Janus International Group, Inc. Q3 FY2024 earnings call

• Janus is facing market uncertainty causing project delays for customers, particularly mid-level non-institutional ones.
• Implemented structural cost reduction plan to improve margins, simplify structure, and enhance efficiencies, expecting $8M-$12M annual pre-tax cost savings and $2M-$4M one-time pre-tax charges.
• Noke Ion rollout in early October, with healthy demand anticipated due to unique customization and updated pricing.
• Strong cash flow generation, with $43M from operating activities in Q3, and repurchased 4.3 million shares for $45.5M in Q3 as part of $100M share repurchase program.
• Balance sheet remains robust with net leverage at 2.0 times, within target range.

In the third quarter, consolidated revenue was $230.1 million, 17.9% lower than the prior year quarter with declines in all three sales channels. The self-storage business was down 22.4%, with new construction down 12.6% and R3 off 34.4% for the quarter. The commercial and other segment saw a 7.8% decline, driven by market softness and weakness in carports/sheds demand but offset by TMC acquisition. Noke's installed units increased to 346,000 from 323,000 at the end of the third quarter, a sequential growth of 7.1%.

• Adjusted 2024 guidance: revenue expected $910M-$925M, adjusted EBITDA $195M-$205M (adjusted EBITDA margin midpoint 21.8%).
• 2025 catalysts include R3 demand, Noke Ion growth, full-year TMC contribution, and benefits from structural cost reduction plan.
• Expect to file 10-Q on November 1.

• Market uncertainty leading to continued project delays through end of 2024.
• Credit loss due to a customer filing for bankruptcy and marketing conditions affecting timely payments from some customers.
• Impact of election uncertainty and potential steel price changes due to tariffs on business operations.

Q: Last quarter felt good about scrubbing backlog and understanding deferrals, what changed to warrant meaningful cut and new order activity/cancellations?

A: Projects hoped to release based on interest rate cut didn't, and Fed's further proposed rate cuts in 2024 caused developers to delay. Non-institutional operators/mom-and-pops most impacted, but R3 has bright spots and Noke Ion opportunity.

Q: Long-term framework, commercial actions impact on price, need to adjust margins?

A: Steel prices near low but not pre-2020; long-term framework still holds with cost offset from structural plan. Commercial actions impact storage price in 2025, but margins expected to recover with market recovery.

Q: Backlogs, cancellations, visibility?

A: No meaningful cancellations, slight backlog decline as customers hold projects; pipeline remains strong.

Q: Credit loss in quarter, incremental in Q4 guide, other customers behind?

A: One large customer bankruptcy caused credit loss, additional reserve against remaining accounts, but no incremental assumed in Q4 guide currently.

Q: Phasing of delayed storage projects, Q4 guidance magnitude?

A: Storage and commercial projects equally affected, Q4 guidance carries over Q3 trends with no major change in macro drivers.

Q: Capital allocation, net leverage impact on deploying capital?

A: Still well within 2%-3% net leverage ratio range, no major constraint on deploying capital currently.

Q: Election uncertainty impact on activity, snapback, project cancellation vs delay?

A: Market uncertainty from interest rates and election causes delays, hopeful for tailwinds in self-storage post-uncertainty.

Q: Hurricane/weather impact on Q3 results/outlook?

A: Very small impact, with some orders for replacement doors from affected sites seen.