Janus International Group Inc

Previous wording

The following discussion and analysis provides information which Janus’s management believes is relevant to an assessment and understanding of consolidated results of operations and financial condition. You should read the following discussion and analysis of Janus’s financial condition and results of operations in conjunction with the Unaudited Condensed Consolidated financial statements and notes thereto contained in this quarterly report on Form 10-Q (the “Form 10-Q”) and the consolidated financial statements and notes

Current wording

The following discussion and analysis provides information which Janus’s management believes is relevant to an assessment and understanding of consolidated results of operations and financial condition. You should read the following discussion and analysis of Janus’s financial condition and results of operations in conjunction with the Unaudited Condensed Consolidated financial statements and notes thereto contained in this quarterly report on Form 10-Q (the “Form 10-Q”) and the consolidated financial statements and notes thereto contained in Janus’s annual report on Form 10-K for the year ended December 30, 2023.

Previous wording

Dollar amounts are shown in millions of dollars, unless otherwise noted, and rounded to the nearest million except for share

Current wording

Dollar amounts are shown in millions of dollars, unless otherwise noted, and rounded to the nearest million except for share and per share amounts.

Previous wording

•Results of Operations: This section provides an analysis of our unaudited results of operations for the three month periods ended March 30, 2024 and April 1, 2023.

Current wording

•Results of Operations: This section provides an analysis of our unaudited results of operations for the three and six month periods ended June 29, 2024 and July 1, 2023.

Previous wording

•Liquidity and Capital Resources: This section provides a discussion of our financial condition and an analysis of our unaudited cash flows for the three month periods ended March 30, 2024 and April 1, 2023. This section also provides a discussion of our contractual obligations, other purchase commitments and customer credit risk that existed at March 30, 2024, as well as a discussion of our ability to fund our future commitments and ongoing operating activities through internal and external sources of capital.

Current wording

•Liquidity and Capital Resources: This section provides a discussion of our financial condition and an analysis of our unaudited cash flows for the three and six month periods ended June 29, 2024 and July 1, 2023. This section also provides a discussion of our contractual obligations, other purchase commitments and customer credit risk that existed at June 29, 2024, as well as a discussion of our ability to fund our future commitments and ongoing operating activities through internal and external sources of capital.

Previous wording

Our business is operated through two geographic regions that comprise our two reportable segments: Janus North America and Janus International. The Janus International segment is comprised of JIEH, whose production and sales are largely in Europe and Australia. The Janus North America segment is comprised of all the other entities including Janus International Group, LLC (together with each of its operating subsidiaries, “Janus Core”), Betco, Inc. (“BETCO”), Noke, Inc. (“NOKE”), Asta Industries, Inc. (“ASTA”), Access Control Technologies, LLC (“ACT”), U.S. Door & Building Components, LLC (“U.S. Door”), Janus Door, LLC (“Janus Door”), and Steel Door Depot.com, LLC (“Steel Door Depot”).

Current wording

Our business is operated through two geographic regions that comprise our two reportable segments: Janus North America and Janus International. The Janus International segment is comprised of JIEH, whose production and sales are largely in Europe and Australia. The Janus North America segment is comprised of all the other entities including Janus International Group, LLC (together with each of its operating subsidiaries, “Janus Core”), Betco, Inc. (“BETCO”), Noke, Inc. (“NOKE”), Asta Industries, Inc. (“ASTA”), Access Control Technologies, LLC (“ACT”), U.S. Door & Building Components, LLC (“U.S. Door”), Janus Door, LLC (“Janus Door”), Steel Door Depot.com, LLC (“Steel Door Depot”), Janus International Canada, Ltd. (“Janus Canada”), and Terminal Door, LLC (“Terminal Door”).

Previous wording

Commercial light duty steel roll-up doors are designed for applications that require less frequent and less demanding operations. Janus offers heavy duty commercial grade steel doors (minimized dead-load, or constant weight of the curtain itself) perfect for warehouses, commercial buildings, and terminals, designed with a higher gauge and deeper guides, which combat the heavy scale of use with superior strength and durability. Janus also offers rolling steel doors known for minimal maintenance and easy installation with, but not limited to, the following options for: commercial slat doors, heavy duty service doors, fire doors, fire rated counter shutters, insulated service doors, counter shutters and grilles.

