ADVANCED DRAINAGE SYSTEMS, INC.WMS
ADVANCED DRAINAGE SYSTEMS, INC. Stock Compensation Disclosure
STOCK-BASED COMPENSATION
The Company has several programs for stock-based payments to employees and directors, including stock options, performance-based restricted units and restricted stock. Compensation expense is recognized on a straight-line basis over the employee’s requisite service period, which is generally the vesting period of the grant. The Company recognized stock-based compensation expense in the following line items on the Consolidated Statements of Operations for the fiscal years ended March 31, 2025, 2024, and 2023:
| (Amounts in thousands) | 2025 | 2024 | 2023 | ||||||||||||||
| Cost of goods sold | $ | 5,232 | $ | 4,708 | $ | 2,579 | |||||||||||
| Selling, general and administrative expenses | 21,349 | 27,278 | 19,080 | ||||||||||||||
| Total stock-based compensation expense | $ | 26,581 | $ | 31,986 | $ | 21,659 | |||||||||||
The following table summarizes stock-based compensation expense by award type for the fiscal years ended March 31, 2025, 2024, and 2023:
| (Amounts in thousands) | 2025 | 2024 | 2023 | ||||||||||||||
| Stock options | $ | 5,944 | $ | 5,287 | $ | 4,314 | |||||||||||
| Restricted stock | 10,403 | 7,991 | 6,988 | ||||||||||||||
| Performance-based restricted stock units | 6,586 | 15,459 | 8,308 | ||||||||||||||
| Employee Stock Purchase Plan | 1,736 | 1,056 | — | ||||||||||||||
| Non-employee director restricted stock | 1,912 | 2,193 | 2,049 | ||||||||||||||
| Total stock-based compensation expense | $ | 26,581 | $ | 31,986 | $ | 21,659 | |||||||||||
2017 Omnibus Plan
The 2017 Omnibus Plan Incentive Plan, as amended in July 2021, (the “2017 Omnibus Plan”) provides for the issuance of a maximum of 5.0 million shares of the Company’s common stock for awards made thereunder, which awards may consist of stock options, restricted stock, restricted stock units, stock appreciation rights, phantom stock, cash-based awards, performance awards (which may take the form of performance cash, performance units or performance shares) or other stock-based awards. The Company had approximately 1.8 million shares available for awards as of March 31, 2025.
Stock Options - Stock option awards are measured based on the grant date estimated fair value of each award. The Company estimates the fair value of stock options using a Black-Scholes option-pricing model. The following table summarizes the assumptions used in estimating the fair value of stock options:
| 2025 | 2024 | 2023 | |||||||||||||||
| Common stock price | $177.38 | $96.51 | $99.29 | ||||||||||||||
| Expected stock price volatility | 45.5% | 45.6% | 41.1% | ||||||||||||||
| Risk-free interest rate | 4.5% | 3.8% | 2.9% | ||||||||||||||
| Weighted-average expected life (years) | 6.0 | 6.0 | 6.0 | ||||||||||||||
| Dividend yield | 0.36% | 0.58% | 0.48% | ||||||||||||||
The stock option activity for the fiscal year ended March 31, 2025 is summarized as follows:
| (Share amounts in thousands) | Number of Shares | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term (in years) | ||||||||||||||
| Outstanding at beginning of year | 964 | $ | 54.68 | 6.0 | |||||||||||||
| Granted | 96 | 175.19 | — | ||||||||||||||
| Exercised | (171) | 47.78 | — | ||||||||||||||
| Forfeited | (18) | 119.20 | — | ||||||||||||||
| Outstanding at end of year | 871 | 67.95 | 5.4 | ||||||||||||||
| Vested at end of year | 646 | 46.74 | 4.4 | ||||||||||||||
| Unvested at end of year | 225 | 128.85 | 1.8 | ||||||||||||||
| Fair value of options granted during the year | $ | 84.53 | |||||||||||||||
As of March 31, 2025, there was a total of $8.2 million of unrecognized compensation expense related to unvested stock option awards under the 2017 Omnibus Plan, as amended, that will be recognized as an expense as the awards vest over the remaining weighted average service period of 1.8 years. All outstanding options are expected to vest. The aggregate intrinsic value for options outstanding and exercisable as of March 31, 2025 was $41.5 million and $40.0 million, respectively. The total intrinsic value of options exercised during the fiscal years ended March 31, 2025, 2024, and 2023 were $20.0 million, $12.1 million and $11.2 million, respectively.
