Hello and welcome to the Janus International Group Fourth Quarter and Full Year 2023 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, FP&A, and M&A of 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. We hope that you have seen our earnings release issued this morning. Please note that we have also posted a presentation in support of this call which can be found in the Investors section of our website at janusintl.com. Before we begin, I would like to remind you that today's call may include forward-looking statements. Any statements made describing our beliefs, goals, plans, strategy, 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 Exchanges Commission, which identified 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 made by us during this call are 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 margin, adjusted net income, and adjusted EPS. Please see our release and filings for a reconciliation of these non-GAAP measures to their most directly comparable GAAP measure. Today, we announced that the Board has approved a stock repurchase program of $100 million. We make no assurances that any repurchase is completed. In today's call, Ramey will provide an overview of the business, Anselm will continue with a discussion of our financial results and introduce our 2024 guidance before Ramey shares some closing thoughts, and we open the call for questions. At this point, I will turn the call over to Ramey.

Thank you, John. I'd like to kick off my comments today with a recap of Janus' financial, operational, and strategic highlights and accomplishments. 2023 proved to be another year of outstanding momentum. Everything we achieve at Janus is a team effort, and I couldn't be prouder of our employees' dedication, hard work, and professionalism. We delivered strong financial results, raising and exceeding financial guidance throughout the year, and delivered full-year adjusted EBITDA that was up 25.9% on a 4.6% increase in revenue. We converted over 140% of adjusted net income to free cash flow of $196 million. This drove year-end net leverage to a record low since going public at 1.6 times, down another 1.2 times during the year and below our stated long-term target range of 2 times to 3 times. Our core business is self-storage, which consists of new construction and restore, rebuild, replace our R3 sales channel. Combined, self-storage makes up roughly two-thirds of our revenue and an even higher percentage of our EBITDA. As we have previously said, the margin profiles across the two components of self-storage are similar, making us agnostic to how our customers seek to add much-needed capacity. While we will report specifics for each channel, along with our commercial and other segments, the discussion of total self-storage helps to smooth out the quarterly noise across the two segments given the lumpiness of project timing. For full year 2023, on a combined basis, self-storage was up 13.2%, driven by new construction, which was up 22.1%, while the R3 sales channel increased 4.3%. Industry fundamentals continue to drive investment in self-storage capacity, which over the last several quarters has focused on greenfield sites compared to 2022 when we saw more demand for our R3 projects. Commercial and other was off 10.2% for the full year. Results reflected challenging comps for the year-ago period as well as a decline in demand for certain product lines. We continue to innovate and broaden our reach to various end markets in order to access tremendous untapped potential on the commercial side. Despite the year-over-year top-line decline, we are very excited about our opportunities there. Nokē, our innovative suite of remote access solutions, had another strong quarter to top off a year of expansion and capabilities and customer adoption. For the year, we increased the number of installations of Nokē Smart Entry system units by 66.3% to 276,000. In support of this expansion in October, we announced the complete back-end migration of Nokē to Amazon Web Services, or AWS. Moving to AWS opens up our ability to further scale the business, leveraging their enterprise software, AI, and security capabilities, positioning us to lead digital innovation in self-storage. We have both enhanced global reach and improved our user experience for both customers and their tenants. We also opened our Atlanta software center, which gives us expanded capabilities to scale the Nokē business for continued strong demand. In January, we announced that a customer intends to expand its installed base of Nokē smart locks across its 43 facilities. This followed our September announcement that a major REIT intends to expand its installed base for our Nokē Screen Digital Access across more than 400 additional facilities, above and beyond their 700 facilities to date. As you can see, we continue to be excited about Nokē and what it can mean for the future of Janus. On the operations front, we recently opened our first European manufacturing facility in Poland. This new facility is strategically located to serve our European market. The fourth quarter also saw a major milestone reached for Janus as Clearlake, our financial sponsor and partner when we became public, sold the last of its position and stepped down from their Board seats. This nearly doubled our public float, dramatically improving our stock liquidity. In adherence with our governance objectives, in January we announced the addition of three highly accomplished independent Directors. On the basis of our solid record of strong results, robust balance sheet, exceptional cash generation profile, expanded float, and desire to create shareholder value through multiple pads, we are pleased today to announce the $100 million share repurchase plan authorized by the Board. The ability to repurchase shares only adds to our commitment of pursuing value-enhancing initiatives through organic expansion and M&A while maintaining a prudently leveraged balance sheet. In summary, we are excited that in 2023, we were able to build on our momentum with another year of record results and strong cash flow while further deleveraging the company. We look forward to expanding our strong market position to capture additional share to create long-term value for all of our stakeholders in 2024 and beyond. With that, I'll turn the call over to Anselm for a further overview of our results along with our initial 2024 guidance.

