Q1 2024 Janus International Group Inc Earnings Call
Hello, and welcome to Janice International group's first quarter 2024 earnings Conference call. Currently all participants are in a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance. During the conference you May press.
Operator: Hello, and welcome to Janus International Group's First Quarter 2024 Earnings Conference Call. Currently, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, they may press star zero on their telephone keypad.
Operator: Star Zero on your telephone keypad.
Operator: Reminder, this conference is being recorded I would now like to turn the call over to MS. Sarah May see active senior director of Investor Relations of Janice. Thank you Ms sacks, you may begin.
Operator: As a reminder, this conference is being recorded. I would now like to turn the call over to Ms. Sarah Maciak, Senior Director, Investor Relations, Janus. Thank you, Ms. Maciak. You may begin.
Sarah Maciak: Thank you, Operator, and thank you all for joining our earnings conference call. I am joined today by our Chief Executive Officer, Ramey Jackson, and our Chief Financial Officer, Anselm Wong.
Sara Macioch: Thank you operator, and thank you all for joining our earnings conference call I'm joined today by our Chief Executive Officer, Randy Jackson, and our Chief Financial Officer, and some long.
Sarah Maciak: 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. Any statements made describing our beliefs, goals, plans, strategies, expectations, projections, forecasts, and assumptions are forward-looking statements. 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.
Sara Macioch: 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 Janice I N T L dotcom.
Sarah Maciak: Before we begin I would like to remind you that today's call may include forward looking statements.
Sarah Maciak: Any statements made describing our beliefs goals plans and strategies expectation projection forecast and assumptions are forward looking statements.
Sarah Maciak: 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.
Sarah Maciak: 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 any forward-looking statement made by us during this call is based only on information currently available to us and speaks only as of the date when it is 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.
Sarah Maciak: 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.
Sarah Maciak: We assume no obligation to update publicly any forward looking statements any forward looking statements made by US. During this call is based only on information currently available to us and speaks only as of the date when it is made.
Sarah Maciak: 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.
Sarah Maciak: Please see our release and filing for a reconciliation of these non-GAAP measures to their most directly comparable GAAP measure on.
Sarah Maciak: Please see our release and filings for a reconciliation of these non-GAAP measures to their most directly comparable GAAP measure. On today's call, Ramey will provide an overview of our business, Anselm will continue with a discussion of our financial results and 2024 guidance before Ramey shares some closing thoughts, and we open up the call for your questions. At this point, I will turn the call over to Ramey.
Sarah Maciak: On todays call Randy will provide an overview of our business and something we will continue with a discussion of our financial results and 'twenty 'twenty four guidance before rainy share some closing thoughts and we open up the call for your questions. At this point I will turn the call over to Randy.
Ramey: Thank you Sarah.
Ramey Pierce Jackson: The first quarter was a busy one at Janus, as we built upon the momentum established in 2023 to deliver a solid start to the year, one that was in line with our expectations. As always, everything we do at Janus is a team effort, and I'd like to thank our employees for their continued hard work, dedication, and professionalism, as they show every day.
Ramey: The first quarter was a busy one in Japan as.
Ramey Pierce Jackson: As we built upon the momentum established in 2023 to deliver a solid start to the year. One that was in line with our expectations as always everything we do at Janus as a team effort and I'd like to thank our employees for their continued hard work dedication and professionalism as they show every day, we delivered five.
Ramey Pierce Jackson: We delivered financial results consistent with our expectations in the first quarter, including adjusted EBITDA that was up 8.3% on a 1% increase in revenue. Our record of strong cash generation continued as we delivered free cash flow in the quarter of $24 million, with a trailing 12-month free cash conversion of adjusted net income rate of over 120%. This drove net leverage at the end of the first quarter to another record low since going public of 1.5 times, down 1.1 times year over year, and below our stated long-term target range of 2-3 times.
Ramey Pierce Jackson: Actual results consistent with our expectations in the first quarter, including adjusted EBITDA that was up eight 3% on a 1% increase in revenue a record of strong cash generation continued as we delivered free cash flow in the quarter of $24 million with a trailing 12 month free cash.
Ramey Pierce Jackson: Conversion of adjusted net income rate over 120%. This drove net leverage at the end of the first quarter to another record low since going public.
Ramey Pierce Jackson: 1.5 times down one one times year over year and below our stated long term target range of two to three times.
Ramey Pierce Jackson: Our sustained strong cash flow generation put us in a position to be very active in our capital allocation activities, and we have been. During the first quarter, we repurchased over 1 million shares, and subsequent to the quarter end, we made both a voluntary pay-down of $21.9 million and repriced our first lean term loan.
Ramey Pierce Jackson: Our sustained strong cash flow generation put us in a position to be very active in our capital allocation activities and we have now.
Ramey Pierce Jackson: During the first quarter, we repurchased over 1 million shares and subsequent to the quarter end. We've made both the voluntary pay down of $21 $9 million and repriced. Our first lien term loan we continue to explore M&A opportunities focusing on key areas of self storage commercial technology and services.
Ramey Pierce Jackson: We continue to explore M&A opportunities focusing on key areas of self-storage, commercial, technology, and services. Our largest business is providing comprehensive solutions in self-storage, which consists of two sales channels, new construction and restore, rebuild, replace, or R3. Combined, self-storage makes up roughly two-thirds of our revenue and an even higher percentage of our EBITDA with a similar margin profile across the two sales channels. And while we 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.
Ramey Pierce Jackson: Our largest business is providing comprehensive solutions in self storage, which consisted two sales channels, new construction and restore rebuild replace for our three combined self storage makes up roughly two thirds of our revenue and even higher percentage of our EBITDA with similar margin profile across the us.
Ramey Pierce Jackson: Two sales channels.
Ramey Pierce Jackson: And while we 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.
Ramey Pierce Jackson: For the first quarter of 2024, on a combined basis, total self storage was up 11% driven by new construction. Industry fundamentals continue to favor investment in self storage capacity, which over the last several quarters has focused on greenfield sites. Our commercial and other sales channel was down 19.2% in the first quarter compared to the year-ago period. The results reflected a continued decline in demand for certain product lines.
