Q4 2023 Janus International Group Inc Earnings Call

Operator: Hello and welcome to the Janus International Group fourth quarter and full year 2023 earnings conference call. Currently, all participants are in a listen-only mode.

Hello, and welcome to the Janus International group's fourth quarter and full year 2023 earnings Conference call. Currently all participants are in a listen only mode.

Operator: A question and answer session will follow the formal presentation. If anyone should require the operator's assistance during the conference, you may press star then zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the call over to your host, Mr. John Rolwing, Vice President, Investor Relations, FP&A, and M&A, Janus. Thank you. You may begin.

And answer session will follow the formal presentation, if anyone should require operator assistance. During the conference you May Press Star then zero on your telephone keypad.

As a reminder, this conference is being recorded I would now like to turn the call over to your host Mr. John <unk>, Vice President Investor Relations F. P N E and M&A of Janice. Thank you you may begin.

John Rolwing: Thank you, Operator, and thank you all for joining our Earnings Conference call. I'm joined today by our Chief Executive Officer, Ramey Jackson, and our Chief Financial Officer, Anthem Wong. We hope that you have seen our earnings release issued this morning. Please note that we have also posted a presentation in support of this call, which can be found in the investors section of our website at JanusINTL.com. Before we begin, I would like to remind you that today's call may include forward-looking statements. A statement made describing our beliefs, goals, plans, strategies, expectations, projections, forecasts, and assumptions are four working statements.

Thank you operator, and thank you all for joining our earnings conference call.

I'm joined today by our Chief Executive Officer, Raymond Jackson.

Our chief financial Officer, and at the mall.

Hope that you have seen our earnings release issued this morning.

Please note that we have also posted a presentation in Florida, they call, which can be found in the investors actually Navajo website that Janet I N T O dot com.

Before we begin I would like to remind you that any call may include forward looking statements.

And then maybe Scott you know I believe goal and strategy.

Station construction forecast and assumptions our forward looking statement.

John Rolwing: Please note that the company's actual results may differ from those anticipated by such forward-looking statements for a variety of reasons, many of which are beyond our control. Please see our recent filings with the Securities and Exchange Commission, which identify the principal risks and uncertainties that could affect our business prospects and future results. We assume no obligation to update publicly any forward-looking statements, and forward-looking statements made by us during this call are based only on information currently available to us and speak only as of the date when they are made. In addition, we will be discussing or providing certain non-GAAP financial measures today, including adjusted EBITDA, adjusted EBITDA margin, adjusted net income, and adjusted EPS. Please see our release and filings for a reconciliation of these non-GAAP measures to their most directly comparable GAAP measures. Today, we announce that the board has approved a stock repurchase program of $100 million. We make no assurances that any repurchases will take place.

Please note that the company's actual results may differ from those in to expand it.

Such forward looking statements.

There's a variety of great.

Many of which are beyond our control.

You can see our recent filings.

And we exchanged tuition which is.

But first of all with <unk>.

And uncertainty that could affect our business.

And future results.

We assume no obligation to update publicly any forward looking statement.

Forward looking statement made by us during this call.

It was the only on information currently available to us.

Only as of the date made.

Sure.

The trunking or providing certain non-GAAP financial measures today.

Adjusted EBITDA adjusted EBITDA margin adjusted net income and adjusted EPS.

So you can see all releasing filings for a reconciliation of these non-GAAP measures to their most Charles when he comparable GAAP measure.

Today, we announced that the board has approved a stock repurchase program of $100 million.

No assurance.

Any repurchase as well.

Right.

John Rolwing: On today's call, Ramey will provide an overview of the business. Anthem will continue with the discussion of our financial results and introduce our 2024 guidance before Ramey shares some closing thoughts and we open up the call to questions. At this point, I will turn the call over to Randy.

On todays call Randy will provide an overview of the business.

And so we'll continue with a discussion of our financial results and then she is our 'twenty to 'twenty four time before rainy shares some closing thoughts and we open up the call question.

At this point I will turn the call over to Randy.

Ramey Jackson: Thank you, John. I'd like to kick off my comments today with a recap of Janus's financial, operational, and strategic highlights and accomplishments. 2023 proved to be another year of outstanding momentum. Everything we achieve at Janus is a team effort, and I couldn't be prouder of our employees' dedication, hard work, and professionalism. We delivered strong financial results, raising and exceeding financial guidance throughout the year, and delivered full-year adjusted EBITDA that was up 25.9% on a 4.6% increase in revenue. Additionally, we converted over 140% of adjusted net income to free cash flow of $196 million.

Thank you John I'd like to kick off my comments today with a recap of Janus its financial operational and strategic highlights and accomplishments.

2023 proved to be another year of outstanding momentum.

Everything we achieved as a team effort and I couldnt be proud of our employees' dedication hard work and professionalism, we delivered strong financial results raising and exceeding financial guidance throughout the year and delivered full year adjusted EBITDA that was up 25, 9% on a $4 six.

Percent increase in revenue.

We converted over 140% of adjusted net income to free cash flow of $196 million.

Ramey Jackson: Distro of year-end net leverage to a record low since going public at 1.6 times, down another 1.2 times during the year, and below our stated long-term target range of two to three times. Our core business is self-storage, which consists of new construction and restore, rebuild, replace, our R3 sales channel. Combined, self-storage makes up roughly two-thirds of our revenue and even a higher percentage of our EBITDA. As we have previously said, the margin profiles across the two components of self-storage are similar, making us agnostic to how our customers seek to add much-needed capacity.

This drove year end net leverage to a record low since going public at one six times down another 1.2 times during the year and below our stated long term.