Current wording

Commercial light duty steel roll-up doors are designed for applications that require less frequent and less demanding operations. Janus offers heavy duty commercial grade steel doors (minimized dead-load, or constant weight of the curtain itself) perfect for warehouses, commercial buildings, and terminals, designed with a higher gauge and deeper guides, which combat the heavy scale of use with superior strength and durability. Janus also offers rolling steel doors known for minimal maintenance and easy installation with, but not limited to, the following options for: commercial slat doors, heavy duty service doors, fire doors, fire rated counter shutters, insulated service doors, counter shutters and grilles. Following the T.M.C. Acquisition (hereinafter defined), our business expanded to provide trucking terminal renovation, construction, remodeling, and maintenance services to trucking customers in the Southeast United States.

Previous wording

•Cash flows from operations of $28.6 and $24.0 free cash flows were generated for the period ending March 30, 2024 compared to $50.3 and $44.2 cash flows from operations and free cash flows for the period ending April 1, 2023.

Current wording

•Cash flows from operations of $59.6 and free cash flow of $49.3 were generated for the six months period ending June 29, 2024 compared to $96.6 cash flows from operations and $87.0 free cash flow for the six months period ending July 1, 2023.

Previous wording

•Common stock worth $15.3 was repurchased, which was 1.02 million shares as part of our previously announced $100.0 share buy-back program.

Current wording

•Common stock worth $10.1 was repurchased in the three months ended June 29, 2024, which was 0.75 million shares as part of our previously announced $100.0 share repurchase program.

Previous wording

•Long-Term Debt to Net Income ratio decreased to 4.4x for the period ending March 30, 2024, from 4.6x as of December 30, 2023, Net leverage ratio decreased to 1.5x for the period ending March 30, 2024, down from 1.6x as of December 30, 2023.

Current wording

•Long-Term Debt to Net Income ratio was 4.6x as of June 29, 2024 and December 30, 2023. Net leverage ratio increased to 1.7x for as of June 29, 2024, up from 1.6x as of December 30, 2023.

Previous wording

Human capital is also one of the main cost drivers of the manufacturing, selling, and administrative processes of Janus. As a result, headcount reflect Janus’s operational status, indicating whether the business is expanding or contracting. We expect a continued rise in our workforce as we expand our operations. Additionally, we foresee the need to hire additional software personnel as we continue to expand the software accessibility component of our business. As of March 30, 2024, and April 1, 2023, the headcount was 2,382 employees (including 424 temporary employees) and 2,301 employees (including 518 temporary employees), respectively.

Current wording

Human capital is also one of the main cost drivers of the manufacturing, selling, and administrative processes of Janus. As a result, management believes that headcount reflects Janus’s operational status, indicating whether the business is expanding or contracting. We expect a continued rise in our workforce as we expand our operations. As of June 29, 2024, and July 1, 2023, the headcount was 2,386 employees (including 430 temporary employees) and 2,385 employees (including 585 temporary employees), respectively.

Previous wording

Management evaluates the performance of its reportable segments based on the revenue of services and products, gross profit, operating margins, and cash from business operations. We use Adjusted EBITDA, which is a non-GAAP financial metric, as a supplemental measure of our performance in order to provide investors with an improved understanding of underlying performance trends. Please see the section “Non-GAAP Financial Measure” below for further discussion of this financial measure, including the reasons why we use such financial measures and reconciliations of such financial measures to the nearest GAAP financial measures.

Current wording

Management evaluates the performance of its reportable segments based on the revenue of services and products, gross profit, operating margins, and cash from business operations. We use Adjusted EBITDA, which is a non-GAAP financial metric, as a supplemental measure of our performance in order to provide investors with an improved understanding of underlying performance trends. Please see the section “Non-GAAP Financial Measures” below for further discussion of this financial measure, including the reasons why we use such financial measures and reconciliations of such financial measures to the nearest GAAP financial measures.