Ramey Pierce Jackson: For the first quarter of 2024 on a combined basis total self storage was up 11% driven by new construction industry fundamentals continue to favor investment in self storage capacity, which over the last several quarters is focused on greenfield sites.
Ramey Pierce Jackson: Our commercial another sales channel was down 19, 2% in the first quarter compared to a year ago period. The results reflected a continued decline in demand for certain product lines, we continue to innovate and broaden our reach to various end markets in order to access untapped potential on the commercial side, despite the year over year.
Ramey Pierce Jackson: We continue to innovate and broaden our reach to various end markets in order to access untapped potential on the commercial side. Despite the year-over-year top line decline, we are very excited about our opportunities there, as well as the potential we see to improve margins. Noki, our innovative suite of remote access solutions, had another strong quarter during which we increased the number of installed units to 300,000 from 276,000 at year-end 2023, representing a sequential growth of 8.7%.
Ramey Pierce Jackson: Your topline decline we are very excited about our opportunities there as well as the potential we see to improve margins.
Ramey Pierce Jackson: Okey, our innovative suite of remote access solutions had another strong quarter during which we increased the number of installed units to 300000 from 276000 at year end 2023, representing a sequential growth of eight 7%.
Ramey Pierce Jackson: In early April we announced the newest edition to our Gnocchi smart entry product lineup, the gnocchi ion and inside the door magnetic hardwired smart walking system.
Ramey Pierce Jackson: In early April, we announced the newest addition to our Noki SmartEntry product lineup, the Noki ION, an inside-the-door magnetic hardwired smart locking system. The sleek yet powerful hardwired smart lock has a number of benefits. It uses low voltage power, fits inside the door, and is compatible with a cloud-native software portal and pairs with our customer-friendly mobile app for ease of access.
Ramey Pierce Jackson: The sleep, yet powerful hardwired smart lock has a number of benefits. It uses low voltage power that's inside the door and is compatible with our cloud native software portal and pairs with our customer friendly mobile app for ease of access.
Ramey Pierce Jackson: ION represents the next step in the expansion of Nokia's capabilities to drive accelerated adoption across our customer portfolios. In summary, we are excited about our start in 2024 as we look to build on our momentum. We look forward to working to expand 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 updates to our 2024 guidance. Anselm?
Ramey Pierce Jackson: <unk> represents the next step in the expansion of capabilities of Nokia to drive accelerated adoption across our customers' portfolios.
Anselm: In summary, we are excited about our start of 2024 as we look to build on our momentum we look forward to working to expand 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 Ann some for further overview of our results.
Anselm: Along with updates to our 2024 guidance anthem. Thanks.
Anselm Wong: Thanks, Ramey, and good morning, everyone. As Ramey stated, we are off to a good start to the year as our first quarter results included top line growth, margin expansion, and strong cash generation, allowing us to make substantial progress on our balanced capital allocation program. Now let me dive deeper into the numbers. In the first quarter, consolidated revenue of $254.5 million was 1% higher as compared to the prior year quarter, as strength in total self-storage more than offset a decline in our commercial and other sales channels.
Anselm: Thanks, Amy and good morning, everyone.
Anselm Wong: Is there any stated we're off to a good start to the year as our first quarter results included topline growth margin expansion and strong cash generation, allowing us to make substantial progress on our balanced capital allocation program now let me dive deeper into the numbers in the first quarter consolidated revenue of $254 5 million.
Anselm Wong: <unk> was 1% higher as compared to the prior year quarter as strength in total self storage more than offset a decline in our commercial and other sales channel.
Anselm Wong: Together, our self-storage business was up 11% for the quarter. Within self-storage, new construction continued its momentum with growth in the quarter of 40.2% as customers continued to add new greenfield capacity. R3 was off 17.3% for the quarter as a result of a decline in retail-to-storage conversion activity compared to the prior year. Total self-storage growth was entirely driven by North America, partly offset by a decline in the
Anselm Wong: Whether our self storage business was up 11% for the quarter within self storage new construction continued its momentum with growth in the quarter up 42% as customers continued to add new greenfield capacity.
Anselm Wong: Our <unk> was up 17, 3% for the quarter as a result of a decline in retail to storage conversion activity compared to the prior year.
Anselm Wong: Total self storage growth was entirely driven by North America, partly offset by a decline in international or commercial and other segment saw a 19, 2% decline in the first quarter driven by continued shifts in demand for certain product lines.
Anselm Wong: Our commercial and other segments saw a 19.2% decline in the first quarter, driven by continued shifts in demand for certain product lines. First quarter adjusted EBITDA of $66.3 million was up 8.3% compared to the year-ago quarter. This solid performance produced an adjusted EBITDA margin of 26.1%, up 180 basis points from the prior year period. This improvement in profitability is a result of a positive impact on geographic segment and sales channel mix and declines in material costs, partially offset by increased operating costs as the business scales for continued growth.
Anselm Wong: First quarter adjusted EBITDA of $66 $3 million was up eight 3% compared to the year ago quarter. This solid performance produced an adjusted EBITDA margin of 26, 1% up 180 basis points from the prior year period.
Anselm Wong: This improvement in profitability as a result of a positive impact of geographic segment and sales channel mix and the claims and material costs, partially offset by increased operating costs as the business scales for continued growth.
Anselm Wong: With regard to the margin benefit from geographic segment mix over 90% of our revenue are sourced from North America, which has a higher margin profile than our international business. During the first quarter International saw revenues down 31, 9%. The primary driver of the steep decline was our largest international market of Griffin entering a recession.
Anselm Wong: With regard to the margin benefit from geographic segment mix, over 90% of our revenue is sourced from North America, which has a higher margin profile than our international business. During the first quarter, international self-revenue was down 31.9%. The primary driver of the steep decline was our largest international market entering a recession and the corresponding impact on project launch decisions. However, we are encouraged that projects are not being canceled but rather put on hold as the underlying fundamentals that make self-storage attractive in that market persist.