Thanks, Ramey, and good morning everyone. I am proud of our record results and our success during 2023 in growing our business, generating strong cash flow, and deleveraging our balance sheet to position us for success. I will first focus my comments on our fourth quarter performance. In the fourth quarter, consolidated revenue of $263.7 million was off 5.7% as compared to the prior year quarter, as strength in total self-storage is more than offset by a decline in our commercial and other sales channel. Together, our self-storage business was up 2.5% for the quarter. Within self-storage, new construction continued its strong year result with growth in the quarter of 14.3%, as customers continue to add new greenfield capacity. The other portion of our self-storage business, R3, was off 9.1% for the quarter as a result of a decline in retail-to-storage conversion activity compared to the prior year. Our commercial and other segment saw a 20.8% decline in the fourth quarter, driven by particularly strong comps last year and a shift in demand for certain product lines that were at an all-time high. Fourth quarter adjusted EBITDA of $74.3 million was up 8.9% compared to the year-ago quarter. This solid performance produced an adjusted EBITDA margin of 28.2%, up 380 basis points from the prior year level. This improvement in profitability is a result of favorable mix from our higher-margin self-storage businesses as compared to our commercial and other sales channel and a continued focus on operational improvements, which more than offset the revenue decline. For the fourth quarter of 2023, we produced adjusted net income of $35.9 million, a 9.8% year-over-year improvement and adjusted diluted earnings per share of $0.24. Adjusted net income was impacted during the quarter by drivers already covered, including favorable mix and cost containment initiatives. Looking at the full year, we generated cash from operating activities of $215 million, including $68.5 million in the fourth quarter, continuing to demonstrate the robust cash generation profile of the business. Capital expenditures for the year were $19 million, up from $8.8 million in 2022. Growth capital projects this year included the Poland factory build-out, additions of new roll formers at BETCO, and enhancements to our lead-to-order process within Microsoft Dynamics. We are proud of our free cash flow profile, which reflects the financial strength of our results. For the full year, we generated free cash of about $196 million. This represented a free cash flow conversion of adjusted net income of 142%. We finished the year with $296.7 million of total liquidity, including $171.7 million of cash and equivalents on the balance sheet. Our total outstanding debt at year-end was $615 million and our net leverage was 1.6 times. The combination of strong liquidity, continued cash generation, and balance sheet strength put us in a position to pursue M&A targets and enact our newly authorized $100 million share repurchase program. I'd also like to add that as part of our continued focus on best-in-class operations reporting and governance, as of the end of our fiscal 2023, we have remediated all remaining material weaknesses from the prior year. Now, moving to our 2024 guidance, building off of the momentum we produced last year and supported by our current backlog and pipeline, full year 2024 revenue is expected to be in the range of $1.092 billion to $1.125 billion, representing organic growth of 4% at the midpoint versus 2023. We expect total self-storage to continue to grow and return to growth for commercial and other. Adjusted EBITDA is expected to be in the range of $286 million to $310 million. At the midpoint, this represents a 4.3% increase versus the prior year and reflects an adjusted EBITDA margin at the midpoint of 26.9%. We expect to see a return to normal seasonality in 2024, where the second and third quarters comprised a large portion of revenues compared to the first and fourth quarters. Thank you. I will now turn the call over to Ramey for his closing remarks.

Thank you again, Anselm. Building off this strong foundation, we are well positioned for another exciting year in 2024; one that is consistent with the longer-term vision for the company we laid out a year ago. Back then, we told you that over the course of the next three to five years, we expect annual revenues to grow organically at a 4% to 6% rate, adjusted EBITDA margins of 25% to 27%, net leverage to be in the range of 2 times to 3 times, and free cash flow to be 75% to 100% of adjusted net income. As you can see from our results, 2023 met or beat all of those targets. Our long-term objectives remain intact. Based on the guidance Anselm laid out, we expect 2024 to feature another year of exceptional performance. We are the industry leader in self-storage solutions with strong customer relationships, particularly among the best-capitalized owners and operators. We have delivered strong organic and acquired top-line growth throughout our time as a public company and have dramatically improved our EBITDA margins, cash flow conversion, and net leverage. As M&A opportunities come to fruition, we have the expertise and dry powder on our balance sheet to execute accretive, shareholder value-enhancing deals. Now we have the expanded capital allocation program to include the new $100 million share repurchase program. I look forward to continuing our positive momentum in 2024 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. We will now be conducting a question-and-answer session. Your first question comes from Daniel Moore with CJS Securities. Please go ahead.