Previous wording

The following table sets forth key performance measures for the three month periods ended March 30, 2024 and April 1, 2023:

Current wording

The following table sets forth key performance measures for the three and six month periods ended June 29, 2024 and July 1, 2023:

Previous wording

Three month period ended March 30, 2024 compared to the three month period ended April 1, 2023:

Current wording

Total revenue decreased by $22.2 or 8.2% for the three month period ended June 29, 2024 compared to the three month period ended July 1, 2023, and decreased by $19.6 or 3.8% for the six month period ended June 29, 2024 compared to the six month period ended July 1, 2023. The $26.2 organic revenue decline for the three months ended June 29, 2024 is attributed to an approximately 50% decline in volume and an approximately 50% decline in pricing. The organic decline was partially offset by $4.0 in inorganic revenue from the T.M.C. Acquisition.

Previous wording

Service Revenues. Service revenues reflect installation services to customers for steel facilities, steel roll-up and swing doors, hallway systems, and relocatable storage units which is recognized over time based on the satisfaction of our performance obligation. Janus is highly integrated with customers at every phase of a project, including facility planning/design, construction, access control and R3 of damaged, or end-of-life products or rebranding of facilities due to market consolidation. Service obligations are primarily short term and completed within a one-year time period. We expect our service revenue to increase as we add new customers and our existing customers continue to add more and more content per square foot.

Current wording

Service Revenues. Service revenues reflect installation services to customers for steel facilities, steel roll-up and swing doors, hallway systems, and relocatable storage units which is recognized over time based on the satisfaction of our performance obligation. Janus is highly integrated with customers at every phase of a project, including facility planning/design, construction, access control and R3 of damaged, or end-of-life products or rebranding of facilities due to market consolidation. Service revenues also include trucking terminal renovation, construction, remodeling, and maintenance services to trucking customers.

Previous wording

Product Cost of Revenues. Product costs of revenues includes the manufacturing cost of our steel roll-up and swing doors, rolling steel doors, steel structures, and hallway systems which primarily consists of amounts paid to our third-party contract suppliers and personnel-related costs directly associated with manufacturing operations as well as overhead and indirect costs. Our product cost of revenues includes warranty costs, excess and obsolete inventory charges, shipping costs, cost of spare or replacement parts, and an allocated portion of overhead costs, including depreciation. Product costs of revenues also include all costs affiliated with erecting a self storage facility for our customers. We expect our product cost of revenues to increase as our product revenues grow.

Current wording

Product Cost of Revenues. Product costs of revenues includes the manufacturing cost of our steel roll-up and swing doors, rolling steel doors, steel structures, and hallway systems which primarily consists of amounts paid to our third-party contract suppliers and personnel-related costs directly associated with manufacturing operations, depreciation on certain assets, as well as other overhead and indirect costs. Our product cost of revenues includes warranty costs, excess and obsolete inventory charges, shipping costs, cost of spare or replacement parts, and an allocated portion of overhead costs, including depreciation. Product costs of revenues also include all costs affiliated with erecting a self storage facility for our customers. We expect our product cost of revenues to correlate to our product revenues.

Previous wording

Service Cost of Revenues. Cost of services includes third-party installation subcontractor costs directly associated with the installation of our products. We expect our service cost of revenues to increase as our service revenues grow.

Current wording

Service Cost of Revenues. Cost of services includes third-party installation subcontractor costs directly associated with the installation of our products. We expect our service cost of revenues to correlate to our service revenues.

Previous wording

Selling and Marketing Expense. Selling expenses consist primarily of compensation and benefits of employees engaged in selling activities as well as related travel, advertising, and trade shows/conventions. We expect selling expenses to increase in absolute dollars in future periods as we expect our revenues to continue to grow.

Current wording

Selling and Marketing Expense. Selling expenses consist primarily of compensation and benefits of employees engaged in selling activities as well as related travel, advertising, and trade shows/conventions. We expect selling expenses to correlate to overall revenues, with some deviations for strategic investments.

