Q4 2024 Janus International Group Inc Earnings Call
Please stand by, your program is about to begin.
Speaker Change: Hello and welcome to the Janus International fourth quarter and full year 2024 earnings conference call.
Speaker Change: 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 star, then zero on your telephone keypad.
Speaker Change: As a reminder, this conference is being recorded. I would like to now turn the call over to your host, Ms. Sara Macioch, Senior Director of Investor Relations for Janus. Thank you. You may begin, Ms. Macioch.
Sara Macioch: 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.
Speaker Change: We hope that you have seen our earnings release issued this morning. We have also posted a presentation in support of this call, which can be found in the Investors section of our website at janisintl.com.
Speaker Change: Before we begin, I would like to remind you that today's call includes forward-looking statements. Any statements made describing our beliefs, plans, expectations, projections, and assumptions are forward-looking statements.
Speaker Change: 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.
Speaker Change: 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.
Speaker Change: 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 was made.
Speaker Change: We will be discussing or providing certain non-GAAP financial measures today, including Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Net Income, and Adjusted EPS.
Speaker Change: Please see our release and filings for a reconciliation of these non-GAP measures to their most directly comparable GAP measure.
Speaker Change: On today's call, Ramey will provide an overview of our business.
Speaker Change: Anselm will continue with a discussion of our financial results and introduce our 2025 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.
Ramey Jackson: Thank you, Sara. I'd like to kick off my comments today by thanking the entire Janus team for their hard work and professionalism.
Ramey Jackson: which has allowed us to showcase the resilience of our business model against a difficult backdrop.
Ramey Jackson: 2024 proved to be a challenging year for the business, as macroeconomic concerns, sustained high interest rates impacting liquidity caused many of our customers to adjust project timing beginning late in the second quarter. Through it all, we have remained focused on what we can control, which is the safety of our employees and the reliability, quality, and service that sets Janus apart with our customers.
Ramey Jackson: We had a busy year in 2024 with a number of milestones.
Ramey Jackson: new offerings and expansions of the Janus footprint. On the self-storage side, we introduced both the Noki ION and Inside the Door Magnetic Hardwired Smart Locking System that is the next generation of our Noki Smart Entry solution and the NS Door Series which includes two new roll-up door solutions engineered to provide a heightened level of safety and security for self-storage facilities.
Ramey Jackson: At our ASTA division, we introduced two new high-performance door systems engineered for durability, security, and seamless, fast-moving operation.
Ramey Jackson: We acquired the assets of TMC, a premier provider of terminal maintenance services and solutions for the LTL trucking industry, primarily in the southeastern United States.
Ramey Jackson: and it's already contributing favorably to our results. Additionally, we opened two new distribution centers, one in Mount Airy, North Carolina, and one in Ontario, Canada.
Ramey Jackson: We've received upgrades of our credit ratings from both S&P and Moody's and repurchased 7.1 million shares under our $100 million share repurchase program, leaving $21.3 million of authorization remaining at year end.
Ramey Jackson: As outlined on our last call, we have taken proactive steps to better align the business with near-term market realities.
Ramey Jackson: This includes a structural cost reduction plan that involves streamlining the labor force, rationalizing our real estate holdings, and reducing SG&A expenses. The plan is on track and we have already begun seeing the benefits.
Ramey Jackson: We now expect to realize 10 to 12 million dollars of annual pre-tax cost savings.
Ramey Jackson: Hans, we'll get into the details of the quarter in a moment, but first I'd like to make a few high-level comments on our full-year results.
Ramey Jackson: For full year 2024, on a combined basis, cell storage was down 9.3%, as a 5.4% increase in our new construction cells channel was more than offset by the 26.6% decline in R3.
Ramey Jackson: While new construction was particularly strong in the first quarter of 2024, the delays that began during the second quarter impacted the full year. R3 continues to be impacted by declines in retail-to-storage conversion activity, as well as delays that have impacted self-storage activity.
Ramey Jackson: Commercial and other was off 10.3% for the year. Results reflected weakness in demand for carports and sheds partially offset by the acquisition of TMC in May.
Ramey Jackson: Noki, our innovative suite of remote access solutions, ended the year at 365,000 installed units, an increase of 32% from 2023.