Target range of two to three times, our core business in self storage, which consist of new construction and restore rebuild replace our our three sales channels combined.

Combined self storage makes up roughly two thirds of our revenue and even a higher percentage of our EBITDA.

As we have previously said the margin profiles across the two components of self storage or similar making us agnostic to how our customers seek to add much needed capacity.

Ramey Jackson: And while we will report specifics for each channel, along with our commercial and other segments, the discussion of total self-storage helps to smooth out the quarterly noise across the two segments given the lumpiness of project timing. For full year 2023, on a combined basis, self-storage was up 13.2%, driven by new construction, which was up 22.1%, while the R3 sales channel increased 4.3%. Industry fundamentals continue to drive investment in self-storage capacity, which over the last several quarters has focused on greenfield sites. Compared to 2022, when we saw more demand for R3 projects, commercial and other was off 10.2% for the full year. Results reflected challenging comps for the year-ago period, as well as a decline in demand for certain product lines.

And while we will report specifics for each channel.

Along with our commercial and other segment.

A discussion of total self storage helps to smooth out the quarterly noise across the two segments given the lumpiness of our project timing.

For full year 2023 on a combined basis self storage was up 13, 2% driven by new construction, which was up 22, 1%, while the archery sales channel increased four 3% <unk>.

Industry fundamentals continue to drive investment in self storage capacity, which over the last several quarters has focused on greenfield sites.

The 2022, when we saw more demand for our three projects.

Commercial I know there was off 10, 2% for the full year results reflected challenging comps for the year ago period, as well as decline in demand for certain product lines, we continue to innovate and broaden our reach to various end markets in order to access tremendous untapped potential.

Ramey Jackson: We continue to innovate and broaden our reach to various end markets in order to access tremendous untapped potential on the commercial side. Despite the year-over-year top-line decline, we are very excited about our opportunities there. Nokia, our innovative suite of remote access solutions, had another strong quarter to top off a year of expansion in capabilities and customer adoption. For the year, we increased the number of installed Nokia Smart Entry System units by 66.3% to 276,000.

On the commercial side.

The year over year top line decline, we are very excited about our opportunities there.

Okey, our innovative suite of remote access solutions had another strong quarter.

Topped off a year of expansion and capabilities and customer adoption.

For the year, we increased the number of installed gnocchi smart entry system units by 66, 3% to 276000.

Ramey Jackson: In support of this expansion, in October, we announced the complete back-end migration of Nokia to Amazon Web Services, or AWS. Moving to AWS opens up our ability to further scale the business, leveraging their enterprise software, AI, and security capabilities, and positioning us to lead digital innovation in self-storage. We have both enhanced our global reach and improved our user experience for both customers and their tenants. We have also opened our Atlanta Software Center, which gives us expanded capabilities to scale the Nokia business for continued strong demand. In January, we announced that a customer intends to expand its installed base of Nokia Smart Locks across its 43 facilities.

And supporting this expansion in October we announced the complete backend migration of Nokia to Amazon Web services or AWS.

Moving to AWS opens up our ability to further scale the business leveraging their enterprise software.

<unk> and security capabilities and positioning us to lead digital innovation and self storage.

We have both enhanced global reach and improved our user experience for both customers and their tenants. We also opened our Atlanta software center, which gives us expanded capabilities to scale that Nokia business for continued strong demand.

In January we announced that our customer intends to expand its installed base of note. These smart locks across its 43 facilities.

Ramey Jackson: This followed our September announcement that a major REIT intends to expand its install base for our Nokia screen digital access across more than 400 additional facilities, above and beyond their 700 facilities today. So, as you can see, we continue to be excited about Nokia and what it can mean for the future of Janus. On the operations front, we recently opened our first European manufacturing facility in Poland.

This followed our September announcement that a major REIT intends to expand its install base for our gnocchi screen digital access across more than 400 additional facilities.

Often beyond their 700 facilities today.

So as you can see we continue to be excited about Nokia and what it can mean for the future of Janice.

On the operations front we.

We opened our first European manufacturing facility in Poland.

Ramey Jackson: This new facility is strategically located to serve our European market. The fourth quarter also saw a major milestone reached for Janus, as Clearlake, our financial sponsor and partner when we became public, sold the last of its position and stepped down from their board status. This nearly doubled our public flow, and dramatically improved our stock liquidity. In adherence with our governance objectives, in January, we announced the addition of three highly accomplished independent directors.

This new facility is strategically located to serve our European market.

The fourth quarter also saw a major milestone reach for Janice as clear Lake our financial sponsor and partner when we became public so the last of its position in stepped down from their board seats. It's.

This is nearly doubled our public float dramatically improved our stock liquidity.

And adherence with our governance objectives in January we announced the addition of three highly accomplished independent directors.

Ramey Jackson: On the basis of our solid record of strong results, robust balance sheet, exceptional cash generation profile, expanded float, and desire to create shareholder value through multiple paths, we are pleased today to announce the $100 million share repurchase plan authorized by the board. The ability to repurchase shares only adds to our commitment to pursuing value-enhancing initiatives through organic expansion and M&A while maintaining a prudently leveraged balance sheet. In summary, we are excited that in 2023 we were able to build on our momentum with another year of record results and strong cash flow, while further deleveraging the company. We look forward to expanding our strong market position to capture additional share and create long-term value for all of our stakeholders in 2024 and beyond. With that, I'll turn the call over to Anselm for a further overview of our results, along with our initial 2024 guidance.

