{"id":8388,"date":"2023-05-13T23:50:43","date_gmt":"2023-05-14T03:50:43","guid":{"rendered":"https:\/\/ifintechworld.com\/news\/janus-international-group-inc-jbi-q1-2023-earnings-call-transcript\/"},"modified":"2023-05-13T23:50:44","modified_gmt":"2023-05-14T03:50:44","slug":"janus-international-group-inc-jbi-q1-2023-earnings-call-transcript","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=8388","title":{"rendered":"Janus International Group, Inc. (JBI) Q1 2023 Earnings Call Transcript"},"content":{"rendered":"
\n

Janus International Group, Inc. (NYSE:JBI<\/span>) Q1 2023 Earnings Conference Call May 11, 2023 10:00 AM ET<\/p>\n

Company Participants<\/strong><\/p>\n

John Rohlwing \u2013 Vice President-Investor Relations and FP&A<\/p>\n

Ramey Jackson \u2013 Chief Executive Officer<\/p>\n

Anselm Wong \u2013 Chief Financial Officer<\/p>\n

Conference Call Participants<\/strong><\/p>\n

Daniel Moore \u2013 CJS Securities<\/p>\n

Stanley Elliott \u2013 Stifel<\/p>\n

Jeff Hammond \u2013 KeyBanc<\/p>\n

Spencer Kaufman \u2013 UBS<\/p>\n

Operator<\/strong><\/p>\n

Hello, and welcome to the Janus International First Quarter 2023 Earnings Conference Call. Currently, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.<\/p>\n

I would like to now turn the call over to your host, Mr. John Rohlwing, Vice President of Investor Relations and FP&A. Thank you. You may begin, Mr. Rohlwing.<\/p>\n

John Rohlwing<\/strong><\/p>\n

Thank you, operator, and thank you all for joining our first quarter 2023 earnings conference call. 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.<\/p>\n

As a reminder, today\u2019s conference call may include forward-looking statements regarding the company\u2019s future plans and prospects. These statements are based on our current expectations, and we undertake no duty to update them. It is important to note that the company\u2019s actual results may differ materially from those anticipated.<\/p>\n

Factors that could cause actual results to differ from anticipated results are contained in the company\u2019s latest earnings release and periodic filings with the Securities and Exchange Commission, and we encourage you to review those factors carefully.<\/p>\n

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 EPS. Please see our earnings release and filings for a reconciliation of these non-GAAP measures to their most directly comparable GAAP measure.<\/span><\/p>\n

I\u2019m joined today by our Chief Executive Officer, Ramey Jackson, who will provide an overview of our business and given operations update; and our Chief Financial Officer, Anselm Wong, who will continue with a discussion of our financial results and outlook before we open up the call for your questions.<\/span><\/p>\n

At this point, I\u2019ll turn the call over to Ramey.<\/p>\n

Ramey Jackson<\/strong><\/p>\n

Thank you, John. Good morning, everyone. Building on our record financial and operational momentum achieved in 2022, we delivered another quarter of outstanding results to start 2023. Notable considering the first quarter is typically our softest of the year. Customer demand continues to be robust as the long-term bullish fundamentals we see across our end markets remain largely insulated from the broader macroeconomic uncertainty.<\/p>\n

Our customers, in particular, in self-storage, are enjoying high demand and strong business fundamentals that should drive a sustained period of investment in facilities and our best-in-class products and solutions are well-positioned to help them achieve their goals. Once again, I would like to thank all of our employees without whom our continued strong performance and success wouldn\u2019t be possible.<\/p>\n

Now turning to some specific thoughts around the quarter. Janus once again produced outstanding operational and financial results that included solid year-over-year gains in revenues, strong margin improvement, further deleveraging and solid cash generation. We\u2019ve told you repeatedly how fundamentals inherent throughout the industry are fueling investment decisions by our customers to add much needed capacity through either new construction or conversions and expansions and that our margin profile is similar regardless of the path they take.<\/p>\n

The particular strength this quarter from R3 continues the recent trend of new capacity coming via conversions and expansions. Noke had another strong quarter as we continue to ramp up our capabilities and expand our market penetration as we discussed on our fourth quarter call, at year-end, there were approximately 106,000 total installed units and during the first quarter, we grew to 204,000 total installed units.<\/p>\n

Our remote access control technologies, particularly Noke represent the best our industry has to offer, and we\u2019re excited about both the accelerating adoption of its use in the future it has in store.<\/p>\n

