to highlight that the disciplined process piece of this, we get this. This is important to -- when we look at multiples, when we look at return on invested capital greater than WACC within 3 years, those are serious financial targets that we have in front of us that we look at all the time, and we'll make sure that when we do look at those acquisitions that meet all the qualitative metrics and targets that we have that we also meet those. And synergies, significant synergy opportunity is another key piece as we look at that M&A strategy. So again, I'll just pause for a second. A lot of these points were on the first slide. Again, we've added the fourth leg of that shareholder value stool, which is so important in addition to our financial performance and execution. So again, sales growth, margin expansion, free cash flow generation and then deploying and allocating that capital to maximize shareholder value. We've proven we can do it. and we know what we need to do going forward to make sure that we provide significant growth ahead of us. There's still significant opportunity left out there for us.

Thanks, Scott. So I think we'll wrap this up and then we'll take questions both from the room and then virtually. I hope you spent this time with us today, and we certainly appreciate it. But I hope you'd agree there's lots of runway left in the business, things that we can go and do several chapters that we can write with both Infiltrator and ADS that there are some fundamentals about the business, this conversion story, a pure-play water, a nice sustainability element with this recycling and the water themes, consistent performance and good stewards of capital and deploying that. And we believe that this makes us, as some of the comparisons Scott showed in that, a very unique investment in our space and quite proud of that and what we've been able to accomplish over the last couple of years. So that kind of wraps up the presentation. But before the questions, we're going to just -- some questions that I know we're going to get. So I'm going to be preemptive and just answer them now. We don't do anything in Russia, all right? You can -- all you guys, you can scratch that one off your list. Yes, we're worried about the price of oil and diesel. We consume a lot of diesel fuel. We run a lot of trucks. Obviously, when the prices of oil rises, it puts upward pressure on our major input costs, particularly from the virgin resin producers. Many of you know that, that's abated somewhat in the polyethylene. What we believe is this is going to kind of put some undergirding to the pricing in the market. We don't anticipate what we saw a year ago. Just that rapid, rapid, rapid, rapid rise, but we don't know. I think this is going to be a very difficult piece to predict. So we'll use the same tools we've been using. Price, swing to the recycled materials, we'll work our supply chain, we'll do all the things that I think we've done successfully over the last year or so. The timing is always a little off sometimes, but I think we know the playbook. We know how to go and run that, and we'll continue to watch it very, very closely. We have plenty of material right now and both Infiltrator and ADS, probably a bit more at ADS versus prior year. So if it rises too fast, we got some room to run. Honestly, we've been fighting a pretty hard battle here over the last couple of months with our resin producers. It's kind of fun. We think we maybe did okay through those battles. But this is something that we obviously have to keep a big eye on. So no Russia. Worried about that. We reaffirm our guidance. Don't ask me about January and February or March or how is March going. We reaffirm our guidance. We're right where we want to be as we close down this year in this quarter. We were very pleased with the third quarter. We got on top of the inflation like we said we were going to do, and we see the fourth quarter right in line with that same kind of behavior. Anything else, Allison? Okay, nothing else you want me to clear out. Okay. Against my better judgment, I'll open it up for questions now. Oh my God. Okay. Yes.

[Operator Instructions]

Mike Halloran with Baird. So a couple of questions. First one, when you think about the 10% growth profile, maybe help understand what that looks like versus what your market growth expectations are, and any kind of color you might have on some of the various subsets from a market perspective.

It will be -- okay. So the 10%, it will be a little front-end loaded because of the pricing kind of ramping up and overhanging into next year. Volume will get a little bit better towards the back end versus the front end is the capacity and all that kind of comes on. We would say definitely 2 points above the -- what I would call our traditional conversion share gain. I mean it's right in that, but we do anticipate to continue to some in the residential pieces. I think these guys got a good backlog. The Infiltrator guys are going to work off of that. And then we believe that the residential still has legs in it, it's not going to fall over if interest rates go up a little bit. So I mean those are the basic color in that. Certainly, we're intending our basic formula of growing that Allied Products at double-digit to also contribute nicely to that. If you think about the 2 machines for Storm Tech, which is a big runner in the whole business, that Ron is adding 1 producing, one that's being delivered later this year. That gives us a nice lift in that whole allied thing. I mean, Mike, can you think of anything I missed in that?

