Hello, and welcome to the Janus International Group Fourth Quarter and Full Year 2022 Earnings Conference Call. Currently, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. I would now like to turn the call over to your host, Mr. John Rohlwing, Vice President, Investor Relations and FP&A for Janus. Thank you. You may begin.

Thank you, operator, and thank you all for joining our earnings conference call. I'm joined today by our Chief Executive Officer, Ramey Jackson, and our Chief Financial Officer, Anselm Wong. 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. 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 margins, adjusted net income, and adjusted earnings per share. Please see our release and filings for a reconciliation of these non-GAAP measures to the most directly comparable GAAP measure. 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 investor section of our website. In addition, after the close of the market today, we will file an 8-K providing a 15-day extension for the filing of our 10-K for the full year of 2022. The company is unable to file its Form 10-K within the prescribed time period without unreasonable effort or expense because it requires additional time to complete its procedures relating to its year-end financial reporting and auditing process. Importantly, the extension is not expected to have any impact on our 2022 financial results in the release or any historical period. On today's call, Ramey will provide an overview of our business, Anselm will continue with a discussion of our financial results and introduce our 2023 guidance. Ramey and Anselm will then discuss our long-term strategy and financial objectives before we open up the call for your questions. At this point, I will turn the call over to Ramey.

Thank you, John. Before I get into a discussion about our record results, I'd like to take a minute to recap Janus's highlights and accomplishments in 2022, a year of accelerating momentum, improving profitability, rapid deleveraging and, most importantly, outstanding execution. We could not be prouder of our employees' dedication, hard work, and contributions to our fantastic results. Early '22 presented a challenging operational backdrop. We were experiencing rapid increases in our steel prices and other inflationary pressures on our inputs. While the lagging nature of our order book meant that commercial actions we put in place to address such pressures took time to offset, we took steps that yielded improvements in revenues and EBITDA margins each quarter of 2022. The results were driven by a combination of organic and acquired top-line growth, commercial actions, working off legacy price contracts, and a relentless focus on cost control. We have built this organization through a combination of outstanding organic growth and smart strategic M&A. One of our four key focus areas in 2022 was the integration of DBCI and ACT, which we acquired in the second half of 2021. Both operations immediately began to contribute to our consolidated results, and I'm happy to report that the integration process is now complete, coming in faster with greater overall synergies than we had originally forecasted. In 2022, we celebrated our 20-year anniversary, growing from a small office space in Temple, Georgia, to what is now a scale of operations that include 17 manufacturing and distribution plants, over 10,000 active customers, over 1,500 employees around the world, and revenues in excess of $1 billion annually. We continue to enhance our capabilities of our Nokē Smart Entry offering and to expand our go-to-market strategy. Nokē is a growing part of the suite of overall solutions we provide to the self-storage industry, and we look forward to providing a few updates on our progress later on this call. And finally, we delivered strong financial results, raising and exceeding financial guidance throughout the year, and delivering full-year revenues that were up 36% to just over $1 billion and adjusted EBITDA growing 53% to $227 million. This drove our year-end net leverage to a record since going public of 2.8x, down over 1.5x versus the end of 2021 and comfortably within our previous target range. We are excited that in 2022, we were able to build on the momentum with record results, strong cash flow, while significantly and rapidly deleveraging the company. We look forward to expanding our strong market position to capture additional share and create long-term value for all of our stakeholders in 2023 and beyond. With that, I will turn the call over to Anselm for an overview of our results for the quarter and the full year along with our initial 2023 guidance.