Previous wording

General and Administrative Expense. General and administrative (“G&A”) expenses are comprised primarily of expenses relating to back office employee compensation and benefits, travel, meals, and entertainment expenses as well as depreciation, amortization, and non-recurring costs. We expect general and administrative expenses to increase in absolute dollars in future periods as we expect our revenues to continue to grow.

Current wording

General and Administrative Expense. General and administrative (“G&A”) expenses are comprised primarily of expenses relating to back office employee compensation and benefits, travel, meals and entertainment expenses as well as depreciation on certain assets, and amortization. We expect general and administrative expenses to correlate to overall revenues, with some deviations for strategic investments.

Previous wording

Interest Expense. Consists of interest expense on short-term and long-term debt and amortization on deferred financing fees (see“Long-Term Debt”section).

Current wording

Interest Expense, net. Consists of interest expense on short-term and long-term debt and amortization on deferred financing fees (see Note 9 to our Unaudited Condensed Consolidated Financial Statements in this Form 10-Q for additional information), partially offset by interest income earned on U.S. Treasury bills.

Previous wording

New Construction sales increased by $39.6 or 61.3% for the three month period ended March 30, 2024 compared to the three month period ended April 1, 2023, primarily due to continued high occupancy rates at existing facilities and continued demand for capacity additions through greenfield sites.

Current wording

New construction sales increased by $7.5 or 7.3% and $40.9 or 21.9% for the three and six month periods ended June 29, 2024 compared to the three and six month periods ended July 1, 2023, respectively. The increase was due to continued elevated occupancy rates as compared to historical long-term averages at existing facilities and continued demand for capacity additions through greenfield sites.

Previous wording

R3 sales decreased by $14.8 or 17.3% for the three month period ended March 30, 2024 compared to the three month period ended April 1, 2023. The R3 sales decrease was primarily driven by the decline in capacity additions being brought on through retail big-box conversion activity.

Current wording

R3 sales decreased by $18.9 or 23.5% and $33.7 or 20.3% for the three and six month periods ended June 29, 2024 compared to the three and six month periods ended July 1, 2023, respectively. The R3 sales decrease was approximately 80% attributed to a decline in facility expansion and retail big-box conversion activity.

Previous wording

Commercial and other sales decreased by $16.0 or 19.2% for the three month period ended March 30, 2024 compared to the three month period ended April 1, 2023, due to shifts in demand for certain product lines, affecting the commercial steel roll up door market.

Current wording

Commercial and other sales decreased by $10.8 or 12.4% and $26.8 or 15.7% for the three and six month periods ended June 29, 2024 compared to the three and six month periods ended July 1, 2023, due to a volume decline for rolling sheet doors in the carports and sheds market and market declines in demand affecting the commercial steel roll up door market.

Previous wording

The cost of revenues decreased by $7.9 or 5.2% for the three month period ended March 30, 2024 compared to the three month period ended April 1, 2023. The decrease in product cost of revenues of $9.7 for the three month period ended March 30, 2024, is primarily attributable to the decline in steel coil pricing, while the increase in service cost of revenue of $1.8 for the three month period ended March 30, 2024, is due to the higher costs necessary to support the service revenue growth of 7.9%.

Current wording

The cost of revenues decreased by $14.9 or 9.7% and $22.8 or 7.4% for the three and six month periods ended June 29, 2024 compared to the three and six month periods ended July 1, 2023, respectively. The decrease in product cost of revenues of $11.2 and $20.9 for the three and six month periods ended June 29, 2024, respectively, is primarily attributable to the decline in revenue volume. The decrease in service cost of revenues of $3.7 and $1.9 for the three and six month periods ended June 29, 2024, respectively, is due to a $2.5 out of period adjustment, offset by the increase in service cost of revenues needed to support the increase in service revenues.

Previous wording

General and administrative expenses increased $3.2 or 9.4% for the three month period ended March 30, 2024 compared to the three month period ended April 1, 2023. The increase for the three months is primarily due to additional headcount primarily for the Atlanta software center opened in fiscal year 2023 and inflationary costs.