Ramey Jackson: The rollout of Nokia ION in the early fourth quarter was met with enthusiasm from our customers and with its unique and flexible customization capabilities and updated pricing structure, we anticipate continued demand for Nokia ION in 2025 and beyond.
Ramey Jackson: Despite a challenging macroeconomic backdrop, we maintain a strong balance sheet with leverage in our target range, while also generating outstanding free cash flow conversion to adjusted net income. As a result, we have the balance sheet strength to grow both organically and acquisitively as the market normalizes.
Thank you. Thank you. Thank you.
Ramey Jackson: As the industry leader in self-storage solutions, we are well positioned to capitalize on opportunities as the macro environment improves and create long-term value for all of our stakeholders in 2025 and beyond.
Ramey Jackson: With that, I'll turn the call over to Anselm for a further overview of the fourth quarter results, along with our initial 2025 guidance. Anselm?
Anselm Wong: Thanks, Ramey, and good morning, everyone. Ramey covered our full year results at a high level, and I will focus my comments on our fourth quarter performance followed by a discussion of our initial 2025 guidance.
Anselm Wong: In the fourth quarter, consolidated revenue of $230.8 million was off 12.5% as compared to the prior year quarter, with declines across all three sales channels.
Anselm Wong: Our self-storage business was down 17.3 percent for the quarter, with new construction down 6.2 percent, as we continue to see the impact from delays that began earlier in the year.
Anselm Wong: R-THRU is off 31.2% driven by continued declines in retail-to-storage conversion activity, as well as slowdowns in redevelopment and renovation activity.
Anselm Wong: Our commercial and other segments saw a 1% decline in the fourth quarter, driven by continued weakness and demand for carports and sheds, mostly offset by our TMC acquisition.
Anselm Wong: For the quarter, the impact to organic revenue use was driven roughly 10% by price and 90% by volume.
Anselm Wong: Fourth quarter adjusted EBITDA of $34.6 million was up 53.4% compared to the year-ago quarter. This represents an adjusted EBITDA margin of 15% compared to 28.2% in the prior year quarter.
Anselm Wong: The decline in profitability is primarily the result of volume decreases. We also had an additional adjustment to our provision for credit losses and an additional warranty reserve in the quarter. Excluding these two adjustments, the fourth quarter adjusted EBITDA margin was approximately 19 percent.
Anselm Wong: In the fourth quarter, we've reduced adjusted net income of $7.7 million, or $0.05 compared to $35.9 million, or $0.24 in the year-ago period.
Anselm Wong: For the full year, we generate cash from operating activities of $154 million, including $51.4 million in the fourth quarter, continuing to demonstrate the robust cash generation profile of the business.
Anselm Wong: For the full year, we generated free cash flow of $133.9 million. This represents a free cash flow conversion of adjusted net income of 163%.
Anselm Wong: The combination of strong liquidity, continued cash generation, and balance sheet strength offers us optionality to pursue M&A targets and continue to execute on our $100 million share repurchase program, which has $21.3 million of remaining authorization.
Ramey Jackson: As Ramey mentioned earlier, the structural cost reduction plan we announced on the third quarter earnings call is on track, and we are already seeing benefits. We now estimate the annual pre-tax savings to be in the range of $10 to $12 million, updating from our prior estimate of $8 to $12 million.
Ramey Jackson: We booked $1.1 million in one-time charges during the fourth quarter of 2024 associated with the plan and now expect total one-time charges in the range of $3 to $4 million compared to our previous estimate of $2 to $4 million.
Ramey Jackson: Now moving to our 2025 guidance, full year 2025 revenue is expected to be in the range of $860 million to $890 million, compared to $963.8 million in 2024.
Ramey Jackson: We expect the first half of 2025 to be slower than the back half.
Ramey Jackson: While growth in new construction has outpaced R3 over the last few years, in 2025 we expect our customers to shift their focus towards R3 projects. As a reminder, the margin profiles for new construction in R3 are similar, so we are agnostic about moves between the two sales channels.
Ramey Jackson: 2025 Adjusted EBITDA is expected to be in the range of $175 million to $195 million compared to $208.5 million in 2024.