Anselm Wong: And the corresponding impact on project launch decisions. We are encouraged that projects are not being canceled, but rather put on hold as the underlying fundamentals that make self storage attractive in that market prices due to the international business is lower margin profile. This contributed to the favorable mix and the Companys overall adjusted EBITDA margin improvement.
Anselm Wong: Due to the international business's lower margin profile, this contributed to the favorable mix and the company's overall adjusted EBITDA margin improvement. For the first quarter, we produced adjusted net income of $31.1 million, a 17.8% year-over-year improvement and adjusted diluted earnings per share of 21 cents. Adjusted income was impacted during the quarter by drivers already covered, including higher revenue and favorable geographic savings and sales channels. We generated cash from operating activities of $28.6 million, continuing to demonstrate the robust cash generation profile of the business.
Anselm Wong: For the first quarter to reproduce adjusted the income of $31 1 million or 17, 8% year over year improvement in adjusted diluted earnings per share of 21 says.
Anselm Wong: Adjusted net income was impacted during the quarter by drivers already covered including the higher revenue and favorable geographic save me and sales channel mix.
Anselm Wong: We generated cash from operating activities of $28 6 million.
Anselm Wong: To demonstrate the robust cash generation profile of the business.
Anselm Wong: Capital expenditures for the quarter were $4.6 million, down from $6.1 million in the first quarter of 2023. Our free cash flow profile reflects the strength of our financial results and the resilience of our business. For the first quarter, we generated free cash flow of $24 million on a trailing 12-month basis. This represented a free cash flow conversion of adjusted income of 123%. We finished the quarter with $303 million of total liquidity, including $178.4 million of cash on the balance sheet. Our total outstanding long-term debt at quarter end was $606.4 million, and our net leverage was 1.5 times.
Anselm Wong: Capital expenditures for the quarter were $4 $6 million down from $6 $1 million in the first quarter of 2023.
Anselm Wong: Our free cash flow profile reflects the strength of our financial results and the resilience of our business for.
Anselm Wong: For the first quarter, we generated free cash flow of $24 million on a trailing 12 month basis. This represented a free cash flow conversion of adjusted income of 123%.
Anselm Wong: We finished the quarter with $303 million of total liquidity, including $178 $4 million of cash on the balance sheet. Our total outstanding long term debt at quarter end was $606 4 million.
Anselm Wong: And our net leverage was one five times. This is an improvement of one one times versus the year ago period and <unk> sequentially.
Anselm Wong: This is an improvement of 1.1 times versus the year-ago period and 0.1 times sequentially. On the strength of our balance sheet business model, improved governance, and resolution of all material weaknesses, in March, we received a credit rating upgrade from S&P to B plus from B with a positive outlook. And in April, Moody's upgraded our credit rating to BA3 from B1 and revised their outlook to positive.
Anselm Wong: On the strength of our balance sheet business model improved governance and resolution of all material weaknesses. In March we received a credit rating upgrade from S&P to be plus from B with a positive outlook and in April Moody's upgraded our credit rating to <unk> from B, one and revised their outlook to positive the combination of strong liquidity continued cash generation.
Anselm Wong: The combination of strong liquidity, continued cash generation, and balance sheet strength puts us in a position to pursue M&A targets and execute against our $100 million repurchase. During the first quarter, we repurchased 1.02 million shares for $15.3 million, including commissions and excise taxes, and subsequent to the quarter, we made both a voluntary prepayment of $21.9 million and repriced our first lien term loan, which reduced our interest rate by 50 Now moving to our 2024 guidance.
Anselm Wong: And balance sheet strength puts us in a position to pursue M&A targets execute against our $100 million repurchase program to address our long term debt during.
Anselm Wong: During the first quarter, we repurchased 1.02 million shares for $15 $3 million, including commissions and exercise tests and subsequent to the quarter. We made both a voluntary prepayment of $21 $9 million and repriced their first lien term loan, which reduced our interest rate by 50 basis points from silver plus 300, plus.
Anselm Wong: CSA to silver plus $2 50.
Anselm Wong: Now moving to our 2024 guidance based on first quarter results and the visibility we have at our end markets. We are reiterating our guidance for revenues and adjusted EBITDA.
Anselm Wong: Based on first quarter results and the visibility we have into our end markets, we are reiterating our guidance for revenues and adjusted EBITDA. Specifically, we continue to expect revenue 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 adjusted EBITDA to be in the range of $286 million to $310 million. 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%.
Anselm Wong: Specifically, we continue to expect revenue to be in the range of 1.0 92 billion to $1 125 billion representing.
Anselm Wong: Representing organic growth of 4% at the midpoint versus 2023.
Anselm Wong: We expect adjusted EBITDA to be in the range of 286 million to $310 million at the midpoint. This represents a four 3% increase versus prior year and reflects an adjusted EBITDA margin at the midpoint of 26, 9%.
Anselm Wong: We expect total self-storage to continue to grow throughout the year. In commercial and other, we expect a return to growth and a rebound for the year. In our international segment, we expect the second half of the year to be stronger than the front half as market conditions normalize and we ramp up our operations at our new polling facility. We mentioned in our last call that we expect a return to normal seasonality in 2024, where the second and third quarter comprise a larger portion of revenues compared to the first and fourth quarters, and that remains the case. Thank you. I will now turn the call over to Ramey for his closing remarks. Ramey
Anselm Wong: We expect total subsidiary to continue to grow throughout the year in commercial and other we expect a return to growth in the back half of the year in our international segment, we expect the back half of the year to be stronger than the front half as market conditions normalize and ramp up our operations at our new Poland facility.
Ramey: We mentioned on our last call that we expect to return to normal seasonality in 2024, where the second and third quarter comprise a larger portion of revenues compared to the first and fourth quarter and that remains the case. Thank you I will now turn the call over to Amy for his closing remarks Remy.