Thanks, Ramey, and good morning, everyone. I am proud of our record results and our success during 2022 in growing our business, generating healthy cash flow, and deleveraging our balance sheet at Janus for success. I will focus my comments on our fourth quarter performance, which exceeded our expectations for revenue and adjusted EBITDA. In the fourth quarter, consolidated revenue of $279.7 million was up 18.9% as compared to the fourth quarter of 2021, driven primarily by increased volume as a result of favorable industry dynamics across all of our sales channels, share gains, commercial actions taken to offset inflationary pressures, and solid execution. Now let me give you additional color around our sales channel results for the fourth quarter. R3 in commercial and other continued to generate strong growth consistent with prior quarters, while new construction saw a year-over-year decline. Specifically, R3 led the way with year-over-year growth in the fourth quarter of 42.7%, driven primarily by continued growth in conversions and expansions. Commercial and other rounded out an outstanding year with fourth-quarter year-over-year growth of 34.3%, primarily due to higher volume through our distributor network with the impact of the commercial actions taken during the year. Our self-storage new construction segment saw a year-over-year decline of 8.1% in the quarter attributable to the difficult comps in the 2021 quarter when delays that had occurred in project permitting earlier in the pandemic eased and customers accelerated their spending to catch up. Adjusted EBITDA of $68.3 million was up 57.5% compared to the fourth quarter of 2021, largely the result of higher revenues and efficiency gains, partially offset by higher costs of sales. Adjusted EBITDA margin for the quarter was 24.4%, which was up 600 basis points from the prior year level, driven primarily by the positive impact of commercial actions and some easing in raw material costs, partially offset by continued inflationary pressures in other areas such as labor and logistics. For the fourth quarter of 2022, we produced adjusted net income of $32.7 million and adjusted diluted earnings per share of $0.22. Adjusted net income was impacted during the quarter by drivers already covered, including increased volume, commercial actions, and integration of our acquisitions. For the full year, we generated cash from operating activities of $88.5 million, including $25.9 million in the fourth quarter. Capital expenditures for the year were $8.8 million, down from $19.9 million in 2021 and continue to highlight the CapEx-light nature of the business. We are proud of our free cash flow profile, which reflects the financial strength of our results. In the fourth quarter, our free cash flow conversion of adjusted net income was 76%, while for the full year that conversion was 73%. We finished the year with $158.4 million of total liquidity, including $78.4 million of cash and equivalents on the balance sheet. Our total outstanding debt at year-end was $708.2 million, and our net leverage was 2.8x at December 31. Now moving to our 2023 guidance on Slide 9. Building off of the momentum we produced last year, full-year 2023 revenue is expected to be in the range of $1.05 billion to $1.07 billion. This increase compared to 2022 is mainly attributed to the organic growth and commercial actions we have taken in the last three quarters to combat cost inflation. Adjusted EBITDA is expected to be in the range of $250 million to $275 million. At the midpoint, this represents a double-digit increase versus the prior year and reflects an adjusted EBITDA margin range of 24% to 26%. We expect our margin profile to be stronger in the second half of the year than the first half. And for our margins in the second half of 2022 to be a good jumping-off point for the beginning of 2023. We expect to produce another year of strong cash flow conversion of adjusted net income and achieve our previous leverage target range, focusing on maintaining our net leverage within our new target range of 2x to 3x. Finally, we are off to a good start in the first quarter with revenue and profits in line with this outlook. Thank you. I will now turn the call over to Ramey to discuss our longer-term strategic goals.