Ramey Jackson: At the midpoint, this reflects an adjusted EBITDA margin of 21.1%. Consistent with our expectation for Ramey, we expect the first half of 2025 to be softer than the back half for EBITDA and EBITDA margin.
Ramey Jackson: As I mentioned earlier, fourth quarter EBITDA was affected by some one-time items. We expect margins to improve sequentially in the first quarter. Cash flow remains robust, and for 2025, we anticipate being near the higher end of the free cash flow conversion of adjusted net income target range of 75% to 100%.
Ramey Jackson: Please refer to the presentation we have posted for details on the key planning assumptions for 2025. Thank you. I will now turn the call over to Ramey for his closing remarks. Ramey.
Ramey Jackson: Thank you again, Anselm. Despite the challenges of 2024, we introduced several new product lines, including Noki Ion and the NS Door Series, and we completed the acquisition of TMC.
Ramey Jackson: We also continue to achieve our net leverage and free cash flow conversion to adjusted net income targets, and importantly, our long-term framework remains unchanged.
Ramey Jackson: Strong occupancy rates continue to fuel demand, and we believe the long-term fundamentals for self-storage industry are intact. Additionally, we estimate more than 60% of existing self-storage facilities are over 20 years old, which creates the potential need for replacement and refurbishment of aging install base.
Ramey Jackson: We are the industry leader in self-storage offering purpose-built, diversified, and ever-evolving solutions for our customers.
Ramey Jackson: With our balance sheet strength, strong cash flow foundation, we will continue expanding our suite of offerings and capabilities while seeking out and delivering accretive shareholder value enhancing opportunities.
Ramey Jackson: I look forward to building positive momentum in 2025 and beyond as we drive long-term value creation for all of our stakeholders.
Ramey Jackson: Thank you again for joining us. Operator, we can now open the lines for Q&A.
Speaker Change: Thank you. At this time we will open the floor for questions. If you'd like to ask a question you may press star 1 on your telephone keypad. If you'd like to remove yourself from the queue you may press star 2. Again that's star 1 to ask a question. We'll pause for just a moment to allow everyone to queue.
Speaker Change: And our first question will come from Jeff Hammond with KeyBank Capital Markets.
Speaker Change: Hey, good morning everyone. This is David Tarantino on for Jeff. Hey David. Hey David.
Speaker Change: Maybe just to start in self-storage, could you walk us through your thoughts more specifically on the key changes in the pipeline of projects and kind of break that out between new construction and R3 and how that informs your thoughts on 25?
Speaker Change: Sure, great question. I think if you look at it, what we're seeing is...
Speaker Change: as expected and guided is that the new construction is, while still there, slowing a little.
Speaker Change: and we're starting to see R3 starting to pick up a little, which is kind of what we normally expect when we see that change in terms of slowing down new construction. So that's what we're slowly seeing right now. It's not, you know, new construction is still pretty healthy in terms of what's in there, but that's what we're slowly starting to see now.
Speaker Change: Maybe just to kind of clear that up, would you expect incremental weakness on the new construction side relative to what we're seeing in 4Q or more of a kind of steady state?
Speaker Change: No, we would see still some slowness and destruction that's kind of built into our 2025 guide and then again our expectations we would see R3 starting to grow.
Speaker Change: Keep in mind that, yeah, keep in mind that, you know, self-storage is local and, you know, we continue to see bright spots in certain markets.
Speaker Change: And then, you know, in addition to that, our go-to-market strategy is focused around the more capitalized customer segments, which bodes well for the current climate.
Speaker Change: Okay, that's helpful. And then maybe could you walk us through the key puts and takes on the margin line, particularly RAT. Could you give us an update on your expectations for price and maybe on that, some color on kind of how tariffs are factored into the outlook?
Speaker Change: Sure, so price I think is still the same assumption that we've had where on the storage piece of our business will be high single digits.
Speaker Change: in terms of the storage piece, in terms of the price year over year. In terms of...
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Speaker Change: As you guys know, the way we buy our steel, we usually have a six-month lag in terms of when we put the order in to when we get the steel.