Thank you. Good morning Ramey, good morning Anselm, and thanks for all the color and congrats on a finish to a really strong year. Maybe start with what was a little softer in commercial, obviously stood out this quarter. You mentioned declines from certain products from all-time highs. Can you maybe elaborate on that a bit? Anselm, I think you mentioned in your remarks that you expect to return to growth in 2024. Do you expect positive growth in commercial for the full year or simply kind of a return to growth at some point?

Yes, good morning Dan. Great question. So, look, we've been talking about the past couple of quarters about a segment within the commercial end market, which is the carports and shed business, which really accelerated during the pandemic when folks were staying at home. So, that's really the biggest driver of that miss in commercial. And then I'll let Anselm answer.

Yes, good morning Dan. What we've discussed is that if you examine our commercial business, we indicated that the fourth quarter would be the last one needed to normalize the carport and shed segment. Currently, we are experiencing normal sales in that category. As we look ahead to 2024 and our commercial segment, we anticipate growth returning. Additionally, within that commercial business, we have been focusing on a segment of rolling steel throughout the year. If you exclude the carports and sheds, there has been decent growth in that area. Therefore, we are optimistic about that part of the commercial sector contributing to our growth again.

That's helpful. And maybe just talk about cadence as we move to Q1, I expect a little bit of kind of year-over-year declines and then improved growth as we move through the year on a year-over-year basis. Are we really through the worst of the comps already?

Yes. What we are observing is a slight normalization of the quarter. That's why I mentioned earlier that Q4 and Q1 are typically slower quarters due to weather and seasonality. We anticipate experiencing this in Q1 with a usual slower start, followed by improvements as we enter the better construction periods in summer, fall, and spring. It's important to remember that this is a construction business, which is affected by weather conditions. For instance, there has been unexpected flooding on the West Coast that has affected several of our projects. Therefore, we expect the usual slower first quarter and Q4, followed by significant growth in Q2 and Q3.

Very helpful. And then shifting to self-storage. Your backlog always provides really strong visibility for the next few quarters. Beyond that, just how would you describe the pipeline of new opportunities entering 2024 compared to maybe 12 or 18 months ago?

Yes. Look, we don't really give detail on the backlog. But what I can say directionally is it still remains strong in kind of both R3 and new construction. So, we're very optimistic there.

Excellent. Maybe one more, I'll jump out. And I know you've heard this question before. Clearly, you had a favorable mix in Q4 and then partly over the year, but your long-term margin target 25% to 27% already at the high end this year and above that this quarter. Again, there is mix in there, but do you see upside to those projections longer term, particularly as Nokē starts to accelerate and gain traction? Thanks again.

Yes. No, thanks for the question, Daniel. You're right. Longer term, yes, absolutely. I think we see some further improvement there as Nokē becomes a bigger part of the mix as well as our normal productivity in the business that we're constantly looking at improvement. So, I think what we're looking at is just, hey, there's a short-term benefit from the mix that we got in Q4, that will normalize in 2024, but then longer term, I think there's definitely upside.

Great. I'll jump back with any follow-ups. Thank you.

Thanks, Dan.

Next question, Jeff Hammond with KeyBanc Capital Markets. Please go ahead.

Hey, good morning guys.

Good morning, Jeff.

Yes. So, maybe just staying on self-storage, can you just talk about how you're seeing the mix of new construction in R3 as you move into 2024. Clearly new, it seemed like you had some backlog catch-up, and I know there's some big consolidation in R3. So, just wondering if there's a little more optimism on the growth rate in R3 or if it's pretty balanced?

Yes. Look, I think I kind of start off by saying that conversions fall within that R3 bucket, the way that we manage it. So, we just consistently report the conversions out of R3. We do see growth in R3 as the industry continues to consolidate and also age. So, we're optimistic there. One of the things we're seeing that we've mentioned in the past is conversion or the availability of kind of the brick-and-mortar, the retail brick-and-mortar is slower. But when you strip that out, you'll see growth in R3. On the new construction front, it remains strong. I think a lot of the kind of secondary and tertiary markets are ramping up. That's where folks move kind of post-pandemic. So, we're seeing a lot of runway there.

Okay. And then just back on margins, you're kind of above the 27% for the last three quarters versus guide at 27%. So, just wondering what the upside and downside risks to that margin guide are outside of maybe some mix normalization?