Now shifting to the financial highlights for the quarter. We delivered consolidated revenues of $251.9 million, an increase of nearly 10% as compared to the same period last year. This growth comes across all sales channels with particular strength in our R3 segment that was up 26.9% year-over-year as well as low-single digit increases in both new construction and commercial.<\/p>\n

Our adjusted EBITDA of $61.2 million came in at 37% higher than Q1 2022, which represents an adjusted EBITDA margin of 24.3%, an improvement of 480 basis points year-over-year. During the quarter, productivity initiatives and commercial actions more than offset higher cost we continue to experience in many parts of our business, particularly labor and logistics. Our company continues to generate strong cash flows, which Anselm will discuss in further detail shortly.<\/p>\n

Over the past 12 months through the end of the first quarter, our free cash flow conversion of adjusted net income was 88%. We expect cash conversion to remain solid over time, putting us in a strong position to focus on maintaining a robust balance sheet while also being flexible to respond to value-enhancing M&A opportunities as we identify them.<\/p>\n

Speaking of the balance sheet, our net leverage remains a key focus for our Board and our management team. I\u2019m extremely proud that we were able to reduce our net leverage this quarter by nearly half a turn, putting us at 2.4 times net debt to trailing 12-month adjusted EBITDA at quarter end and well within our target range of 2 to 3 times.<\/p>\n

Solid execution, strong underlying fundamentals and prudent uses of cash put us in this enviable position today, allowing us to run the business with a healthy balance sheet while being able to analyze both organic and inorganic growth opportunities.<\/p>\n

Before I hand it over to Anselm, I\u2019d like to talk about our progress towards our long-term objectives laid out on our last earnings call. We are driving towards achieving all these targets by expanding our industry-leading positions in our end markets, growing Nok\u0113 adoption with our self-storage customers, driving efficiencies across the platform and executing value-accretive M&A. With respect to our stated long-term goals, our top line growth to start the year, which is all organic at this point as DBCI and ACT were acquired in 2021 positions us well to achieve our full year target range of 4% to 6% organic revenue growth.<\/p>\n

Our EBITDA margins of 24.3%, which were up dramatically year-over-year, are trending well towards our long-term target range of 25% to 27%. Our strong conversion of adjusted net income to free cash flow to start the year sets us up to achieve our target conversion range of 75% to 100% for full year. And as I mentioned earlier, our net leverage is comfortably inside our target range. Our end markets remain strong and resilient, and we look to leverage our leadership position to capture additional share and create long-term value for all of our stakeholders.<\/p>\n

With that, I\u2019ll turn the call over to Anselm for an overview of the financials and our updated outlook for the full year.<\/p>\n

Anselm Wong<\/strong><\/p>\n

Thanks, Ramey, and good morning, everyone. In the first quarter, revenue of $251.9 million was up 9.8% compared to the prior year quarter, driven by solid demand in all three of our sales channels. R3 led the way and was up 26.9%, while new construction and commercial and other were both around 2% to 3% higher versus the prior year quarter. The diversity and stability of our offering is particularly evident when you look at our revenue mix for the quarter, which was almost perfectly split into third across our three sales channels.<\/p>\n

The impressive growth from our R3 segment in the quarter continues to be bolstered by new capacity additions in the form of conversions and expansions. Our customers\u2019 focus on adding new capacity remains weighted towards our R3 offerings as opposed to greenfield new construction site, driven by the availability of idle brick-and-mortar retail capacity to our customers. In new construction, growth was slower than in the previous year as first quarter 2022 was positively impacted by pent-up demand that occurred during pandemic impacted 2021.<\/p>\n

In the first quarter, we continue to see construction times elongate as [indiscernible] and other delays persist. In Commercial and other, growth has started to normalize compared to a very strong first quarter of 2022, which included benefits from commercial actions and market share gains. Our products are used in a broad range of end markets, including hotels, warehouses, pharmacy, schools and many others. We see continued potential for growth in commercial and other. Adjusted EBITDA of $61.2 million was up 37% compared to the year ago quarter.<\/p>\n

The combination of solid demand, commercial actions and cost-saving initiatives continues to help offset increases in labor as we work to scale the business for continued growth, including additional investments in Nok\u0113 driving us closer to the margin profile we view as more representative of our business. Adjusted EBITDA margin for the quarter was 24.3%, an increase of 480 basis points from the year ago quarter.<\/p>\n

Our contracts today and going forward are designed with flexibility to accommodate moves in our input costs by design, eliminating prolonged lag in the cost recovery in times of high inflationary impacts. For the first quarter 2023, we produced adjusted net income of $26.4 million, which was up 31.6% from first quarter 2022. Adjusted diluted earnings per share of $0.18 compared to $0.14 in the year-ago quarter.<\/p>\n