On the basis of our solid record of strong results robust balance sheet exceptional cash generation profile expand inflow and desire to create shareholder value through multiple paths. We are pleased today to announce the $100 million share repurchase plan authorized by the board.

The ability to repurchase shares.

<unk> adds to our commitment of pursuing value enhancing initiatives through organic expansion and M&A, while maintaining a prudently leveraged balance sheet.

In summary, we are excited that in 2023, we were able to build on our momentum with another year of record results and strong cash flow while further deleveraging the company.

Look forward to expanding our strong market position to capture additional share create long term value for all of our stakeholders in 2024 and beyond.

With that I will turn the call over to Amazon for a further overview of our results along with our initial 2024 guidance Angela.

Anthem Wong: Thanks, Ramey. And good morning, everyone. I am proud of our record results and our success during 2023 in growing our business, generating strong cash flow, and leveraging our balance sheet to position us for success. I will first focus my comments on our fourth quarter performance. In the fourth quarter, Consolidated Revenue of $263.7 million was off 5.7% as compared to the prior year quarter. However, that strength in total self-service was more than offset by a decline in our commercial and other sales channels.

Thanks, Amy and good morning, everyone I am proud of our record results and our success during 2023 and growing our business generating strong cash flow and deleveraging our balance sheet positioning us for success.

I'll first focus my comments on our fourth quarter performance.

In the fourth quarter consolidated revenue of $263 $7 million was up five 7% as compared to the prior year quarter.

As strength in total self services more than offset by a decline in our commercial and other sales channel.

Anthem Wong: Together, our self-storage bids were up 2.5% for the quarter. Within self-storage, new construction continued its strong year result, with growth in the quarter of 14.3%, as customers continued to add new greenfield capacity. The other portion of our self-storage business, R3, was off 9.1% for the quarter as a result of a decline in retail storage conversion activity compared to the prior year. Our Commercial and Others segment saw a 20.8% decline in the fourth quarter, driven by particularly strong comps last year and shifts in demand for certain product lines that were at an all-time high. The fourth quarter adjusted EBITDA of $74.3 million was up 8.9% compared to the year-ago quarter.

Together, our self storage business was up two 5% for the quarter within self storage nukes. Construction continued its strong year result with growth in the court of 14, 3% and as customers continue to add new Greenfield capacity.

The other portion of our self storage business are three was off nine 1% for the quarter as a result of a decline in retail storage conversion activity compared to prior year.

Our commercial and other segment saw a 28% decline in the fourth quarter, driven by particularly strong comps last year and shift in demand for certain product lines that were at an all time high.

Fourth quarter, adjusted EBITDA of $74 $3 million was up eight 9% compared to the year ago quarter. This solid performance produced an adjusted EBITDA margin of 28, 2% up 380 basis points from the prior year level.

Anthem Wong: This solid performance produced an adjusted EBITDA margin of 28.2%, up 380 basis points from the prior year level. This improvement in profitability is the result of a favorable mix from our higher-margin self-storage businesses as compared to our commercial and other sales channels, and a continued focus on operational improvements which more than offset the revenue decline. For the fourth quarter of 2023, we produced adjusted net income of $35.9 million, a 9.8% year-over-year improvement, and adjusted diluted earnings per share of 24 cents. Adjusted net income was impacted during the quarter by drivers already covered, including favorable mix and cost-containment initiatives. Looking at the full year, we generated cash from operating activities of $215 million, including $68.5 million in the fourth quarter, continuing to demonstrate the robust cash generation profile of the business. Capital expenditures for the year were $19 million, up from $8.8 million in 2022.

This improvement in profitability as a result of favorable mix from our higher margin self storage businesses as compared to our commercial and other sales channel and a continued focus on operational improvements, which more than offset the revenue decline.

For the fourth quarter 2023, we produced adjusted net income of $35 $9 million, a nine 8% year over year improvement in adjusted diluted earnings per share of <unk> 24 cents.

Adjusted net income was impacted during the quarter by drivers already covered including favorable mix and cost containment initiatives.

Looking at the full year, we generated cash from operating activities of $215 million, including $68 5 million in the fourth quarter continued to demonstrate the robust cash generation profile of the business.

Capital expenditures for the year were $19 million up from $8 $8 million in 2022.

Anthem Wong: Growth capital projects this year included the Poland factory build-out, additions of new roll formers at Betco, and enhancements to our lead-to-order process within Microsoft Dynamics. We are proud of our free cash flow profile, which reflects the financial strength of our results. For the full year, we generated free cash flow of $196 million.

Growth capital projects. This year included the polling factory build out additions of new roll formers at VESCO and enhancements to our leads the order process within Microsoft dynamics.

We are proud of our free cash flow profile, which reflects the financial strength of our results for the full year, we generate free cash of about $196 million. This represented a free cash flow conversion of adjusted net income of 142%.

Anthem Wong: This represented a free cash flow conversion of adjusted income of 142%. We finished the year with $296.7 million of total liquidity, including $171.7 million of cash and other assets on the balance sheet. Our total outstanding debt at year end was $615 million, and our net leverage was 1.6 times.

We finished the year with $296 $7 million of total liquidity, including 171 $7 million of cash and includes on the balance sheet.

Our total outstanding debt at year end was $615 million Internet language was one six times to.

Anthem Wong: The combination of strong liquidity, continued cash generation, and balance sheet strength put us in a position to pursue M&A targets and enact our newly authorized $100 million share repurchase program. I'd also like to add that, as part of our continued focus on best-in-class operations, reporting, and governance, as of the end of our fiscal 2023, we have remediated all remaining material weaknesses from the prior year. Now moving to our 2024 guidance, building off of the momentum we produced last year and supported by our current backlog and pipeline, full year 2024 revenue is expected to be in the range of $1.092 billion to $1.125 billion, representing organic growth of 4% at the midpoint versus 2023. We expect total self-storage to continue to grow as a return to growth for commercial and others. Adjusted EBITDA is expected to be in the range of $286 million to $310 million.