Ramey Pierce Jackson: Thank you again, Anselm. The hard work we have done and the momentum we have built is paying off, as we had a solid start to the year while also executing capital allocation on multiple fronts. Our long-term objectives remain intact, and based on the reiterated guidance Anselm just laid out, we expect 2024 to feature another year of strong performance. We are the industry leader in self-storage solutions, with differentiated offerings and ever-improving capabilities to help our customers address the under-supply of self-storage capacity prevalent today.
Ramey: Again Ann sung.
Ramey Pierce Jackson: The hard work, we have done and the momentum we have built are paying off as we had a solid start to the year. While also executing capital allocation on multiple fronts. Our long term objectives remain intact and based on the reiterated guidance and some just laid out we expect 2024 to feature another year of strong performance.
Ramey Pierce Jackson: Are the industry leader in self storage solutions with differentiated offerings ever improving capabilities to help our customers address the under supply of self storage capacity prevalent today.
Ramey Pierce Jackson: Those best-in-class offerings have allowed us to deliver strong, organic, and acquired top-line growth, improved EBITDA margins, and outstanding cash generation. We continue to have the expertise and dry powder on our balance sheet to pursue and execute accretive shareholder value-enhancing opportunities. I look forward to continuing our positive momentum in 2024 and beyond as we aim to 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. Thank you.
Speaker Change: Those best in class offerings have allowed us to deliver strong organic and acquired topline growth improved EBITDA margins and outstanding cash generation. We continue to have the expertise and dry powder on our balance sheet to pursue and execute accretive shareholder value enhancing opportunities I'll look forward to.
Ramey Pierce Jackson: Our positive momentum in 2024 and beyond as we intend to 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: Thank you. 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. For a participant choosing speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question is from Jeff Hammond with KeyBank Capital Markets. Please proceed.
Speaker Change: Thank you if you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May press star two if he would like to remove your question from they can't for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys.
Operator: Our first question is from Jeff Hammond with Keybanc capital markets. Please proceed.
Jeffrey David Hammond: Hey, good morning, guys.
Jeffrey David Hammond: Good job. How are you?
Jeffrey David Hammond: Hey, Jeff how are you.
Jeffrey David Hammond: Yeah, I just want to hit on, you know, kind of how you're seeing the backlog and pipeline, clearly new construction was really strong, wondering if, you know, that drew down the backlog or if there was any pull forward there.
Jeffrey David Hammond: Just wanted to hit on you know kind of how you're seeing the backlog and pipeline clearly new construction was really strong wondering if you know that drew down backlog or if there was any pull forward there.
Speaker Change: Yes, great question nothing is changed there.
Ramey Pierce Jackson: Yeah, great question. You know, nothing's changed there. When you talk about new construction, self-storage, and backlog, the pipeline remains strong, the backlog remains strong, and we're, you know, we're very optimistic.
Ramey Pierce Jackson: When you talk about new construction self storage backlog.
Ramey Pierce Jackson: Pipeline remains strong backlog remains strong.
Speaker Change: Gary optimistic.
Ramey Pierce Jackson: Okay.
Jeffrey David Hammond: Okay, great. And then the commercial.
Ramey Pierce Jackson: Okay, Great and then commercial I'm just wondering is this.
Jeffrey David Hammond: I'm just wondering, is this kind of lingering? You know, that, you know, the shed and carport piece of the business, you know, comping tough comps, or is there something, you know, more meaningful going on? And maybe how to think about, within the 4% midpoint revenue growth guide, what you're thinking for commercial on a full year.
Jeffrey David Hammond: Lingering.
Jeffrey David Hammond: You know the the shed and carport, you know piece of the business.
Jeffrey David Hammond: Copying tough comps or is there something in a more meaningful going on and just maybe how to think about you know what.
Jeffrey David Hammond: Within the 4% mid point revenue growth guide, what what Youre thinking for commercial on a full year basis.
Ramey Pierce Jackson: Yeah, I'll let Anselm talk about the guide, but look, I think it's a continuation of the segment around carports and sheds. As you know, we do not have the visibility into the commercial kind of channel because of our go-to-market strategy. But we do, you know, feel like there's a softness in general in that sector in addition to those segment lines. But if Anselm, you want to talk about that?
Speaker Change: Yeah, I'll, let him talk about the guide, but look I think it's a continuation of.
Anselm Wong: This segment around carports and sheds.
Anselm Wong: As you know we do not have the visibility end of the commercial.
Anselm Wong: Kind of channel because of our go to market strategy.
Anselm Wong: But we do feel like there is a softness in general in that sector.
Anselm Wong: In addition to those those segment lines, but advanced something you want to talk yeah. I think the visibility is still not there Jeff and I think the way I look at from the guide point of view is that you've seen the strength of the self storage instability there.
Anselm Wong: Yeah, I think the visibility is still not there, Jeff. And I think the way I look at it from the guide point of view is that you've seen the strength of soft storage and stability there. If we still see some softness there, I think there will be enough storage strength to kind of offset that piece, as you say, in Q1. But right now, it's still uncertain there because our visibility is low there. But I will see if I break down the details below. Like Ramey said, the carport shed still seems a bit softer, but the rolling steel and the other parts seem to be holding there.
Anselm Wong: You'll see some softness there I think there will be an storage strength to kind of offset that pizza as you've seen in Q1.
Anselm Wong: But right now it's still uncertain there because their visibility is low there but I.
Anselm Wong: I would see if I break down the details below the agreements that are upwards shed still sees a it seems a bit softer, but the rolling steel and the other parts seem to be holding there.
Anselm Wong: So it's just a matter of getting through that piece.
Ramey Pierce Jackson: So it's just a matter of getting through that piece. Yeah, and just, you know, last thing for me, we're still bullish on that segment. We're going to continue to execute our plan, we've got a great plan to continue to grow and be in the right spot when there is an, you know, uptick in that macro. You know, you and I talked about some of the initiatives about geographic expansion and then also product enhancement. So we're, I feel like we're in a good spot. And we'll continue to be, you know, build that lineup.