No, I think what we -- sorry, what we think about the end markets are kind of in that mid-single digit over the next couple of years in terms of the underlying end market growth that supports that 10% growth.

So one clarification, then the second question. The clarification is, when you say 2 points of conversion, that's not 2 points of growth you're saying if you were at x percent market share?

We're 33 go to 35, yes.

Got it. Follow-up then. That's a lot of capital you guys can deploy, high-quality problem to have, right? So twofold question. One, are there the opportunity sets in the marketplace from an M&A perspective to deploy that level, and then secondarily, maybe just a little bit more granularity on how you think about the buyback decision and what kind of triggers that at a high level?

Yes. I think the M&A funnel is one that I think is very active. I think in the building products space, water space, there's a lot of targets that are in that $50 million to $100 million, $50 million to $200 million EV kind of arena. There are some large opportunities out there as well. Are they actionable is always something that we look at? So there's a lot of opportunity. There's a lot of activity that's going on. So we'll continue to watch it. I think as well, my comment about opening the aperture is something to think about as well because everybody's definition of the water space is different, and how you look at that thematically as well with sustainability. So again, we're trying to be a little bit more open-minded as we think through things, very happy and pleased with the Infiltrator and that adjacencies -- close adjacency to storm water, and we'll continue to consider that and work through that as we go. So I think those are great opportunities. On the second part of your question, when it comes to buybacks, again, we'll look at our financial performance. forecast, projections and where we're going. We'll look at kind of where the stock is performing versus our belief on kind of where that needs or should be. We like the word opportunistic when we tie that in there, and we do it in a disciplined way when we do enact the share buyback. So again, we target 2 to 3x leverage. We want to use the balance sheet. We're always -- like I said earlier, we will never sacrifice a growth opportunity to do that. But as long as we've got all of the growth opportunities taken care of, and this is available to still stay within our target leverage range, then that's how we look at it, Mike.

Matt Bouley, Barclays. Thanks for all the details today. So on the 400 to 500 basis points of margin expansion, it sounded like, Scott, at the end, you just said being wary about where material prices could go. So I guess part one is can you confirm that of that 400 to 500 basis points, there's not an assumption of material cost tailwind in that? And then part 2 would be just what are the drivers between volume leverage, these operational investments, automation, et cetera, how do you kind of bridge that gap?

So the assumption is that there's no wild kind of explosion of that, it's that we definitely get volume leverage through that, but we're going to take cost out through the automation through the -- all the different activities you saw today. So we would get per unit cost down today. That said, if we get a little spread help, we're going to take it that, and manage our against those things pretty well. But we don't expect some miracle thing to kind of happen. But we want to get back to good fundamental the 28 to 29, where we were last year by the end of this period, that's what we'll work towards.

Okay. Understood. And the second one, the $400 million to $500 million investment in CapEx over the next 3 years. Just curious, are we kind of entering a new paradigm? Is this off the top of my head kind of mid-single digits percentage of revenue over the next 3 years. Is that kind of through cycle where you see capital investment? Or is this just kind of a several year upcycle and eventually you guys sort of normalize, and I guess the easy question would be what sort of a normalized free cash flow conversion over time?

So there's really, I think, Matt, 2 answers to that. One is, clearly, the capital intensity of the Infiltrator business is pretty big. And we had some things immediately that we wanted to invest in. You saw them in the video, those were the next-generation technologies, the compression mold and that building 7, the advanced molding facility up there. I think as opportunities present itself with the growth of that business, we'll probably continue to invest at a pretty good clip, well ahead of where they were prior to the acquisition. I think a piece of that could be in this recycling arena to make sure they have the right stream of materials. It could be in some of these active treatment areas, but it's not going to be as capital intensive as some of this molding equipment. So think of that as we've got a big bump, it might come down a little, but it's not going to go to spending $5 million or $6 million a year. It's going to be tens and tens of millions a year. I think on the ADS, it's a bit different. There is certainly some catch-up. It's a bigger, wider network that takes longer to invest in than Ron's type of equipment does. So I see that being at an elevated rate for a while. And there's definitely some refresh we got to do in that fleet also, which is going to -- it's all going to be good stuff. I mean it will make it safer, more efficient to load, we'll get more out of that. So I think that the ADS investments are going to lead to a whole new kind of way of doing business in our manufacturing in loading and in our operations. We have some great ideas on the loading thing that we were not quite ready for yet, but we're pushing on some things. So I would see that 1 a bit more elevated. Where that falls out? I definitely see $150 million a year for next year and the year after. It might go down, but it's not going to go down to 70, I don't think. That was a long answer. And I would reiterate in this that Roy is not a cheap date. So those guys have a lot of unique and creative ways to continue to do great things in their business. So he's probably already thinking over there some ways he can go spend money.