The combination of strong liquidity continued cash generation and balance sheet straight put us in a position to pursue M&A targets and enact our newly authorized $100 million share repurchase program.

I'd also like to add that as part of our continued focus on best in class operations reporting and governance as of the end of our fiscal 2023 we have remediated all remaining material weaknesses from the prior year.

Now moving to our 2024 guidance building off of the momentum we produced last year and supported by our current backlog and pipeline full year 2024 revenue is expected to be in the range of 1.0 92 billion to $1 $1 billion to $5 billion, representing organic growth of 4% at the midpoint versus 2023.

We expect total self storage to continue to grow in a return to growth for commercial and other.

Adjusted EBITDA is expected to be in the range of 286 million to $310 million.

Ramey Jackson: At the midpoint, this represents a 4.3% increase versus the prior year and reflects an adjusted EBITDA margin at the midpoint of 26.9%. We expect to see a return to normal seasonality in 2024, where the second and third quarters comprise a large portion of revenues compared to the first and fourth quarters. Thank you. I will now turn the call over to Ramey for his closing remarks.

At the midpoint. This represents a four 3% increase versus prior year and reflects an adjusted EBITDA margin at the mid point of 26, 9%.

We expect to see a return to normal seasonality in 'twenty 'twenty, four where the second and third quarter comprise a large portion of revenues compared to the first and fourth quarter.

Thank you I will now turn the call over to Randy for his closing remarks rainy.

Ramey Jackson: Thank you again, Hanson. Building off this strong foundation, we are well positioned for another exciting year in 2024, one that is consistent with a longer-term vision for the company we laid out a year ago. Back then, we told you that over the course of the next three or five years, we expect annual revenues to grow organically at a four to six percent rate, adjusted EBITDA margins of 25% to 27%, net leverage to be in the range of 2 to 3 times, and free cash flow to be 75 to 100% of adjusted net income.

Thank you again anthem.

Building off this strong foundation, we are well positioned for another exciting year in 2024.

One that is consistent with our longer term vision for the company, we laid out a year ago.

Back then we told you that over the course of the next three to five years, we expect annual revenues to grow organically at a 46% range adjusted.

Adjusted EBITDA margins of 25% to 27% net leverage to be in the range of two to three times and free cash flow to be 75% to 100% of adjusted net income.

Ramey Jackson: As you can see from our results, 2023, met or beat all of those targets? Our long-term objectives remain intact, and based on the guidance Ansem laid out, we expect 2024 to feature another year of exceptional performance. We are the industry leader in self-storage solutions, with strong customer relationships, particularly among the best-capitalized owners and operators. We have delivered strong organic and acquired top-line growth throughout our time as a public company and have dramatically improved our EBITDA margins, cash flow conversion, and net leverage. As M&A opportunities come to fruition, we have the expertise and dry powder on our balance sheet to execute accretive, shareholder value-enhancing deals. And now we have the expanded capital allocation program to include the new $100 million share repurchase program. I look forward to continuing our positive momentum in 2024 and beyond as we drive long-term value creation for all of our stakeholders. Thank you again for joining us.

As you can see from our results.

23 met or beat all of those targets, our long term objectives remain intact and based on the guidance and some laid out we expect 2024 and a feature or another year of exceptional performance.

We are the industry leader in self storage solutions with strong customer relationships, particularly among the best capitalized owner operators.

We have delivered strong organic and acquired topline growth throughout our time as a public company.

And have dramatically improved our EBITDA margins cash flow conversion and net leverage.

As M&A opportunities come to fruition, we have the expertise and dry powder on our balance sheet to execute accretive shareholder value enhancing deals.

And now we have the expanded capital allocation program to include the new $100 million share repurchase program.

I'll look forward to continuing our positive momentum in 2024 and beyond as we drive long term value creation for all of our stakeholders.

Thank you again for joining US operator, we can now open up the lines for Q&A. Please.

Operator: Operator, we can now open up the lines for Q&A. Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue.

Thank you we will now be conducting a question and answer session.

I'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is the question queue. You May Press Star two if you would like to remove your question from the queue.

Daniel Moore: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Your first question comes from Daniel Moore with CJS Securities. Please go ahead. Thank you. Good morning, Remy. Good morning, Anselm.

For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

Your first question comes from Daniel Moore with CJS Securities. Please go ahead.

Thank you good morning, good morning, and some of them and thanks for all the color and congrats on a finish to a really really strong year, maybe start with what was a little softer than in commercial obviously stood out this quarter you mentioned declines from certain products from all time highs can you maybe elaborate.

Daniel Moore: And thanks for all the color and congrats on a finish to a really, really strong year. Maybe start with what was a little softer in commercial, but obviously stood out this quarter.

Ramey Jackson: You mentioned a decline from certain products from all-time highs. Can you maybe elaborate on that a bit? And Anselm, I think you mentioned in your remarks that you expect to return to growth in 2024. Do you expect positive growth in commercial for the full year or simply kind of a return to growth? Good morning, Dan.

And that a bit and and and some I think you mentioned and you got your remarks that you expect to return to growth in 'twenty. Four do you expect positive growth in commercial for the full year or simply kind of a return to growth at some point.

Yeah, Good morning, Dan.