Current wording

General and administrative expenses increased $5.0 or 14.2% and $8.2 or 11.8% for the three and six month periods ended June 29, 2024 compared to the three and six month periods ended July 1, 2023. The increase for the three and six months is primarily due to additional payroll for the Atlanta software center, normalized run rate of share-based compensation having 3 years of grants included in the expense, and professional services related to M&A activity.

Previous wording

Income tax expense increased by $1.5 or 16.7% from $9.0 for the three month period ended April 1, 2023, to $10.5 expense for the three month period ended March 30, 2024, due to increase in income before taxes.

Current wording

Income tax expense decreased by $2.9 or 23.4% and $1.4 or 6.5% from $12.4 and $21.4 for the three and six month periods ended July 1, 2023, respectively, to $9.5 and $20.0 expense for the three and six month periods ended June 29, 2024, respectively, due to decrease in income before taxes.

Previous wording

The $4.7 or 18.1% increase in net income for three month period ended March 30, 2024 as compared to the three month period ended April 1, 2023, is largely due to an increase in revenues and a decrease in cost of revenues, partially offset by an increase in operating expenses for the three month period ended March 30, 2024.

Current wording

The $9.4 or 25.4% and $4.7 or 7.5% decrease in net income for three and six month periods ended June 29, 2024 as compared to the three and six month periods ended July 1, 2023, respectively, is largely due to a decrease in revenues and increase in operating expenses partially offset by a decrease in cost of revenues for the three and six month periods ended June 29, 2024.

Previous wording

The following table and discussion compares Janus North America sales by sales channel.

Current wording

The following tables and discussion compares Janus North America sales by sales channel.

Previous wording

New construction sales increased by $33.4 or 40.2% for the three month period ended March 30, 2024 compared to the three month period ended April 1, 2023. The increase in the three month period ended March 30, 2024 was due to continued high occupancy rates at existing facilities and continued demand for capacity additions through greenfield sites.

Current wording

New Construction sales increased by $10.8 or 12.8% and $50.4 or 33.8% for the three and six month periods ended June 29, 2024 compared to the three and six month periods ended July 1, 2023, respectively. The increase was due to continued elevated occupancy rates as compared to historical long-term averages at existing facilities and continued demand for capacity additions through greenfield sites.

Previous wording

Commercial and Other sales decreased by $15.5 or 18.6% for the three month period ended March 30, 2024 compared to the three month period ended April 1, 2023, due to shifts in demand for certain product lines, affecting the commercial steel roll up door market.

Current wording

Commercial and Other sales decreased by $10.7 or 12.3% and $26.2 or 15.3% for the three and six month periods ended June 29, 2024 compared to the three and six month periods ended July 1, 2023, respectively, due to a volume decline for rolling sheet doors in the carports and sheds market and market declines in demand affecting the commercial steel roll up door market.

Previous wording

The $3.7 or 2.7% decrease in cost of revenues for the three month period ended March 30, 2024 compared to the three month period ended April 1, 2023, is primarily due to the decrease in product cost of revenues of $7.0, which is primarily attributable to the decline in steel coil pricing, while the increase in service cost of revenue of $3.3 for the three month period ended March 30, 2024, is due to the higher costs necessary to support the service revenue growth of 20.0%

Current wording

The $13.6 or 9.7% and $17.3 or 6.2% decrease in cost of revenues for the three and six month periods ended June 29, 2024 compared to the three and six month periods ended July 1, 2023, respectively, is primarily due to the decrease in product cost of revenues of $11.5 and $18.6 which, in turn, is primarily attributable to the decline in product revenues. The decrease in service cost of revenues of $2.1 and $1.3 for the three and six month periods ended June 29, 2024, respectively, is dueto a$2.5 out of period adjustment, offset by the increase in service cost of revenues needed to support the increase in service revenues.

Previous wording

Income from operations increased by $7.5 or 15.4% from $48.7 for the three month period ended April 1, 2023 to $56.2 for the three month period ended March 30, 2024, primarily due to an increase in revenue and a reduction in cost of revenues, partially offset by an increase in selling and general and administrative expenses.