Speaker Change: And just last thing for me.
Ramey Pierce Jackson: Still bullish in that segment you know, we're going to continue to execute our plan. We've got a great plan to continue to grow and be in the right spot. When there is a uptick in in that macro.
Ramey Pierce Jackson: <unk>.
Ramey Pierce Jackson: We've talked about some of the initiatives about geographic expansion and then also product enhancements so were.
Ramey Pierce Jackson: I feel like we're in a good spot and we will continue to be.
Ramey Pierce Jackson: Continue to build that lineup.
Ramey Pierce Jackson: And then maybe just speak last one speak to our three dynamics I know.
Jeffrey David Hammond: Can I maybe just speak, last one, you know, speak to our three dynamics? I think you were saying that kind of conversions have kind of abated a little bit, but you have, you know, certainly the consolidation dynamic that's playing through. What do you see in there?
Jeffrey David Hammond: You were saying kind of conversions.
Jeffrey David Hammond: Have has kind of abated, a little bit, but you have you know certainly the consolidation dynamic that's.
Jeffrey David Hammond: Playing through just what are you seeing there.
Anselm Wong: Yeah, I think if you look at our street job, I think we're still seeing that there are not many opportunities for the conversions, but no different than the prior quarters that we've been talking about. And that's why you see the strength of the new construction is that we still have to meet the demand there. I think in terms of the consolidations, we're starting to see some orders come in from that.
Speaker Change: Yeah, I think if you look at <unk> I think we're still seeing that there's not many opportunities for the conversions, but no different than the prior quarters that we've been talking and Thats why you see the strength of the new constructions that we still have to meet the demand there.
Anselm Wong: In terms of.
Anselm Wong: The consolidations that we're starting to see slowly some of the orders come in from that again, we had mentioned that there was a little slowness in terms of that starting because of some of the integration issues that some customers are just working through that will help them with so it's more just time that we're seeing is still there, but I think we're starting to see some of those.
Anselm Wong: Again, we had mentioned that there was a little slowness in terms of that starting because of some of the integration issues that some of our customers are just working through that we're helping them with. So it's more just timing that we're still seeing. But I think we're starting to see some of those orders trickle in now.
Anselm Wong: Orders trickle in them.
Speaker Change: Great I'll pass it on.
Operator: Great, I'll pass it on.
Anselm Wong: Yes.
Daniel Joseph Moore: Our next question is from Daniel Moore with CJS Securities. Please proceed.
Operator: Hey, Jeff our our next question is from Daniel Moore with CJS Securities. Please proceed.
Daniel Joseph Moore: Yes. Thank you good morning, good morning out something for taking the questions.
Daniel Joseph Moore: Yes, thank you. Good morning, Ramey. Good morning, Anselm.
Daniel Joseph Moore: Thanks for taking the questions. I know, obviously, as you tend to think about new construction and R3 work interchangeably within self-storage. That said, you know, 40% growth jumps off the table in terms of new construction. So let's talk about where that growth is coming from. Are there specific geographies that are expanding faster? And, you know, do we expect new construction to continue to outpace R3 for the remainder of the year? Thanks. Yeah.
Daniel Joseph Moore: And then obviously as you tend to think about new construction in our three work and her team to believe within self storage that said you know 40% growth jumps off the table in terms of new construction. So just talk about where that growth is coming from are there specific geographies that are expanding faster.
Daniel Joseph Moore: And do we expect new construction to continue to outpace our three for the remainder of the year.
Ramey Pierce Jackson: Yeah, a great question, and I'm glad you brought that up.
Speaker Change: Yeah, Great question and I'm glad you brought that up I mean, as you know we're agnostic in terms of how our customers add add supply.
Ramey Pierce Jackson: I mean, as you know, we're agnostic in terms of how our customers add supply, but it's a continuation of some of those secondary tertiary markets that remain robust. Obviously, the new construction topic for over a year and a half has been in terms of third-party data, which is totally different than what we've been printing. So I understand the concern.
Ramey Pierce Jackson: But its a continuation of of some of those secondary tertiary markets.
Ramey Pierce Jackson: That remained robust obviously, the new construction topic over a year and a half has been.
Ramey Pierce Jackson: In terms of third party data, it's totally different than what we've been printing.
Ramey Pierce Jackson: But, you know, from our visibility and listening to our customers, there are a lot of markets that are still under supply. And that's where you're seeing our growth. And notwithstanding elevated construction costs and obviously, you know, cost of capital, you know, self storage is a long-term business. And so what's happening today is the end market is still strong in certain areas. And they're investing in the long term future of the asset. So, again, just the continuation of the markets that are under supply that kind of go under the radar.
Ramey Pierce Jackson: So I understand the concern but.
Ramey Pierce Jackson: From our visibility and listening to our customers. There's a lot of markets that are still under supplied.
Ramey Pierce Jackson: And Thats, where youre seeing our growth.
Ramey Pierce Jackson: And then notwithstanding.
Ramey Pierce Jackson: Elevated construction cost and obviously cost of capital.
Ramey Pierce Jackson: It's self storage is a long there's a long term business and so what's happening today is the end market is still strong in certain areas and they're investing in the long term future of the asset so.
Ramey Pierce Jackson: Again, just a continuation of.
Ramey Pierce Jackson: The markets that are under supplied that kind of go under the radar.
Ramey Pierce Jackson: Hello.
Daniel Joseph Moore: And on the margin front, obviously, remain impressive in light of kind of a mixed macro environment and appreciate all the color on the geographic and product mix and how that plays in. But just how should we think about the cadence of margins as we look to Q2 versus Q1? I know Q2 and Q3 seasonalally a little bit stronger, and as well as kind of the cadence for the remainder of the year within the confines of that 27-ish percent guide at the midpoint. Thank you. Yeah, no Dan, that's how I think about it.