Speaker Change: So, if you think about this year, a big chunk of the year is already at prices of steel that were, I call it, end of last year, beginning of this year in terms of price point, in terms of tariffs.
Look, I think, you know, the steel producers.
Speaker Change: are most likely going to raise their prices. We don't see steel going down, we don't see steel going up, but ultimately...
Speaker Change: The steel price is going to be impacted by the overall demand of steel, so it will be a wait and see in terms of seeing what really happens to that in terms of the actual street price when it actually happens.
Speaker Change: I think, just to add to that, you know, I think the question is, you know, how will...
Speaker Change: The domestic mills price their products, will it be based on true supply and demand?
Speaker Change: Well, they accelerate the pricing based on the protectionism around the tariffs, but what we do believe is steel will not be going down.
Okay, great. Thanks, guys.
Thank you. Thank you. Thank you.
Speaker Change: Thank you. Our next question will come from Daniel Moore with CJS Securities.
Speaker Change: Thank you, good morning Ramey, good morning Anselm. Appreciate the comments, appreciate the comments around the cadence for H1 and H2, certainly makes sense.
Daniel Moore: Just maybe more granularity, how should we think about kind of revenue and EBITDA for Q1 relative to what we saw in Q4 overall? I think Anselm, you said margins up a little bit, but just holistically, how should we kind of think about that?
Speaker Change: Yeah, what we kind of guided is the jump-off point. If you think of it, if you adjust for the one timers in Q4, you get about a 19% kind of margin rate. The way we view it is that Q1 will be that as the jump-off point and
Daniel Moore: sequentially increasing throughout the year as the costs, you know, benefits come through as well as just volume increases.
Speaker Change: Got it and any any comments from a kind of a top line where we using Q4 as a jump-off point?
Speaker Change: Yeah, it'll be probably the way we look at it, I think, you know, obviously there was the pent-up demand that we talked about with the delays and that started to come through. I think if you look at it into Q1, it'll probably be going back to our normal seasonality. I just want to remind everyone there's weather. And if you look at the weather so far this quarter, you probably see a lot of, you know, conditions that don't allow for construction as nicely. So there'll probably be that normal impact that we have some seasonality.
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Speaker Change: got it helpful and then I guess just maybe one more and I'll jump back to you but if you maybe just kind of delineate between if you look at the midpoint of the revenue guide how we think about kind of self-storage versus
Speaker Change: new construction, you know, on a year-over-year basis. I mean, new construction is starting to flatten out. We actually see that get back to growth in the back half of the year. And then, obviously, you gave good color on R3 versus...
on Deconstruction.
and Sara Macioch.
Speaker Change: The way you should think about it, Dan, is that obviously, first of all, the price commercial actions that we did will impact the absolute dollar amount.
Speaker Change: So you would see still decline year over year from an absolute dollar point of view?
Speaker Change: You would see probably what we're thinking about is new construction still slowly.
declining a little as R3 throughout the year grows again.
Speaker Change: And then, but again, impacted by price, so keep that in mind. And then commercial, which the other component of it is that our thoughts are that, that's kind of gotten to a bottom. We got a lot of good growth we're seeing in the rolling steel side of the house.
Speaker Change: We have the new Mount Erie locations that's helping that grow there. So our expectation is that we'll start seeing commercial getting back to growth as well.
Very helpful. I'll jump back with any follow-ups. Thanks.
Thanks, Sam.
Speaker Change: Thank you. Our next question comes from John Lovallo with UBS.
John Lovallo: Good morning, guys. Thank you for taking my questions as well. Maybe just, you know, dovetailing off the last question there in terms of Q1 with the 19%, you know, jump-off point and, you know, some seasonality. I mean, how are things actually shaking out so far through the quarter? I mean, are you feeling like you're on track pretty consistently with those expectations or are you expecting, you know, a stronger kind of march to kind of catch up?
John Lovallo: No, we're on track with the guide we have right now, so I think everything is moving along as expected that we see right now.
Speaker Change: Okay and then in terms of the buybacks it seems like the pace may have slowed a bit I think looks like maybe nine million in the fourth quarter versus something like 45 million in the third quarter despite the stock being lower and any reason why you may have backed off a bit there?