Anthem Wong: Great question. So look, we've been talking about, you know, the past, reporters about a segment within the Market. Harcourt. Associates. Consents to these hearings will be destroyed by subpoenas.

Great question. So look we've been talking about you know the past couple of quarters about a segment within the commercial and.

The end market, which is the carports and shed business, which really accelerated.

Anthem Wong: This comes after his close interaction with Dan. So that's really the biggest driver of that misandry. Yeah, morning, Dan. And basically, kind of what we've talked about is if you look at our commercial business, we said Q4 would be the last quarter to kind of normalize that carport and shed segment of business. What we're seeing is normal sales in that category now. And that's why when we look at 2024, you look at our commercial segment, we expect growth again back there. Part of the, within that commercial business, we have a segment called Rolling Steel that we've been pushing throughout the year, and if you backed out of the coverage and sheds, you would have seen some decent growth there. So we're bullish on that part of the commercial business that will help us get to growth.

During the pandemic when folks were staying at home.

So that's really the biggest driver.

Atlas in commercial.

And then I'll, let Ken answer Yeah, good morning, Dan and basically kind of what we just talked about is if you look at our commercial business. We said Q4 would be the last quarter, you kind of normalize that carport and shed.

Segment of business, what we're seeing is normal sales in that category now and that's why when we look at 2020 for you that our commercial segment.

Expect growth again back there pardon within that commercial business, we have a segment called rolling steel that we've been pushing that throughout the year and if you backed out the cub.

Coverage and see it sheds you would've saw some decent growth there. So we're bullish on that part of the commercial that will help us get to growth again.

Anthem Wong: That's helpful, and maybe just talk about cadence, uh... as we move to Q1, expect a little bit of kind of year-over-year declines and then improved growth as we move through the year, on a year-over-year basis, or are we really through the worst of the comps already? Yeah, so if you look at what we saw, Dan, what we're seeing is a bit of normalization of the quarters.

That's helpful and maybe just talk about the cadence.

As we move to Q1, you expect a little bit of kind of year over year declines and then improved growth as we move through the year on a year over year basis, where are.

Are we really through the worst of the comps already.

Yeah. So if you look at what we saw at the Dan. So Q what were seeing is a bit of normalization of the quarter. So that's why I mentioned it in the transcript earlier is that the Q4 and Q1 is.

Anthem Wong: So that's why I mentioned it in the transcript earlier, that Q4 and Q1 are usually your normal lower quarters because of weather, probably the season now, and stuff like that. So we're expecting to see some of that in Q1, where it's going to be the normal slower start, and then back into when you're into your summer, fall, spring, kind of, you know, better construction areas. I think the one reminder is always that we are a construction business, so it does get impacted by weather. So, you know, unfortunately, on the West Coast, there's been some flooding there that's impacted a number of our jobs there as well. So I think what we'll see is just that normal, lower first quarter growth in Q4 as well and then back to our big quarter growth in Q2. Very helpful.

It's usually a normal laurie quarters, because of weather because of seasonality and stuff like that so we're expecting to see some of that in Q1, where its going to be the normal slower start and then back into when you're into your summer falls.

Spring kind of better construction area. That's you see that I think the one reminder, is always that we are this is a construction business. So.

It does get impacted by weather. So Unfortunately, you know the west coast, there's been some flooding there that's impacting all of the number of our jobs here as well. So I think what we'll see is just that normal.

So our first quarter for Q4, as well and then back to a big quarters of growth in the Q2 Q3.

Very helpful and then shifting to self storage at your backlog always provides you know really strong visibility for the next few quarters.

Daniel Moore: And then, shifting to self-storage, your backlog always provides, you know, really strong visibility for the next few quarters. Beyond that, just how would you describe the pipeline of new opportunities entering 2024 compared to, you know, maybe 12, 18 months? Yeah, look, we don't really give detail on the backlog, but what I can say directly is that both are. Excellent. Maybe one more? I'll jump out. And I know you've heard this question before.

On that just how would you describe the pipeline of new opportunities entering 2024 compared to maybe 12 18 months ago.

Yeah look at you know, we don't really give detail on the backlog, but what I can say directionally is it still remains strong.

And kind of those are three and in new construction. So we're very optimistic there.

Excellent maybe one more I'll jump out and I know you've heard this question before I'm clearly you had a favorable mix in Q4, and then partly over the year, but your long term margin targets of 25% to 27% already at the high end this year and above that this quarter.

Anthem Wong: Clearly, you had a favorable mix in Q4 and then partly over the year, but your long-term margin target is 25 to 27%, already at the high end this year and above that this quarter. Again, there is some mix in there, but do you see upside to those projections longer term, particularly as Nokia starts to accelerate and gain traction? Thanks. Yeah, no, thanks for asking, Dan.

You know again I, there's mix in there, but do you see upside to those projections longer term, particularly as gnocchi starts to accelerate and gain traction. Thanks again.

Yeah, no what I'm, saying things listen Dan you're right longer term, yes, absolutely I think we see some further improvement there as gnocchi becomes a bigger part of it the mix as well as our normal productivity in the business that we're constantly working at improving so I think what we're looking at is just a there was a short term benefit from the mix. So we got in Q4, it'll normalize in the two.

Anthem Wong: And you're right, longer term, absolutely. I think we will see some further improvement there as Nokia becomes a bigger part of the mix, as well as our normal productivity in the business, which we're constantly looking to improve. So I think what we're looking at is just, hey, there's a short-term benefit from the mix that we got in Q4. It'll normalize in 2024, but then, longer term, I think there definitely is. Great. I'll jump back with any follow-ups. Thank you. Thanks, man. Next question, Jeff Hammond with KeyBank Capital Markets, please go ahead. Hey, good morning guys. This morning,

24, but then longer term I think there's definitely upside.