Ramey Pierce Jackson: On the margin front, obviously remain impressive in light of kind of a mixed macro environment and appreciate all the color on the geographic and product mix and how that plays in.
Speaker Change: Just how should we think about the cadence of margins as we look to Q2 versus Q1, and Q2 Q3 seasonally a little bit stronger and as well as kind of the cadence for the remainder of the year with him and confines of that.
Speaker Change: <unk> 27 ish percent guide at the midpoint. Thank you yeah.
Anselm Wong: Yeah, no, Dan, that's how I think about it. Like you said, we always have to step up in Q2 because our volume is larger in Q2, Q3, so we get the benefit there. I think, you know, one of the things we always talk about is that we're always looking for opportunities for productivity as well. So our factories are, you know, always looking for opportunities. Our Poland factory in Europe is just finally getting up to speed with the last piece of equipment that's installed there. So I think we're still, you know, bullish in terms of looking at margin improvement for the business.
Speaker Change: Yeah, no that's how to think about it like you said, we always have the step up in Q2, because our volumes and larger in Q2 Q3. So we get the benefit there I think one of the things. We always talk about is that we're always looking at opportunities for productivity as well. So our factories are always looking for opportunities a polling factory in Europe is just fine.
Anselm Wong: Getting up to speed with the last piece of equipment. That's installed there. So I think we're still bullish on in terms of.
Anselm Wong: Looking at margin improvement for the business.
Anselm Wong: Yeah.
Anselm Wong: Got it and then.
Daniel Joseph Moore: Got it. And then just in terms of capital allocation, obviously, well below your leverage targets and buying back stock with a lot of capacity left, just your talk about the pipeline, and maybe, you know, the kind of level of dialogues around M&A, how that's the bid-ask spread, and whether you're seeing, you know, more opportunities that could come to fruition in the next 12-18 months.
Daniel Joseph Moore: Just in terms of capital allocation.
Daniel Joseph Moore: Obviously, now well below your leverage targets and buying back stock with a lot of capacity left.
Daniel Joseph Moore: Can you talk about the pipeline and maybe kind of level of dialogues around M&A.
Daniel Joseph Moore: How that is.
Daniel Joseph Moore: The bid ask spreads and whether youre seeing more opportunity that could come to fruition in the next 12 to 18 months.
Speaker Change: Yeah, it's still a lot of opportunities out there I think we're excited about all the different areas that we're looking for from an M&A point of view.
Anselm Wong: Yeah, there are still a lot of opportunities out there. I think we're excited about all the different areas that we're looking for from an M&A point of view. I don't think much has changed in terms of what the opportunities are out there. There are opportunities. I think there's just a balance of ones that are priced reasonably for an acquisition versus some that are still asking for a higher multiple. But I think there's still a lot of opportunities that we're seeing in all the different areas that we've been looking for there. And then I think just in general from a capital allocation point of view, you're right, we're doing great in terms of generating cash, and it just gives us the flexibility to be opportunistic when we need to be.
Operator: All right, I'll jump back with any follow-ups. Thank you again. Thanks, Dan.
Operator: I don't think much has changed in terms of what the opportunities out there there are opportunities I think there's just a balance of ones that are.
Operator: Iced reasonably for an acquisition versus some of them are still asking for a higher multiple but I think theres still lot of opportunities that we're seeing in all the different areas that we've been looking for.
Operator: And then I think just in general from a capital allocation you're right. We just we're doing great in terms of generating the cash and just gives us the flexibility to be opportunistic when we need to be.
Speaker Change: Alright, I'll jump back with any follow ups. Thank you again.
Speaker Change: Thanks, Dan Thanks, Dan.
John Lovallo: As a reminder, there's star one on your telephone keypad if you would like to ask a question. Our next question is from John Lovallo with UBS. Please proceed.
Operator: As a reminder, the star one on your telephone keypad, if he would like to ask a question. Our next question is from John Lovallo with UBS. Please proceed.
John Lovallo: Hey, Good morning, guys. This is actually Matt Johnson on for John I. Appreciate you taking my questions. I know you guys kind of touched on this already.
Matt Johnson: Hey, good morning, guys. This is actually Matt Johnson on for John.
Matt Johnson: I appreciate you taking my questions. I know you guys kind of touched on this already, but just to put a finer point on it. I think at the midpoint of your full-year outlook, you have sales of 4%. How are you guys thinking about new construction versus R3 versus commercial on a full-year basis within that?
Matt Johnson: But a finer point on it I think at the midpoint of your full year outlook, you have sales up 4%.
Matt Johnson: How are you guys thinking about new construction versus our three versus commercial on a full year basis within that.
Anselm Wong: Yeah, I think, you know, that's why we kind of started showing the storage together. I think, again, we're agnostic between how it goes in either one, at least that from a high-low right now what we see in the media thing is new construction is going to stay fairly strong from what we can tell from the backlog and then I think from an R3 point of view it's really still that leveling off of the conversion opportunities out there and we're still hopeful that that'll come back in terms of opportunity there but again overall we just feel that there's still that strength and stability in that storage piece.
Speaker Change: Yeah, I think that's why we kind of started showing the storage together I think.
Anselm Wong: Again, we're agnostic between how it goes in either one at.
Anselm Wong: At least that from a high low right now what we see in the media thing is new construction is going to stay fairly strong from what we can tell for the backlog.
Anselm Wong: I think from an hour three point of view.
Anselm Wong: Its really still that leveling off of the conversion opportunities out there and we're still hopeful that that will come back in terms of opportunity there, but again.
Anselm Wong: Overall, we just feel that there is still that strength and stability in that storage piece, yes.
Ramey Pierce Jackson: Yeah, and just on the conversion piece, you know, and I think we're on record saying this, it's more about normalization than it is anything else, you know, because of the pandemic-created permitting issues and occupancy rates in the high 90s, mid to high 90s. I mean, capacity needed to come online as quickly as possible. And that was just the quickest way operators could bring capacity online. But you know, in terms of what we're seeing, it's really just coming back to normalization. And so we feel good about it, just not at those kind of pandemic levels.