Thank you, Anselm. Coming off this impressive record year at Janus, I'm pleased today to lay out for you, beginning on Slide 10, our first longer-term vision for the company since becoming public almost two years ago. Over the last 20 years, we have built the industry leader in self-storage solutions that also features newer and rapidly growing offerings in the commercial, industrial, and remote access sectors. That journey has resulted in strong market share, particularly with the largest and most well-capitalized owners of facilities. We have plenty of room to grow across all of our sales channels and into new market segments. Here are the important takeaways I would like you all to understand from this call. First, we are focused on expanding our industry leadership position in well-structured, resilient markets that are not overly influenced by economic cycles. Second, we have positioned the company to deliver strong revenue growth with a number of key drivers that I will discuss in more detail in a moment. Third, we are executing against our plan to deliver enhanced profitability, driving our adjusted EBITDA margins meaningfully higher. Fourth, our strong free cash flow generation, driven by a solid conversion of adjusted net income, provides us with capital deployment optionality to drive shareholder value. And finally, we look to continue our proven ability to execute value-accretive acquisitions with a focus on bolt-on opportunities in adjacent categories that complement and benefit from our market-leading position in our core competencies. Let me recap where we are today to set the table for where we are going. Today, we have a robust company that delivers strong top-line results of over $1 billion annually, EBITDA margins rising through the low 20s, a solid balance sheet that is leveraged at only 2.8x, and a track record of solid conversion of adjusted net income to free cash flow. Over the course of the next 3 to 5 years, we expect annual revenues to grow organically at a 4% to 6% rate. Adjusted EBITDA margins to rise to a 25% to 27% range, net leverage to be in a range of 2x to 3x, and free cash flow to be 75% to 100% of adjusted net income. We expect to accomplish this by expanding our leadership position in self-storage and growing share in commercial, industrial, and other adjacent areas, all while maintaining a relentless focus on cost control and a strong balance sheet. Now let me dive a little deeper into the factors that will influence that growth. On the self-storage side, end-user demand has and will continue to come from life events, which are referred to in our industry as the 6 Ds: dislocation, divorce, disaster, death, decluttering, and distribution. These life events often occur regardless of the macroeconomic environment, making demand for capacity resilient. Today, continued high occupancy rates across self-storage mean we are still a long way off from equilibrium, so demand for new capacity continues to come from a combination of new construction, refurbishments, and repurposing. Our margin profile was similar for any of those routes, allowing us to be agnostic as to the source of our growth. Our customer base today is better capitalized and more strategic than at any point in our history. And our share with the leaders in that group, like the REITs, is second to none. We are continuously expanding our portfolio of solutions to grow that side of the business, including increasing upfront design, build capabilities like we have at BETCO, enhancing our smart entry offering like Nokē, and further increasing our dollar-per-square-foot content. We have tremendous untapped potential on the commercial side as we continue to innovate and broaden our reach to various end markets as the need for commercial warehousing and distribution capabilities grow. Commercial customers also have a shorter life cycle, as their doors are generally larger and used much more frequently compared to self-storage, representing a recurring business for Janus. While the outsized growth we saw in 2022 in our commercial and other segments may result in challenging comps near-term, we are very excited about our opportunities there. We continue to be excited about our Nokē smart entry system business. Its open orders have more than doubled over the last 12 months, and the pipeline of opportunities continues to grow. The build-out for the Nokē ground game is ongoing, and we expect the addition of ACT to be a more important part of supporting this growth strategy. We are thrilled by our early success, as well as the current trajectory of Nokē as it becomes an increasing part of our offering to customers and contributor to our financial results. We expect to continue moving into adjacent verticals where we can create synergies and unlock value, potentially growing into new geographies as we move down that path. In partnership with our customers to better serve their needs, we will continue to evolve our portfolio with new innovative solutions, keeping us at the forefront of our industry. Along with the solid fundamentals and organic growth we have seen to date, M&A has been a big part of our journey. We have established a legacy of excellence regarding identifying and acquiring assets and companies that bolster our solutions offerings and are accretive to our earnings. We expect opportunistic M&A to continue to play a role in our growth, and we are continually evaluating potential opportunities for adjacent or bolt-on targets, as well as technology and transformative targets. You saw us take a big step forward in our offerings with the additions of DBCI and ACT in 2021, and with their successful integration ahead of schedule and with greater-than-expected synergies, we are well positioned to tackle the next attractive opportunity that we uncover. Areas of focus for us and potential M&A include self-storage interiors, warehousing systems, commercial and loading docks, exterior doors, and technology and wireless solutions. So what does that mean in the aggregate? Simple. We will expand our leadership across our sales channels to drive top-line growth and improve profitability. We will accomplish this by partnering with our customers to deliver an expanded suite of offerings while also having the balance sheet strength and integration expertise to be opportunistic both tactically and strategically as opportunities arise. Let me turn it back to Anselm to go a little deeper into the financial particulars of our long-term outlook.