Great I'll jump out and jump back with any follow ups. Thank you.

Thanks, Ed.

Next question, Jeff Hammond with Keybanc capital markets. Please go ahead.

Hey, good morning, guys.

Good morning, Jeff.

Yeah, So maybe just saying that self storage can you just talk about you know kind of how you're seeing the mix of new construction in all three as you move into 'twenty four.

Jeff Hammond: Yeah, so maybe just saying on self-storage, can you just talk about, you know, kind of how you're seeing the mix of new construction in R3 as you move into 24? Clearly, it seemed like you had some backlog catch-up, and I know, you know, there's some big consolidation in R3, so just wondering if there's a little more optimism on the growth rate in R3 or if it's pretty Yeah, look, I think, you know, kind of start off by saying that conversions fall in that R3 bucket the way that we manage them, so we do see growth in our three as well. Elliott, Janus, age.

Clearly knew it seemed like you had some backlog catch up and I know you know, there's some big consolidation into August already so I'm just wondering if.

If there's a little more optimism on the on the growth rate in our three or if it's pretty balanced.

Yeah look I think.

Let's start off by saying that convergence fall within that our three bucket the way that we manage it so.

Just consistently reported the conversions out of our three so we do see growth in our three as the industry continues to consolidate and also age. So we're optimistic there are one of the things we're seeing that we've mentioned in the past as conversions or the availability of.

Ramey Jackson: So we're optimistic there. One of the things we're seeing..., conversions or the availability of under the brick and mortar, the retail brick and mortar.

Kind of the brick and mortar retail brick and mortar.

It is slower.

Anthem Wong: But when you strip that out, you'll see growth, then on the new construction front, a lot of the kind of secondary and tertiary markets are ramping up, that's where folks are. Okay, and then just back on margins, you know, you've been kind of above the 27 for the last three quarters versus, you know, guide for a 27. So just wondering what the, you know, upside and downside risks Yeah, I think the biggest thing is the mixed organization. I think you saw that all the quarters this past year have been fairly consistent and, you know, on the higher end of our guide. I think it's just more as we looked at 2024 as the normal wise sales, we'll see commercial come back to growth, and obviously, the current commercial segment's a little lower than our storage. So that brings us back down there. But I think, you know, if everything stays consistent, we'll still be within that range that, Okay, just on the commercial business, maybe just update us on how you're doing to kind of close that margin gap. I think that was kind of the goal to eventually pull those up.

But when you strip that out you'll you'll see growth in our three.

And then on the new construction front same thing. It remains strong I think you know a lot of the kind of secondary and tertiary markets are ramping up that's what folks move kind of post pandemic. So we're seeing a lot of runway there.

Okay, and then just back on margins, you're kind of above the 27 for the last three quarters versus you know guide of 27. So just wondering what the upside and downside risks to that margin guide are you know outside of maybe some mixed.

Normalization.

Yeah, I think the biggest thing is the mix organization I think where you saw that you know all of the quarters. This past few years and fairly consistent and you know in the higher end of our guide them I think it's just more as we as we looked at 2024 is the normal wise sales will see commercial come back to growth in the us.

Our commercial segment's a little lower than your story, so that brings it back down there, but I think you know if everything stays consistent we will still be within that range that we've seen in the recent quarters.

Okay, but just on the commercial business, maybe just update us on how youre doing to kind of close that margin gap I think that was kind of a target.

So eventually pull those up maybe just give us a sense of progress there.

Anthem Wong: Maybe just give us a sense of progress there. Yeah, I would say it'll still be a bit more because the business model is different. It's a distribution model versus the full solution model and storage site.

Yeah.

It'll still be a bit lower because the business model is different it's a distribution model versus the full solution.

Solution well in storage site, but what we've been working on is actually consolidating the build of a lot of our commercial products as well is opening up our west coast commercial operation. So that we don't have to ship from Citi or North Carolina, or Georgia area sites to get commercial out there. So I think that'll show some improvements in terms of margin is.

Anthem Wong: But what we've been working on is actually consolidating the build of a lot of our commercial products as well as opening up our West Coast commercial operations so that we don't have to ship from, say, our North Carolina or Georgia area sites to get business out there. So I think that'll show some improvements in terms of margin as that gets ramped up. But just as a minor longer term, it will still be lower because it's a distribution type of business. Okay, great.

That gets ramped up but I, just as a minor longer term it still will be lower because it's not it's a distribution type of business versus a full solution business.

Okay, great. Thanks, guys.

Jeff Hammond: Thanks, guys. Inc. Next question, Brad Hewitt with Wolf Research, please go ahead. Hey, good morning, guys. Thanks for taking my question. Abrams.

Yep. Thanks next.

Next question, Brad Hewitt with Wolfe Research. Please go ahead.

Hey, good morning, guys. Thanks for taking my question.

Hey, Brad.

Brad Hewitt: Wondering if you could provide any additional color on what drove the Q4 revenue shortfall versus the prior guidance. Looks like self-storage revenue was down about 3% sequentially. We saw another step down in commercial. He talked about the headwinds in carport and shed, but I was just curious if there were any other moving pieces in the quarter relative to the guidance. Yeah, the commercial for the carports and sheds was a little, you know, worse than we thought it was going to be in terms of how much the normalization would be. I think you saw that piece of it when it printed and then on the storage side.

I'm wondering if you could provide any additional color on what drove the Q4 revenue shortfall versus the prior guidance.