Anselm Wong: Yeah, and just on the conversion piece.
Ramey Pierce Jackson: And I think we're on record, saying this it's more about.
Ramey Pierce Jackson: Normalization than it is anything else because of the pandemic created permitting issues.
Ramey Pierce Jackson: Occupancy rates in the high <unk> mid to high 90% capacity needed to come online as quickly as possible and that was just the.
Ramey Pierce Jackson: The quickest way operators could could bring capacity online but.
Ramey Pierce Jackson: In terms of what we're seeing it's really just coming back to normalization.
Ramey Pierce Jackson: So we feel good about it.
Ramey Pierce Jackson: Just not at those kind of pandemic levels.
Speaker Change: Got it thanks for that and then just if I could touch on on input cost a little bit I think steel prices are down pretty meaningfully year to date. So just how are you guys thinking about the dynamics between price cost through the rest of this year.
Matt Johnson: Got it. Thanks for that.
Anselm Wong: Yeah, Steel's actually, if you've been following, it's down from the beginning, but it's more stabilized in terms of kind of looking at how it's been year over year. So the good thing about it is that it's always going to be volatile, but it's actually a bit more stable. So I think that just creates a better environment where there's not a lot of price that we have to do. Because, you know, anytime you have to do price, it's not that we won't do it; we have the ability to do it, but it's always a tougher one to bring through there. So I think if it holds in kind of the area where it is right now, it'll be a bit more stable market for us from that point of view.
Matt Johnson: Yes, Steel's SUV been following its down from beginning but it's more stabilized in terms of kind of looking at how it's been year over year. So.
Matt Johnson: And then just if I could touch on input costs a little bit. I think steel prices are down pretty meaningfully year to date. So just how are you guys thinking about the dynamics between price and costs through the rest of this year? Yeah, Steel's actually been following
Matt Johnson: The good thing about it is that it's always going to be volatile, but it's actually a bit more stable. So I think that just creates a better environment, where there's not a lot of.
Matt Johnson: Price that we have to do because any time you have to do price. It's not that we won't do we have the ability to do it but it is always a tougher one to bring through there. So I think if it holds in kind of the area where it is right now I think it'll be a bit more stable market for us from that point of view.
Speaker Change: Thank you.
Matt Johnson: Thank you. Our next our next question is from Brad <unk> with Wolfe Research. Please proceed.
Operator: Our next question is from Brad Hewitt with Wolf Research. Please proceed.
Bradley Thomas Hewitt: Hey, good morning, guys. Thanks for taking my questions Good morning, Brad.
Bradley Thomas Hewitt: Hey, good morning, guys. Thanks for taking my question. Morning, Brad. So, curious to hear what you guys are seeing from a backlog perspective, maybe how that has trended recently, and how far your visibility extends this year, particularly on new construction? I think some of the public REITs have kind of talked down to the new development side of things, but I'm just curious what you're seeing from a backlog and pipeline perspective.
Anselm Wong: Yeah, no, like Ramey said earlier, the backlog is still holding there, and I think what we're seeing is that the tertiary markets, you know, are where a lot of the build is, and if you look at a lot of the, I would say, mom and pop segment are the ones that are building those areas, and that's where we're seeing, you know, strength there that it's still an It's not something that these guys look at and say, hey, just right here, and let's stop now.
Bradley Thomas Hewitt: So curious to hear what you guys are seeing from a backlog perspective.
Anselm Wong: Maybe how has that trended recently and how far does your visibility extend this year, particularly on new construction I think some of the public Reits have kind of talked down.
Anselm Wong: On the new development side of things, but just curious what youre seeing from our backlog and pipeline perspective.
Speaker Change: Sure Yeah, no I get it right you said earlier the backlog is still holding there and I think what we're seeing is that the tertiary markets.
Anselm Wong: Is where a lot of the build is and if you look at a lot of the I would say the mom and pop segment are the ones that are building in those areas and that's where we're seeing strength. There there is still opportunity and it is a long cycle business. It's not something that these guys look at it and say Hey, just right here and lets stop now I think they're looking for the long term.
Anselm Wong: They're looking for the long term, and just recent new orders in the pipeline that we've been looking at are just a reflection of that. That we're seeing, like Ramey and I have been kind of reviewing some of those, and they're still, you know, those operators are still looking for the long cycle and say, hey, this is a good return for us long term. The rates might be a bit high now, but I think they're, they don't just look at the current peak. So I think that's kind of where we're seeing the backlog in the pipeline hold up. Yeah,
Anselm Wong: And just recently new orders in the pipeline that we've been looking at are just a reflection that we are seeing like really I mean, I have been kind of reviewing some of those and Theres still you know those operators are still looking for the long cycle and say Hey, This is a good return for us long term.
Anselm Wong: The rates might be at high now, but I think they are they don't just look at the current piece. So I think thats kind of where we're seeing the backlog and pipeline to holdup, Yeah, and just just to remind you that the rights and kind of institutional the customer base that we view as institutional represents about 30% of the market and so our visibility.
Ramey Pierce Jackson: Yeah, and just to remind you, you know, the REITs and kind of institutional, the customer base that we view as institutional represents about 30% of the market. And so our visibility, you know, considering our market share is really reflective of the entire market in the Americas. So we feel like that's kind of perhaps where the disconnect is as well.
Ramey Pierce Jackson: <unk>.
Ramey Pierce Jackson: Considering our market share is really reflective of the entire market in the Americas.
Ramey Pierce Jackson: So we feel like Thats kind of perhaps where the disconnect is as well.
Speaker Change: Okay, Great. That's helpful. And then maybe in terms of Gnocchi just curious what you guys are expecting this year from a revenue perspective, and how do you think about the timing of a potential acceleration there on the top line.
Bradley Thomas Hewitt: Okay, great. That's helpful. And then maybe, in terms of Nokia, just curious what you guys are expecting this year from a revenue perspective, and how do you think about the timing of a potential acceleration there?