Thanks, Ramey. Turning to our longer-term targets from a quantitative perspective, we expect to continue driving growth in both our top-line and our profitability while also maintaining a robust balance sheet and generating strong cash flows. In the next 3 to 5 years, our plan calls for consolidated annual revenues to grow 4% to 6% on an organic basis, adjusted EBITDA margins to reach 25% to 27%. Our free cash flow conversion to be in the range of 75% to 100% of adjusted net income, and our net leverage to stay within our range of 2x to 3x. These targets are consistent with the solid trajectory in our business that we have demonstrated since going public. Now let me discuss the factors that we expect will drive our above-market revenue growth. We see these targets broken down into four categories on top of our underlying market growth. First, we continue to drive a larger footprint, increasing our scope in self-storage in areas like design, build and moving into adjacent verticals while also expanding our offerings in commercial and other. Second, we expect the upward trend in Janus-related content per square foot of installed self-storage capacity to continue as we introduce more value-added solutions. Third, we improved our contract structuring to better address the variability in our costs and our price policy reflect the appropriate margins relative to the services and solutions we provide. And finally, we will drive continued adoption and expansion of Nokē and other innovative offerings to our customers. Before I get to the drivers of our expected margin expansion, let me spend a moment on our costs. Our business has a number of cost inputs that have seen volatility and inflation in the last few quarters, namely steel, labor, and logistics. While the commercial actions we had taken to offset these pressures have a lagging effect, we were able to deliver steady margin improvement across the full year. Steel pricing remains volatile, as evidenced by a number of price increases by North American mills during the first quarter of 2023 alone. So the improved contracting structure with customers I just discussed is key. Next, let me discuss the bridge from the roughly 22% adjusted EBITDA margins we delivered in 2022 to the target range of 25% to 27%. The first step comes from improved operating leverage derived from higher volumes, essentially spreading fixed costs over a larger base. The second step is the commercial action and contracting changes we have implemented. Third, we expect to improve our product mix to favor higher-margin offerings. Fourth, we plan to drive further operational gains across our growing platform with a focus on efficiency and agility. Finally, we expect higher-margin technology enhancements and offerings of Nokē to gain momentum. Moving on to cash flow and capital allocation. We have a proven track record of solid cash generation and conversion of adjusted net income to free cash flow. We expect to continue growing our cash flows from operations in the coming years, and for free cash flow conversion to be in the range of 75% to 100% of adjusted net income. This puts us in a position of strength with regard to capital allocation options. We reached the bottom half of our previous leverage target range in under two years, and opportunities remain there as we reap further benefits from our growing scale. In addition to maintaining a solid balance sheet, we have a number of other capital deployment avenues we can consider, including M&A, growth investments, and other value-enhancing initiatives to return capital to shareholders. I will not rank those potential buckets, but wanted to highlight that our strong cash flow generation puts us in a position to consider any and all of them. We are in constant communication with the Board around this topic and will consider all options of value creation for our shareholders while always prioritizing the competitive base that our strong balance sheet provides. Most importantly, we will be both strong and nimble. What we have built to date positions us for an exciting future, one that is reflected in our outlook for 2023 and beyond. Thank you. I will now turn the call back to Ramey for closing remarks.

Great. Thank you again, Anselm. As you can tell, we are excited about the results we have achieved and the outlook we provided. We are the industry leader in a resilient, well-structured market with plans to deliver above-market growth and improving profitability, and the strength of our balance sheet and our cash flows are differentiators for us as we look at a wide array of capital allocation options. We are proud of how Janus performed during 2022, including closing out the year with another quarter of record revenues and adjusted EBITDA. We entered 2023 well-situated to build on the momentum we established for top-line growth and improving profitability, which should result in 2023 being another year of record financial results as we work our way towards achieving our longer-term targets. I firmly believe in the power of this organization and our ability to deliver strong shareholder value over the long term. I look forward to continuing our positive momentum in 2023 and beyond as we drive long-term value creation for all of our stakeholders. Thank you again for joining us. Operator, we can now open up the lines for Q&A, please.

Thank you. Our first question comes from the line of Jeff Hammond with KeyBanc Capital Markets. Please proceed with your question.

I appreciate the great color. I really like the long-term outlook and color there. As we look into '23, I guess, we're seeing self-storage occupancy rates normalize, some economic uncertainty kind of emerge here. Just trying to get a sense of what you're seeing from orders backlog, pipeline, where you might be seeing any cracks? And then, within your revenue growth assumption for guidance, should we assume that all three segments grow, or should we think about maybe tough comps in commercial? Thanks.