Like self storage revenue was down about 3% sequentially. We saw another step down in commercial you talked about the headwinds and carport instead, but just curious if there were any other moving pieces in the corner relative to the guidance.

And commercial was the corporate inches was a little worse than we thought it was going to be in terms of how much the normalization would be.

I think you saw that did that that piece of it would it printed in the on the storage side I think what we saw is a little bit more delays in projects there and the backlog is still looking good like Randy said, but we saw some push outs and again, it's a construction business. So when you look at some of the weather impacts to the country you saw with the flooding in California.

Anthem Wong: I think what we saw is a bit more delays and projects there. The backlog is still looking good, like Randy said, but we saw some push-ups.

Anthem Wong: And again, it's a construction business. So when you look at some of the weather impacts on the country, you see the flooding in the California region that impacts our sites to be able to deliver. So we did see some of that.

The region that does impacts our sites to be able to deliver so we did see some of that hopefully we'll get through you know in Q1, when you know some of the weather related items get normalized.

Anthem Wong: Hopefully, we'll get through in Q1, when some of the weather-related things get normalized, we'll go back to a kind of normal. Okay, that's helpful. And then switching to capital allocation, given net leverage is now down to 1.6 times, how do you think about the balancing of share buybacks versus M&A? Is M&A the priority with buybacks kind of filling the gap in the absence of M&A, or do you see capital allocation as more of a balance going forward? Now, I think you hit it the way we see it.

Go back to kind of normal business in terms of construction.

Okay. That's helpful and then switching to capital allocation given net leverage is now down to one six times. How do you think about balancing share buybacks versus M&A is M&A the priority with buybacks kind of filling the gap in the absence of M&A or do you see capital allocation.

Our balance going forward.

No I think you hit it the way we see it we see M&A as the first thing we are definitely looking at targets as we always do but I think the market at least expectation in terms of our pricing is actually normalizing so to get back to a realistic level. So we're hopeful that we can you.

Anthem Wong: We see M&A as the first thing. We are definitely looking at targets, as we always do. And I think the market, at least the expectations in terms of pricing, are actually normalizing. So to get back to a realistic level.

Execute on some of the ones that we're looking at and I think he was exactly right is that we're glad to get the approval for the share.

Anthem Wong: So we're hopeful that we can, you know, execute on some of the ones that we're looking at. And I think you're exactly right that we're glad we got the approval for the share buyback. So we have another lever, you know, in the meantime, if something slows up in terms of the M&A side to take. Next question, John Lovallo with UBS, please go ahead. Good morning, guys.

Share buybacks. So we have another lever you know in the meantime, if something slows up in terms of the M&A side.

In Q1.

Thanks, guys.

Next question, John Lovallo with UBS. Please go ahead.

Good morning, guys. Thank you for taking my questions as well and I apologize if you've covered this hi, my line dropped so I apologize if you did cover this but in terms of the outlook is a 4% increase in revenue you expect at the midpoint. It looks like EBITDA is expected to go up by a little over 4%, maybe four 3% at the midpoint what's.

John Lovallo: Thank you for taking my questions as well. I apologize if you covered this. My line dropped, so I apologize if you did cover this. But in terms of the outlook, there's a 4% increase in revenue expected at the midpoint. It looks like EBITDA is expected to go up by a little over 4%, maybe 4.3% at the midpoint. What's driving the sort of lack of leverage on that revenue value?

<unk> sort of the lack of leverage on that on that revenue.

Yeah. If you look at our what we had talked about in 2023 as we became a public company and actually started adding the cost to you know put where we needed meaning in the back office finance.

Anthem Wong: Yeah, if you look at what we talked about in 2023, as we became a public company and actually started adding the costs to, you know, what we needed, meaning in the back office, finance, you know, HR, legal, et cetera, the functions to really support all the requirements. But we only added most of those costs in the back half of the year. So you'll get an impact of a full year of costs there that impacts the ability to get savings there. Long term, once we have all that in place, which is the last area that we're focused on is IT, we should get normal fixed cost leverage improvement because, for example, I won't need to hire another chief accounting officer or another treasurer, et cetera.

Each are legal et cetera, the functions that really support all the requirements. We only added most of those costs in the back half of the year. So you'll get a impact of a full year of costs there that impacts the ability to get savings there I think longer term once we have all that in place which are the last area that we're focusing as I T.

We should get normal fixed cost leverage improvement because for example, I won't need to hire another chief accounting officer, and other treasury et cetera. So it's just a matter of timing of getting adding all those.

Cost and resources that we needed to support the business.

Understood and you guys have made some really nice progress on the commercial actions and productivity can you just help us kind of quantify the cost savings that are expected to come through in 2024 from the actions already taken and then what is the sort of incremental opportunity as we move through 2024.

Anthem Wong: So it's just a matter of timing of getting all those costs and resources that we needed to support understood. And you guys have made some really nice progress on commercial actions and productivity. Can you just help us kind of quantify the cost savings that are expected to come through in 2024 from the actions already taken? And then what is the sort of incremental opportunity as we move through 2020? Yeah, I think for 2020, I think we'll start seeing, we haven't disclosed, but we'll start seeing some benefits from the new Poland factory that we put in place, as well as some of the equipment buys that we have made in some of our factories there. So I'm expecting, without disclosing, some decent benefits from that as well. I think longer term, what we're looking at is actually further improvements and consolidation, like we always do. So we're always looking at the footprint; we're looking at where we make things.

Yeah, I think for 'twenty three I think we'll start to see we we haven't disclosed the we'll start seeing some benefits from the new polling factory that we put in place as well as some of the equipment buys that we had in some of our factories, there so I'm expecting them without disclosing it some decent benefits from that as well I think longer term and what we're looking at.