Restricted Stock - The information about the unvested restricted stock grants as of March 31, 2025 is as follows:
| (Share amounts in thousands) | Number of Shares | Weighted Average Grant Date Fair Value | |||||||||
| Unvested at beginning of year | 205 | $ | 100.96 | ||||||||
| Granted | 108 | 170.38 | |||||||||
| Vested | (100) | 103.77 | |||||||||
| Forfeited | (14) | 120.78 | |||||||||
| Unvested at end of year | 199 | $ | 135.82 | ||||||||
At March 31, 2025, there was approximately $16.5 million of unrecognized compensation expense related to the restricted stock that will be recognized over the weighted average remaining service period of 1.8 years. The total fair value of restricted stock that vested during fiscal year ended March 31, 2025, 2024 and 2023 was $15.0 million, $8.4 million and $9.0 million, respectively. The fair value of restricted stock is based on the fair value of the Company’s common stock at the date of grant.
Performance-based Restricted Units (“Performance units”) - The information about the performance units granted under the 2017 Omnibus Plan is as follows:
| (Share amounts in thousands) | Number of Shares | Weighted Average Grant Date Fair Value | |||||||||
| Unvested at beginning of year | 197 | $ | 99.57 | ||||||||
| Granted | 77 | 166.18 | |||||||||
| Added by Performance Factor | 45 | 105.82 | |||||||||
| Vested | (93) | 104.44 | |||||||||
| Forfeited | (17) | 111.29 | |||||||||
| Unvested at end of year | 209 | $ | 122.33 | ||||||||
At March 31, 2025, there was approximately $8.4 million of unrecognized compensation expense related to the performance units that will be recognized over the weighted average remaining service period of 1.4 years. For the performance units granted in fiscal 2025, 2024 and 2023, 50% of the award is based upon the achievement of certain levels of Return on Invested Capital for the performance period and 50% is based upon the achievement of certain levels of cash flows from operations for the performance period. The performance units each have a 3-year performance period. The performance units, and any accrued dividend equivalents, will be settled in shares of the
Company’s common stock, if the applicable performance and service conditions are satisfied. The fair value of performance-based restricted stock units is based on the fair value of the Company’s common stock at the date of grant.
2013 Stock Option Plan
The Company’s 2013 stock option plan (“2013 Plan”) generally provided for grants of stock options with the exercise price equal to fair value on the date of grant. The grants generally vest in three to five equal annual amounts beginning in year one and expire after approximately 10 years from issuance. The Company had no shares available for grant under the 2013 Plan as of March 31, 2025. The stock option activity for the fiscal year ended March 31, 2025 is summarized as follows:
| 2013 Plan | |||||||||||||||||
| (Share amounts in thousands) | Number of Shares | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term (in years) | ||||||||||||||
| Outstanding at beginning of year | 86 | $ | 24.20 | 2.0 | |||||||||||||
| Granted | — | — | — | ||||||||||||||
| Exercised | (73) | 24.20 | — | ||||||||||||||
| Forfeited | — | — | — | ||||||||||||||
| Outstanding at end of year | 13 | 24.20 | 1.0 | ||||||||||||||
| Vested at end of year | 13 | 24.20 | 1.0 | ||||||||||||||
| Unvested at end of year | — | $ | — | — | |||||||||||||
For the 2013 Plan, the aggregate intrinsic value for options outstanding and currently exercisable as of March 31, 2025 was $1.1 million and $1.1 million, respectively. The total intrinsic value of options exercised during the fiscal year ended March 31, 2025, 2024, and 2023 were $10.9 million, $1.8 million and $9.6 million, respectively.
Employee Stock Purchase Plan (“ESPP”) - In July 2022, the Company’s stockholders approved the Advanced Drainage Systems, Inc. Employee Stock Purchase Plan, which provides for a maximum of 0.4 million shares of the Company’s common stock. Eligible employees may purchase the Company's common stock at 85% of the lower of the fair market value of the Company's common stock on the first day or the last day of the offering period.Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | May 15, 2025 | Showing above |
| 2017 | May 30, 2017 | |
About Stock Compensation Disclosures
Stock-based compensation disclosures detail the equity awards granted to employees and executives — including stock options, restricted stock units (RSUs), and performance shares — along with the valuation methods and assumptions used to expense them. This section reveals the true cost of talent retention and the alignment between management incentives and shareholder interests.
Key signals: total unrecognized compensation expense and its expected recognition period signal future earnings headwinds from already-granted awards. For stock options, examine Black-Scholes assumptions — expected volatility, risk-free rate, and expected term — as understating any of these reduces reported compensation expense. Compare stock compensation expense as a percentage of revenue against peers to assess dilution cost. Watch vesting schedules for acceleration clauses tied to change-of-control events. Performance-based awards with undemanding targets may indicate weak governance. Add back stock compensation to operating cash flow to calculate a more conservative free cash flow figure.