Yes. Great question. Look, I think that self-storage in particular, that you are seeing some normalization in terms of occupancy rates and things of that nature. But there's a lot of strength in occupancy rates. They're still kind of low to mid-90%. Yes, I think pricing is still relatively strong. And we have a strong kind of seasonal outlook in the next few months. So I think you'll see some great results in the next few months in terms of the performance. What we are seeing, Jeff, is a shift from new construction into investing in their existing portfolio, and that's our R3 division. And as you know, it doesn't matter in terms of where those sales come from because our margins are similar in both new construction. But there's still a lot of investment in self-storage. So we're very optimistic.

Yes. And Jeff, to your point, you're right, we have some tough comps in our commercial. So if you're talking about growth rates, we expect growth in new construction and our R3 segment, and probably depending on the quarter, a little softness in the commercial side but still lots of opportunity we see there for growing.

Okay. Great. And then I understand the volatility in steel, but we did see quite a bit of disinflation in that. And I think through 3Q, you hadn't had much help from that. So maybe just talk to any help on price cost into 4Q and maybe how you're thinking about it as some of that lower-priced steel comes through?

Sure. Yes. And as we said in prior calls, we have a lag time between getting that steel value. So we would say we got a little bit in Q4, but the majority is starting to come in the middle of Q1, which is when we're going to see it. And if you follow the steel price, obviously, it's a key raw material for us. It's actually on its way back up if you look at where steel is going in the recent months.

Okay. And then just last one on the long-term targets. I guess these are your first formal targets as a public company, but there were some initial ones out around the time of the SPAC. And there seems to be maybe a little bit lower growth rate and a little bit lower margin. Is this a function of kind of where we are in the cycle, some conservatism, or what's really changed, if anything?

Yes. I think if you look at it, we're putting numbers there that are realistic that we're definitely going to hit, and you've seen what we do. It's like we always make our numbers here. So that's what we're trying to be as prudent in this environment that we're facing. A lot of uncertainty still in this market, so we thought it prudent, and we said, hey, let's put what's realistic in terms of growth rates you see there. Margin rates, very similar thing, but there's definitely upside opportunity there.

And just one more thing, Jeff. As it relates to the SPAC deck, we've exceeded most of those data points to date. So from a revenue perspective and things of that nature. And in addition to that, it didn't include public company costs, just a reminder there.

Yes, absolutely. Thanks, guys.

Thank you. Our next question comes from the line of Reuben Garner with The Benchmark Company. Please proceed with your question.

Congrats on the strong close to last year. Let's see. So you mentioned kind of maybe a different go-to-market strategy with Nokē, and you brought up ACT. I was just curious if you could kind of elaborate on that. Does that mean there's an effort to go after maybe some of the smaller operators, and if so, what's kind of the logic behind that move?

Yes. I mean in terms of ACT; it was always a part of the integration for them to be more meaningful on the installation piece. They're low-voltage professionals, and there are centers of excellence around that. So our thinking was just to integrate that as quickly as possible. In terms of customer profile, no, we're covering the entire market, whether it's large operators or smaller operators, those operators that are utilizing the virtual management system. And then, probably the biggest difference is we're really leveraging the Janus sales team, leveraging those relationships and things of that nature to accelerate growth.

Got it. And then, can you talk about your visibility? I guess for this year, more so than the long-term framework, but kind of embedded in that 4% to 6%—how are you thinking about volume and price? And I know you were kind of asked the recent order rate question, but just if things do turn in the economy, how sensitive would your kind of results be in the near term?

Yes, I'll kind of start, Anselm, if you want to close it out. Look, in terms of our visibility, we've said many times that it's a year or two in advance. We're doing a lot of the drawings and unit mix on projects that are still a year or two out. So when you look at our dashboard, Reuben, it's very positive. I mentioned that there is a focus on kind of the R3, whether refurbishment or conversion or expansion. All of our indicators, which we rely on heavily, are very positive on the self-storage side of it. So if you want?

Yes. And Reuben, let me just add a little more on that. Obviously, we don't disclose our backlog, but it's still very healthy what we can see in that visibility too. And if you look at 2023 from the growth rate, as you would expect, we still have the carry out of the commercial actions we had done in 2022. So a large portion of that 4% to 6% is commercial apps; it's still bleeding its way into the year.

Yes. And just last, kind of to conclude, our practice is to set realistic expectations, and that's what we've done in terms of laying out the guidance.