It is actually further.

Movements in 'cause, it's always like we always do so we're always looking at the footprint, where you're looking at where we make things. So I'm one of the things that we had guided to that.

That is coming is in our new West coast operations for us the volume there and demand has improved there and we're looking to actually add some more capacity out there as well. So I think that will further help us improve and be a bit more efficient out there. So when you don't have to shift things in it.

It's an area of the country, Yeah, and one more thing that I'll add is we'll be opportunistic on our steel buys.

Is that kind of commodity fluctuates a will be.

Keenly focused on being opportunistic there.

Understood. Thank you guys.

Okay.

Thank you we have a follow up from Daniel Moore with CJS Securities. Please go ahead.

Thanks again I.

Anthem Wong: So one of the things that we had guided to that is coming is a new West Coast operation for us. The volume there and demand there have improved, and we're looking to actually add some more capacity out there as well. So I think that'll further help us improve and be a bit more efficient out there. So we don't have to shift things in that area.

I guess just pulling on the string of M&A since that's the priority.

In terms of opportunity you know what kind of range of deal sizes are we looking at and just remind us what a typical valuation range looks like.

Yeah as you know.

We don't just kind of disclose the size of the deals, but I think what I can tell you is that it.

Anthem Wong: Moore thing that I'll add. Understood, thank you guys, Drake. Thank you. We have a follow-up from Daniel Moore with CJS Securities. Please go ahead.

Some of the deals we're looking at are probably on the smaller to mid size area. Yeah that makes sense for us that will help us because I was certain areas of our business and again, we don't disclose kind of the metrics, but I think what you can expect is we're looking for accretive acquisitions within that 18 month range period there.

Daniel Moore: Thanks again. I guess just pulling on the thread of M&A, since that's the priority, in terms of opportunity, you know, what kind of range of deal sizes are we looking at? And just remind us what a typical valuation range is.

Hopefully be faster than that but that's kind of what we're looking at.

Anthem Wong: Now, as you know, we don't disclose the size of the deals, but I think what I can tell you is that some of the deals we're looking at are probably smaller to mid-sized deals. That makes sense for us. That will help us accelerate certain areas. Again, we don't disclose the kind of the metrics, but I think what you can expect is that we're looking for a creative acquisition. Hopkins. Elliott is there. Fasher than that, but that's kind of what, helpful. And then Noki, obviously seeing continued good traction in terms of installs.

Helpful. And then gnocchi, obviously seen continued continue to see good traction in terms of installs.

The yeah. The the last two deals that you announced <unk> have those sort of book and others up at all and just talk about the cadence of dialogues you know, both with larger Reits and as well as our independence.

Last six months relative to maybe the prior six to 12.

Ramey Jackson: Has the last two deals that you announced, have those sort of woken others up at all? And just talk about the cadence of dialogues, you know, both with larger REITs, as well as independents, over the last six months relative to maybe the prior six to 12 months. No, look, there's certainly a... a very proud, labor cause.

Oh look at it Theres certainly a snowball effect.

Due to the market when we make those announcements and those partnerships.

I'm very proud of kind of where we are we continue to.

Innovate on the back end.

You know we're investing in that in that vertical heavily right now as you can as you can see.

You know still in conversations with the largest operators.

When you kind of see there the labor cost issues that they're having a solution.

Solution at center stage.

So yeah, we're excited about the momentum and continue to innovate so.

Exactly where we are right now.

Daniel Moore: Helpful and maybe one more for Ramey, just cash flow, obviously exceptional this year. Just talk about your outlook for CapEx for 24 and how you're thinking about working capital and what free cash flow potential can look like. Hey, Sharon, Dan, I think if you looked at what we did in 23, we're very happy with what we did in terms of working capital and cash flow. I think CapEx, outside of what I mentioned about the West Coast operation, that'll probably be a little higher than what we saw in 23. But outside of that, there's not anything else that would impact it. I think the other thing in terms of working capital, I think there's still some improvement that we can make there, in our receivables area that we're working on, but I think Mountain Proving that we got this year is a good trend that will continue to stay on.

Helpful and maybe one more for me just cash flow, obviously exceptional this year.

Just talk about your outlook for Capex for 'twenty, four and you know how you're thinking about working capital and what are you know free cash flow potential can look like.

He shared that I think if you looked at what we did in 'twenty. Two we're very happy with what we did in terms of working capital and cash flow I think capex outside.

Outside of what I mentioned about the west coast operation that will probably.

Having a little higher than what we saw in 'twenty three.

But outside of that there's not anything else that sizable that would impact. It I think the other thing in terms of working capital I think theres still some room. There we can get there in terms of our receivables area that we're working on them, but I.

I think you know the amount of improvement that we got this year is a good trend that will continue to stay on and focus and improve.

Got it very good.

Good look forward to seeing you down at temple in a month or so thanks again.

Anthem Wong: Got it. Very good. Look forward to seeing you down in Temple in a month or so. Thanks again. That was a great day. I would like to turn the call over to Ramey Jackson for closing remarks.

That's great that's very good.

I would like to turn the call over to Amy Jackson for closing remarks.

Okay, great. Thank you everyone for joining us today, we appreciate your support of Janus International and look forward to updating you on our progress have a great day.

This concludes today's teleconference. You may disconnect your lines at this time and thank you for your participation.

Operator: Ward to updating you on our. This concludes today's teleconference. You may disconnect your lines at this time and thank you for your participation. Elliott.

Yeah.

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