I think the key factor is the mix organization. The past year's quarters have been fairly consistent and on the higher end of our guidance. Looking ahead to 2024, as sales normalize, we expect to see commercial growth return, although the current commercial segment may be slightly lower than our storage segment, which could pull overall numbers down. However, if things remain steady, we should still stay within the range we've experienced over the recent quarters.

Okay. And just on the commercial business, maybe just update us on how you're doing to kind of close that margin gap. I think that was kind of the target to eventually pull those up. Maybe just give us a sense of progress there?

Yes, I would say it will still be slightly above our business model, but it is different. This is a distribution model compared to the full solution model on the storage side. We have been focusing on consolidating the development of many of our commercial products and also expanding our West Coast commercial operations. This will allow us to avoid shipping from our North Carolina or Georgia sites to meet commercial needs there. I believe this will lead to margin improvements as we ramp up operations. However, in the longer term, margins will still be lower because this is a distribution-focused business rather than a full solution business.

Okay, great. Thanks guys.

Thanks.

Next question, Brad Hewitt with Wolfe Research. Please go ahead.

Hey, good morning guys. Thanks for taking my question.

Hey, Brad.

Wondering if you could provide any additional color on what drove the Q4 revenue shortfall versus the prior guidance? It looks like self-storage revenue was down about 3% sequentially, and we saw another step-down in commercial. You talked about the headwinds in carport and shed, but just curious if there were any other moving pieces in the quarter relative to the guidance?

Yes, commercial was a little worse than we thought it was going to be in terms of how much the normalization would be. I think you saw that piece of it when it printed. And on the storage side, I think what we saw is a little bit more delays in projects there. The backlog is still looking good, like Ramey said, but we saw some pushouts. And again, it's a construction business. So, when you look at some of the weather impacts to the country, you saw the flooding in the California region that does impact our sites to be able to deliver. We did see some of that. Hopefully, we'll get through in Q1 when some of the weather-related items get normalized, and we'll go back to normal business in terms of construction.

Okay, that's helpful. And then switching to capital allocation. Given that leverage is now down to 1.6 times, how do you think about balancing share buybacks versus M&A? Is M&A the priority with buybacks kind of filling the gap in the absence of M&A? Or do you see capital allocation as more balanced going forward?

No, I think you hit it the way we see it. We see M&A as the first thing. We are definitely looking at targets as we always do. I think the market, at least, expectation in terms of pricing is actually normalizing to get back to a realistic level. So, we're hopeful that we can execute on some of the ones that we're looking at. I think you're exactly right, is that we're glad we get the approval for the share buyback. So, we have another lever, in the meantime if something slows up in terms of the M&A side to execute on.

Thanks guys.

Next question, John Lovallo with UBS. Please go ahead.

Good morning guys. Thank you for taking my questions as well, and I apologize if you covered this, but my line dropped, so I apologize if you did cover this. But in terms of the outlook, there's a 4% increase in revenue expected at the midpoint. It looks like EBITDA is expected to go up by a little over 4%, maybe 4.3% at the midpoint. What's driving sort of the lack of leverage on that to net revenue volume?

Yes, as we discussed in 2023, when we transitioned to a public company, we began to account for the necessary costs, particularly in the back office functions like finance, HR, and legal to meet all requirements. Most of these expenses were incurred in the latter half of the year, which affected our ability to realize savings over the full year. In the long run, after we have everything set up, particularly in IT, we expect to see improvements in fixed cost leverage. For instance, we won't need to hire additional top accounting or treasury personnel. It’s mainly about the timing of adding the costs and resources needed to support the business.

Understood. And you guys have made some really nice progress on the commercial actions and productivity. Can you just help us kind of quantify the cost savings that are expected to come through in 2024 from the actions already taken? And then what is the sort of incremental opportunity as we move through 2024?

Yes, for 2024, we will begin to see benefits from the new factory in Poland and the equipment purchases we've made at various facilities there. I'm optimistic about the positive impact of these changes. Additionally, we're focused on further consolidation and continuously assessing our operations. We also plan to establish new operations on the West Coast, as demand and volume in that area have increased. We aim to expand our capacity there, which should enhance our efficiency and reduce shipping needs within that region.

Yes. And one more thing that I'll add is we'll be opportunistic on our steel volumes. As that commodity fluctuates, we'll be keenly focused on being opportunistic there.

Understood. Thank you guys.

Thanks.

I would like to turn the call over to Ramey Jackson for closing remarks.

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 great day.

This concludes today's teleconference. You may disconnect your lines at this time and thank you for your participation.