Yes, I definitely understand that. You've proven that in the last year. Just a quick follow-up on that. So once it's in backlog, historically, are delays more likely than cancellations of projects? Is that how to think about it, or do these tend to—once they're in backlog, they tend to move forward kind of no matter what?

Yes, they do. Typically, those projects have secured funding, so typically, delays are meaningful from a permitting office, whether it's weather this time of year, but once it hits the backlog, it typically turns into revenue, Reuben.

Great. Congrats again, guys, and good luck this year.

Thank you. Our next question comes from the line of Stanley Elliott with Stifel. Please proceed with your question.

This is Andrew Maser on for Stanley. Thank you for taking my question. Related to the long-term growth and margin targets, I'm wondering what you're assuming as far as growth for the Nokē business. I think in an older slide deck, you all threw out a $1 billion market opportunity number assuming 20% penetration. Where does that market opportunity stand today, and where do you think it will go in the next 3 to 5 years?

Yes, I can start there. We haven't really disclosed that. But what I can tell you is we expect Nokē this year in '23 to still be in the kind of the mid-$40 million range, and we included that in our investor deck, but you've heard us talk about the opportunity. It's meaningful; it's massive. And so we're still very optimistic, and it's still very early in growth. We're still having to—the industry is still having to understand the technology, understand how to operate their business, to improve their business with this technology, and I think we're making good headway there. So again, we're early in the cycle, but very optimistic.

Yes. I mean I think as you saw in our slides on Nokē, we added the kind of the units' growth. You can see that it was up 50% from '21 to '22. So still seeing good, strong growth in that Nokē business. I would say, like in the long range in terms of what we've assumed, we just assumed that similar pattern that we're growing it. We haven't actually assumed any step change, like we said—because we don't know when that's going to happen, but it will happen that sometime when some big REIT takes over and says it's going to go across the board. Obviously, we'll see the impact of that when that happens.

And then in the press release, you mentioned expanding your share in commercial, industrial, and other tangential areas. I'm wondering if you could expand on what you meant by other tangential areas. Thanks.

I think what we're trying to just describe is just the opportunity because if you think of what we've done in our commercial business, it's all been in that mainly the R&R space. And there's a lot more opportunities in that commercial space for other products or other options that we can get into. As we mentioned in other calls, we're not in that spec side of the house of the business in commercial, so there's more opportunity there. So I think what we're trying to articulate is that we're still very small in the commercial business, and it's just a lot more opportunity that we see out there that we can go grab.

Thank you. Our next question comes from the line of Daniel Moore with CJS Securities. Please proceed with your question.

Congrats. Great quarter and certainly a positive outlook. Just in terms of the cadence, I want to make sure I heard. It sounds like margins may be a little higher in H2 versus H1. Is that right, Anselm? And maybe top-line, given you had kind of accelerating financial improvement through the year, is top-line growth maybe a little faster in the first half, even across the year? How do we think about that?

Yes. I think you just said it exactly, how we've actually been talking about it in terms of the second half being a bit stronger than the first half. But yes, that's exactly how I would put it.

Got it. Switching gears a little bit. Just in terms of Nokē, obviously, a recent new hire in terms of head of corporate strategy and leading that initiative. Just any early operational marketing, go-to-market changes being contemplated or even implemented?

Yes. Look, I think we're always looking at ways to improve operations. And I guess you're referring to Alessandro—with his hire. Look, he has a long track record of success at Honeywell. He's been in the technology sector for a long time, and he has had a lot of success there. Our intent here is just to bolster what we have. We have a great sales team. We have a great commercial division, and then the integration with ACT. But his job is to really help us scale for the volume that we know we're going to have. We spend a lot of time focusing on scalability, and that's really what you saw with that hire.

Got it. In terms of the balance sheet and cash flow, taking the long-term leverage target down, maybe you had previously, and I missed it, by a half turn. Does that just reflect the higher interest rate environment? Any thoughts behind a slight delta there?

Yes, you're right. We improved by about half a turn. I think it just really represents the strength of our generation of cash and continued goal of deleveraging. So I think what we're looking at is just like all the analysts and shareholders that have been talking to us about and say, hey, going to an uncertain environment. There's a lot of feedback about having a better leverage ratio. So that's kind of how we landed there. It doesn't mean that we're not going to look at other opportunities for M&A that this company was built on that might push it a little. But I think in a steady state, that's where we think the company is pretty comfortable with.