I'd also highlight, Scott talked about it earlier, but we have a very disciplined, we got CIP, capital approval process. We have a look-back review that we do as well. And again, we firmly believe that the best use and method to deploy our capital is organically, highest return, lowest risk. And we think we can do that really well. And we've got a lot of opportunity over the next 3 years.

John Lovallo, UBS. Thanks for doing this today. This was really helpful. First question on the margin improvement. Maybe if you could just help us how to think about the cadence of that improvement? I mean, is it going to be fairly linear? Or do you think it's going to be more kind of back-end loaded with the volume?

Welcome. Good to see you again. It's going to be, I mean, the way I'll describe it is pretty linear. I mean we want to grind it out kind of 100 basis points a year, those kinds of things. That's why I'll describe it. It might be a little steeper at the beginning and level off some. That's what I -- if I had to bias it, I might bias it that way.

Okay. That's helpful. And then just on that 10% sales CAGR, I just want to clarify that, that is organic entirely?

Yes.

And then okay, on the acquisition opportunities, I think you've said in the past that there aren't many Infiltrators out there, but are there other deals of size that you think could make sense?

Yes. There are. There are. They're not always hugely easy to get to. But we certainly know and talk about it with our Board and talk about it with -- we do. What are those 4 or 5 or 6 that would be really large scale type of things. There's not many businesses like that, that's right. But with any of those, there's a degree of risk that you take versus other deployments of that capital organically or whatnot. So that's what we kind of go through in our mind. But we do know what they are. We have pretty rich discussions around that kind of stuff, but making sure they're available and being able to tolerate that risk versus the other ones. That's how we kind of think about it and talk about it and we'll move on it.

Next question comes from Garik Shmois from Loop Capital. Can you speak to the cadence of sales growth through the 2025 time horizon? Do you see it as fairly consistent throughout the time frame? Or will it be back half weighted given the timing of the capacity expansion plans?

I think it will be a little steeper in the front, a little bit more growth in the coming year because of the forward of the price that we've had, I mean, what is the number that we quote as the price rise 35% or something like that in this year. So there's clearly carryover that's going to get you into that. The capacity that we've added, we're going to get more volume growth in there. We have material now that we can support Bob Klein and Darla Huff in the agriculture business this year. So we've got some really nice volume levers in addition to the price carryover, and so I think it'll be a bit steeper in the front.

And follow-up, how high can you drive the use of recycled materials? According to the presentation, Infiltrator uses 83%, but the consolidated company is near 50-50 recycled divergent. Where do you see the total blended average going over the next several years? And is there anything structural or strategic preventing Infiltrator type level percentages of recycled material being used across the entire company?

Wow, that's a very well-written question. So they do. They've always had very high content, and we'll continue to have high content in Infiltrator. The structural impediment would be regulatory on certain types of public jobs where they don't allow recycled material today. We're very active in working those and changing those and trying to mitigate, or get recycled materials or fillers or different things into those products, think of our HP or gray pipe and it grows at 15% a year. We really can't use recycled in that. So those are the kinds of things to go and work on. What's that ultimate number on the pipe side? I don't think it's 83%. I think it's my personal thing. I think it's in the mid-60s, but it's going to take years to get there. But that 1 billion pounds that we want to do, he's going to, Roy and the Infiltrator folks are going to -- for them to grow at those kind of rates, they're going to need a lot of material for us to grow the agriculture business and that in 12 non-residential business, plenty of room to grow that overall thing. I mean it's going to be a matter of getting the capital, the capacity, the supply streams in place to go and do that. It's a heck of a challenge, 10 years to do it, though. Remind me of that, 10 years to do it.

Rob Davis, ACK Asset Management. Scott, just backing up a little bit, when we were introduced to Infiltrator...

It comes to the zinger, I'm ready now.