Current wording

Income from operations decreased by $10.5 or 17.1% and $3.0 or 2.7% for the three and six month periods ended June 29, 2024 compared to the three and six month periods ended July 1, 2023, respectively, primarily due to an decrease in revenue yielding a decline in margin along with an increase in selling and general and administrative expenses.

Previous wording

Results of Operations - Janus International - For the three month period ended March 30, 2024 compared to the three month period ended April 1, 2023:

Current wording

Results of Operations - Janus International - For the three and six month periods ended June 29, 2024 compared to the three and six month periods ended July 1, 2023:

Previous wording

The following table illustrates the sales by channel for the three month periods ended March 30, 2024 and April 1, 2023.

Current wording

The following table illustrates the sales by channel for the three and six month periods ended June 29, 2024 and July 1, 2023.

Previous wording

New Construction sales decreased by $6.2 or 33.3% to $12.4 for the three month period ended March 30, 2024 compared to $18.6 for the three month period ended April 1, 2023. The decrease is due to a decline in volume as a result of the U.K. recessionary period.

Current wording

New Construction sales decreased by $3.3 or 17.8% and $9.5 or 25.6% for the three and six month periods ended June 29, 2024 compared to the three and six month periods ended July 1, 2023, respectively. The decrease is due to a decline in volume as a result of the U.K. recessionary period.

Previous wording

International Cost of Revenues and Gross Margin

Current wording

International Cost of Revenues

Previous wording

Cost of revenues decreased by $3.7 or 24.7% for the three month period ended March 30, 2024. Cost of revenues were $11.3 for the three month period ended March 30, 2024 and $15.0 for the three month period ended April 1, 2023. The decrease in cost of revenues for the three month period ended March 30, 2024, is primarily due to a decrease in sales volume.

Current wording

Cost of revenues decreased by $1.2 or 8.4% and $4.9 or 16.7% for the three and six month periods ended June 29, 2024 compared to the three and six month periods ended July 1, 2023, respectively. The decrease in cost of revenues is primarily due to a decrease in sales volume.

Previous wording

Income from operations decreased from $2.3 for the three month period ended April 1, 2023 to a $0.7 loss from operations, for the three month period ended March 30, 2024. The decrease for the period is primarily due to a decrease in sales volume.

Current wording

Income from operations decreased from $2.8 to $0.6 for the three month period ended June 29, 2024, and from $5.1 income from operations to a $0.1 loss from operations for the three and six month periods ended June 29, 2024 compared to the three and six month periods ended July 1, 2023. The decrease for the period is primarily due to a decrease in sales volume.

Previous wording

Eliminations include transactions to account for intersegment activity. The eliminations necessary to arrive at consolidated financial information activity for the three month periods ended March 30, 2024 and April 1, 2023 are as follows:

Current wording

Eliminations include transactions to account for intersegment activity. The eliminations necessary to arrive at consolidated financial information activity for the three and six month periods ended June 29, 2024 and July 1, 2023 are as follows:

Previous wording

Our financial policy seeks to: (i) selectively invest in organic and inorganic growth to enhance our portfolio, including certain strategic capital investments and (ii) maintain appropriate leverage by using free cash flows to repay outstanding borrowings.

Current wording

Our financial policy seeks to: (i) selectively invest in organic and inorganic growth to enhance our portfolio, including certain strategic capital investments, (ii) maintain appropriate leverage by using free cash flows to repay outstanding borrowings and (iii) repurchases of common stock.

Previous wording

(1)The interest rate on the Amendment No. 6 First Lien Term Loan as of March 30, 2024, was 8.37%, which is a variable rate based on Adjusted Term SOFR, subject to a 1.00% floor and 10 basis points flat CSA, plus an applicable margin percent of 3.00%.

Current wording

(2)The interest rate on the Repricing Amendment as of June 29, 2024, was 7.84%, which is a variable rate based on Adjusted Term SOFR plus an applicable margin percent of 2.50%.