Speaker Change: It's just that we were just balancing other uses of cash. You know, obviously, we still wanted to do M&A and there's some timing in what we were looking at there.
Speaker Change: that we just made sure that we had cash for that if it did happen. And then also just re-looking at kind of some of those year-end capex that we needed for some of our equipment, but that's all it was there just to balance kind of uses of cash.
Speaker Change: Got it. And last one from my end. Have you guys noticed any changes in the competitive dynamics across your markets? Any new competitors or capacity emerging over the past call six months or you know maybe even 12 months?
more impacted by the current, you know...
Speaker Change: situation. Like I mentioned earlier, our go-to-market strategy is more around the capitalized customer segment.
Speaker Change: and theirs is the opposite, basically the mom and pops that are on the sideline right now. So I think we're in a good position to gain a lot of market share in 2025.
All right, thanks very much guys. Thank you.
Speaker Change: Thank you. Our next question comes from Phil Neame with Jefferies.
Hey guys, congrats on a strong quarter.
Speaker Change: Yeah, the last few quarters you talked about projects being paused on rates. Rates remain still pretty elevated. So I'm just curious to get your update here. What are you seeing from perhaps that customer group? How are backlogs shaping up bidding activity and certainly on the conversion to orders as well?
Speaker Change: Great question, Phil, and I think what we talked about is, yeah, interest rates are still high and the big thing that we were trying to articulate was just the liquidity impact to our customers.
customers that are still well-capitalized.
Speaker Change: They might not be able to do so many concurrent projects at the same time. So we just saw, you know, the movement finally of some of those projects that were being held up because they had finished a project and able to now add another project to it. So I think that's kind of what we started to see in Q4.
Speaker Change: You know, rates are obviously still high, so I don't necessarily see them being able to all of a sudden add even more projects concurrently than what they can do.
Speaker Change: In terms of the backlog, I'm just happy to report that the backlog and the pipeline remain stable. In addition to that, we're seeing actual growth in both of those metrics in our international business.
Okay, super. I guess a question for Anselm.
Speaker Change: If I heard you correctly, your expectation is still for high single-digit price declines
Speaker Change: So if we kind of parse that out and just look at volumes, I think your volumes are down.
Speaker Change: Almost 20% in 3Q, we're down like mid-team in the fourth quarter, so when we think about the volume cadence through the year
Speaker Change: Is it expected to be still pretty negative the first half and then some sort of recovery in the back half? Is that how we should think about it?
Speaker Change: Yeah, that's what we're seeing right now. We're still cautious. It's still, you know, not the greatest conditions right there. So we're trying to be cautious about what we see. And again, just a reminder, we really took a deep dive. Look at all the projects in the pipeline right now in terms of timing and how they'll flow. And what we're seeing is project timing is stretching out a little more.
Speaker Change: We would expect to see some decline still in that first half and maybe a little going into Q3.
Okay, that's helpful, Colin.
Speaker Change: And one last one from me, R3 was still pretty weak during the quarter, you kind of alluded to...
Perhaps that team growth, I know.
Speaker Change: We talked about, I believe there's an opportunity for a large customer on the rebranding and conversion side of things for a large REIT customer. Can you give us a little more color on how that's progressing, how that could contribute this year? And then where are conversions? Have you started seeing that bottom and...
Speaker Change: When we look at the 25, is that term positive, or is it still kind of pretty soft here?
Speaker Change: Yeah, conversions are, you know, we don't, it's bottom pretty much, we're not seeing...
Speaker Change: a big increase. There could be something in the back half, but at this point we're not seeing that.
Speaker Change: Our three work rebranding, I think there's going to be more opportunities, not just for that one REIT because I think the environment is more open to more acquisitions from all the customers. So I think that's where we'll see more three rebranding work.
Okay, thank you.
Thank you. Thank you.
Speaker Change: Thank you. There are no additional questioners at this time. I'd like to now turn it back to our presenters for any closing remarks.
Speaker Change: Okay, 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.
and Anselm Wong.
Speaker Change: Thank you, ladies and gentlemen. This does conclude today's presentation. You may now disconnect.
Rest in Peace Rachel
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