Ramey Pierce Jackson: Yeah, look, I couldn't be more proud of that team. You know, we hit 300,000 connected devices. And we continue to innovate, you know, we're listening to our customers. The latest release around ION, you know, super proud, very optimistic. It gives us more flexibility on pricing. It gives us more flexibility on the offering in terms of what our customers actually need.
Bradley Thomas Hewitt: Yeah look I couldn't be more proud of that team, we get 300000 connected devices.
Ramey Pierce Jackson: And we continue to innovate we're listening to our customers the latest release around the eye on.
Ramey Pierce Jackson: Uh huh.
Ramey Pierce Jackson: Super proud very optimistic.
Ramey Pierce Jackson: It gives us more flexibility on pricing it gives us more flexibility on the offering in terms of what our customers actually need.
Anselm Wong: And so yeah, we're very optimistic. We've got great feedback, we continue to refine, we continue to get better at stability, and we continue just honestly to innovate there. So, super bullish in terms of an inflection point. I can't really predict that, but we're doing all the right things in terms of customer engagement and just refining the offering to set it up to really accelerate adoption. Anselm, you got anything else? Yeah, as you know, Brad, we don't disclose the Nokia piece of it, but I think what Ramey said is we're bullish on terms of the opportunity with the new product.
Anselm Wong: And so yes, we're very optimistic we've got great feedback we continue to refine we continue to get better on stability. We continue just honestly to to innovate there. So.
Anselm Wong: Super bullish in terms of an inflection point I can't really predict that but we're doing all the right things in terms of customer engagement.
Anselm Wong: And then just refining the offering to set it up to really accelerate adoption.
Anselm Wong: Have you got anything else, yes, we don't as you know.
Anselm Wong: We don't disclose the Nokia visa, but I think.
Anselm Wong: He said, we're bullish in terms of the opportunity with the new product. We're in the middle of beta testing their property and hopefully we'll have lunch.
Anselm Wong: We're in the middle of beta testing that product, and hopefully, we'll have a launch later in the year for that product because it just brings a lot more optionality to our customers and a more stable product just because it is hardwired versus a battery-powered product.
Anselm Wong: Later in the year for that product as it just brings a lot of more.
Anselm Wong: <unk> analogy to our customers and a more stable product.
Anselm Wong: Because it is a hardware versus the battery powered product.
Speaker Change: Great. Thanks, guys.
Bradley Thomas Hewitt: Great. Thanks, guys. Thanks Brad. Thanks Brad.
Speaker Change: Thanks, Brian Thanks, Brad.
Bradley Thomas Hewitt: Our next question is a follow up from Daniel Moore with CJS. Please proceed.
Operator: Our next question is a follow-up from Daniel Moore with CJS. Please proceed.
Daniel Joseph Moore: Thank you again, who couldn't let the call go without a gnocchi question. So.
Daniel Joseph Moore: Thank you again. Yeah, we couldn't let the call go without a Nokia question. So since that was covered, I'll go one step deeper. Just obviously, you know, the eye on, you know, lower cost from an entry-level perspective, any differential in terms of the recurring revenue potential versus Nokia One? And, you know, what are your expectations for uptake? I know it's early, but do you think this could be, you know, as big or bigger or faster growth, you know, relative to Nokia One as we move forward? Just trying to get a sense for how you think about that, the relative opportunity. Yeah, it opens up a lot of options.
Daniel Joseph Moore: And so that was covered I'll go one step deeper just obviously you know the eye on the lower cost from an from an entry level perspective.
Daniel Joseph Moore: The differential in terms of the recurring revenue potential versus no Q1, and you know what are your expectations for uptake I know, it's early but do you think this could be.
Daniel Joseph Moore: As big or bigger or faster growth relative to Q1 as we move forward just trying to get a sense for how you think about the relative opportunities there. Thanks.
Anselm Wong: Yeah, it opens up a lot of options, so at this point in time, the recurring is still the same that either one, Nokia One versus Nokia Ion, but what the Ion allows is just a bit of optionality because a lot of the feature set on the Nokia One are optional on the Nokia Ion, which makes it a bit more optionally, it blinds to different segments because some of our customers might not want all the features, so this allows them to get the base features and add on as they please, and what it also offers is even if they install the base model, they can actually add the different features after the fact, which is what we like about building this new product for our customers.
Daniel Joseph Moore: It opens up a lot of options.
Anselm Wong: At this point in time, the recurring is still the same that either one Nokia <unk> versus Nokia.
Anselm Wong: But what the iron allow us or is this just a bit of optionality because a lot of the feature set on the Nokia won are optional in the gnocchi ion which makes it a bit more opportunities.
Anselm Wong: Linked to different segment than some of our customers may not want all the features. So this allows them to get the base features and add on as they as they please and what it also opera is even if the installed base model. They can actually add the different features after the fact, which is what we like.
Anselm Wong: Building this new product for our customers.
Speaker Change: Alright, Thank you again.
Speaker Change: Thanks, Dan.
Ramey Pierce Jackson: We have reached the end of our Q&A session. I would like to turn the conference back over to Ramey for closing remarks.
Speaker Change: We have reached the end of Ari.
Ramey: A Q&A session I would like to turn the conference back over to Amy for closing remarks, yes.
Ramey Pierce Jackson: Yeah, thank you everyone for joining us today. We'd like to remind you of our annual meeting of shareholders coming up on June 24th. We encourage you to vote your shares and look forward to your feedback. We appreciate your support of Janus International and look forward to updating you on our progress again in the future. Have a great day. Thank you.
Ramey: Thank you everyone for joining us today, we'd like to remind you of our annual meeting of shareholders coming up on June 24, we encourage you to vote your shares and look forward to your feedback. We appreciate your support of Janus International and look forward to updating you on our progress again in the future have a great day.
Operator: Thank you; this will conclude.
Speaker Change: Thank you. This will conclude today's conference you may disconnect. Your lines at this time and thank you for your participation.
Operator: Okay.
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