That makes sense. Last one, obviously, CapEx was modest, kind of CapEx, working capital, and cash flow expectations for '23 within the confines of that 75% to 100% conversion target long-term?

Yes, Dan. So in the short term this year, as you've seen the numbers, our business continues to grow. So our normal maintenance CapEx is still in that same range at 1.5%. But we do have some investments in some new areas for equipment for growth, as well as some factory improvements. So you'll see it slightly blip up this year to support that growth, but then it will come back into the normal 1.5% range for maintenance CapEx.

Okay. And you talked a little bit about capital allocation priorities. M&A seemingly back on the table now that we're down below 3x. Is that the right way to think about it? In terms of default, is it pay down debt and consider buybacks? Just thoughts there.

Definitely, the cash position we're in is great. We have a lot of optionality. I don't think M&A has been off the table. I think it's always on the table. I think the environment in the past year has not been the greatest, as you would expect, in terms of getting deals done. But that's always on the table. I think we're assessing all the optionalities for the cash that we're generating right now, and obviously, pay down debt is one of the options that we can take.

Just let me add to that, please. Dan, M&A is very important to us. It's a part of who we are, and I think we have a successful track record of M&A. So the pipeline remains to be strong. We focus on it. We're continuously looking at opportunities so that regardless will never change. It's a part of who we are.

Perfect. Appreciate the color. I look forward to having the opportunity to see some of your facilities down in Atlanta, in Georgia, I should say, next month, and best of luck.

Thank you. Our next question comes from the line of John Lovallo with UBS. Please proceed with your question.

This is actually Spencer Kaufman on for John. Thank you for the question. Maybe the first one, just following up on some of the last question. If you just look at that 75% to 100% free cash flow conversion, that 2x or 3x leverage target seems conservative unless there's a substantial amount of cash going towards M&A, and it seems like there could be. But just curious as to, in your internal model, how much cash you guys are allocating for acquisitions. And just given the current macro uncertainty, is it fair to assume that you'd rather be at the low end of that 2 to 3x leverage target range? And I know I'm kind of going a little bit over here, but just given that all your debt is floating rate. I mean, would you consider paying down more debt more aggressively right now with your cash flow to kind of be below that target range?

Yes. We're actually—like we said before, it's optionality. So definitely that's on the plate that we're looking at right now. So we're actually looking at the various options that being one of them. I think, obviously, we don't comment on M&A right now in terms of the allocation or anything there. The only other material item would be the CapEx that I said that we're implementing for growth in the business would impact the conversion to a bit on the lower end than what it would normally be. But outside of that, I think you're right; I think one of the things we want to look at is definitely the floating debt and the interest rate there and what we're paying. Fortunately, we have a lot of options here to deal with that in terms of the cash we're generating as well as the cash we closed the year with.

Right. Okay. That makes sense. And just turning gears here. For your longer-term financial targets, the 4% to 6% organic growth. Can you just parse out sort of your expectations for R3 versus commercial versus new construction and how you're thinking about that share gain versus the market piece?

Yes. We don't share the split out there, but as we've talked about our business before, and obviously, I don't want to say anyone can forecast how the economy goes. But the way we actually run our business is that we don't have a split for R3 or new construction. As Ramey said earlier, as we see some of the new construction go down, generally, the R3 goes up. So it's a balanced approach depending on where we are in the self-storage cycle.

Okay. And if I can just sneak in one more, and apologies if I missed this earlier on the call, but the delay of the 10-K filing, can you just provide a little bit more color as to what's driving that?

Yes. It's just the amount of work to get through in terms of all the audit work and stuff that we have to do. So I don't think there's anything other than that. There's just a number of things where you get through, and then BDO has to do their work. We don't believe that there's going to be any impact on any of the numbers that we reported.

Okay, got it. Thank you, guys, and good luck.

Thank you. Ladies and gentlemen, that concludes our question-and-answer session. I'll turn the floor back to Mr. Jackson for any final comments.

Okay. Great. Thank you, everyone, for joining us today. We appreciate your support of Janus International and look forward to updating you on our progress. Have a good day.

Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.