No, you got the zinger on the computer. One of the advantages Infiltrator had was a lot of the material science is a lot of the blending they had where they had a very wide net, could take in anything and just mix from different silos. That was something I think you were looking at bringing into legacy ADS. Can you talk a bit about where you are with that, how much more room there is to grow in terms of expanding your feedstock? And then just 2 others in recycling, your ability to find more feedstock both for HDPE, polypropylene as there's more companies out there for more reasons looking for different sources of supply, ESG and stuff like that? And also what you're seeing from your competitors, if anyone's trying to compete with you guys in terms of recycled pipe?

All right. So Rob and the ACK team, they visited us down there 2 plus -- before the pandemic, 3 years ago now. And what he's referring to and Ron talked about it, Darin talked about it, too, is one of the keys is you get the wider the stream of material you can buy and the greater your capability to blend it and process it to that very narrow specification, so it goes through your machines well is really, that's part of the magic. And we have extended that into the ADS, not as pervasively as we want to, but as we reduce the flake and created pellets, that's all that part of that program to go and do that. So we're kind of 2/3 of the way through that, I would say, Rob, but we believe there are other steps to do where we could aggregate that material blending, that material science pieces, probably not at one place or 1 building or 2 buildings like Ron does. It might be in a couple of locations across the country. And that's part of what Darin and Ricky and our team are working on there. Now one of your other questions was how could we go out and find these available materials. And we talked -- Darin did and showed that our procurement teams have been out on the road a lot over the last year. I would also say in one of the synergy programs we had, Ron's team and the ADS team actually did a lot of great cross work between their supply basis to identify more material over the last year and contributed to that synergy plan significantly. But we have found, I think, more available streams of supply in North America than we anticipated as we've been out there beating the bushes. Is there competition for that material? Yes. The -- we have -- I wouldn't say it's probably at its most fierce yet, but we anticipate it getting a little tighter. That's why we're trying to develop some unique relationships. That's why we're participating in this recycling partnership to get more post-consumer polypropylene. That's why we're engaged like we've never been before in being more visible in the recycling, being more visible in positioning the company as a big recycler, being more public about where we want to go. We want to attract people in because we have a good story. When we show up and tell people the scope and scale of the recycling we do, they want to partner with us, the DuPont example is an excellent one, where we want to get more of those. So there, that market will tighten. We will be competing against these big guys. There's -- any time these consumer packaged goods people come crashing in, it's like a cannonball in the baby pool. I've seen this kind of stuff before in these things. So you just -- that's the way they're going to go do it. You just got to play smarter and then have the relationships and the capability to go in and kind of execute in there. That's what we'll do. I like our chances.

Okay. Any other questions from the audience either here in person or online? Okay. One more.

Go ahead. Go ahead. You're going to give the question to us anyway.

The active on-site treatment at Infiltrator, I mean, it seems like a relatively large market opportunity compared to right now, you're sort of in your nascency, it sounded like. What do you need to kind of push harder into that? Is it M&A? I've heard you talk about new product development. I want to know what's the opportunity to kind of crack more into that market.

You're right in the [indiscernible]. So M&A could very well be a part of it. But I don't think the business itself has found the right solution. So we spend a lot of time thinking about what is the right solution for that business. What is the right answer? A lot of what happens now is people take concepts from municipal, large municipal central server systems and then try and shrink them down. So -- but there are other ways to get things done. And regulations are changing, the things we want to accomplish with the wastewater are changing. I talked a little bit about nitrogen reduction, phosphorus reduction, contaminant reduction is one of the things that active treatment will perform and do well. But I think innovation, going back to that, is still needed in the industry and -- that's what we're working on right now.

Thanks, Roy.

Thanks, Roy. I mean I knew you guys would pick up on that. That's an incremental market. The 2 acquisitions made there within the last 4 or 5 years are kind of just a start. I mean now that you see these guys, you can see, I mean, they're very, very talented engineers, very talented innovators, so we'll go back and continue to work that in several different ways.

Any other questions before we finish, wrap up?

All right. So again, I really do appreciate the folks that made the effort to get here today in New York. And it's nice to see you all again. It's kind of really fun to be able to be in person with you all and not just be on the video all the time. It's an exciting time to be here. I think you -- I hope you sense the energy that the team has and the alignment that they have. It's -- these businesses are good, solid businesses that have lots of unique characteristics that I think make them very attractive in our space and probably overall. And we look forward to kind of working this plan coming back in a couple of years and giving you an update on that, and we'll be updating you along the way. So I think there's boxed lunches and things, we will hang around here for a while, but -- and answer any additional questions. But again, thank you and safe travels.