We had another solid quarter of cash flow generation. First quarter cash from operating activities was approximately $50.2 million and free cash flow was approximately $44.2 million. This adds to our multiyear trend of strong conversion of adjusted net income to free cash flow, representing a trailing 12-month free cash flow conversion of 88% of adjusted net income. We continue to focus on initiatives to improve working capital and strengthen our metrics.<\/p>\n

From a balance sheet perspective, we closed the quarter with $658.4 million of total debt, $69.6 million of cash and equivalents and a net leverage of 2.4 times net debt to adjusted trailing 12-month EBITDA, down from 2.8 times at the end of 2022. Our performance demonstrates our ability to delever quickly, and we remain focused on maintaining our leverage within our target range of 2.0 to 3.0 times. Interest expense in the first quarter was $16 million.<\/p>\n

During the quarter, we paid down $50 million of our first lien term loan facility using cash on hand, which should help us partially offset the adverse impacts of rising rates in 2023. We were pleased to see that our credit rating was upgraded at Moody\u2019s two weeks ago, reflective of the strong efforts we have made.<\/p>\n

Now turning to our 2023 outlook. Based on our solid first quarter results, continued strong backlog and current visibility of end markets, we are raising our full year 2023 outlook for revenue and adjusted EBITDA. We now expect revenue to be in the range of $1.06 billion to $1.08 billion, a 5% increase at the midpoint compared to our full year 2022 results, driven primarily by a combination of commercial actions and volume-related organic growth. We expect growth in 2023 to reflect the strong underlying fundamentals we see across all three sales channels.<\/p>\n

We are raising our expectations for adjusted EBITDA to be in the range of $253 million to $278 million, representing a 17% increase at the midpoint versus our full year 2022 results. Given the strength in our margins in the first quarter, we expect the second half March to be balanced with the first half margin. We expect full year results to reflect a solid year of margin improvement in our business as we pursue our long-term objective to deliver healthy adjusted EBITDA margin in the range of 25% to 27% over the next several years<\/p>\n

Thank you. I will now turn the call back to Ramey for closing remarks.<\/p>\n

Ramey Jackson<\/strong><\/p>\n

Great. Thank you again, Anselm. We executed well in the first quarter, setting the table to deliver on our increased full year outlook while advancing our plans to achieve our longer-term objectives. We are in the early innings of what we believe is a strong multiyear demand environment, one that should drive record revenues, improved EBITDA margins and strong cash flow generation, all while maintaining a more conservative balance sheet. The continued strength in our results is directly attributable to the outstanding execution by our team and the fundamentals in our end market. I expect we will build on this momentum across 2023 as we drive towards another record year.<\/p>\n

Thank you, again, for joining us. Operator, we can now open up the lines for Q&A, please.<\/p>\n

Question-and-Answer Session<\/strong><\/p>\n

Operator<\/strong><\/p>\n

Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] Thank you. Our first question comes from Daniel Moore with CJS Securities. Please proceed with your question.<\/p>\n

Daniel Moore<\/span><\/strong><\/p>\n

Thank you, Ramey, Anselm, John, good morning. Thanks for taking the question.<\/p>\n

Ramey Jackson<\/span><\/strong><\/p>\n

Good morning, Dan.<\/p>\n

Anselm Wong<\/span><\/strong><\/p>\n

Good morning, Dan.<\/p>\n

Daniel Moore<\/span><\/strong><\/p>\n

Start with \u2013 you described your visibility as being a year or even significantly more in advance. And last quarter, I think you said the dashboard was very positive. Just talk about to what extent that visibility remains intact, at least through the remainder of fiscal 2023 and into 2024. And how would you describe the order pipeline across R3 as well as new construction, commercial versus maybe three or six months ago.<\/p>\n

Ramey Jackson<\/span><\/strong><\/p>\n

Yes. Good question, Dan. So nothing\u2019s changed from quarter-to-quarter. Our pipeline backlog remains robust. All of our indicators indicate strong momentum, not only in kind of new construction but also R3. So nothing\u2019s changed from that capacity.<\/p>\n

Daniel Moore<\/span><\/strong><\/p>\n

Helpful. Really healthy sequential growth in Nok\u0113 placements. Just update us on the traction and testing for Nok\u0113 particularly among the larger REITs. And I think Carrier recently entered the market with a competing product. Is that a good sign or a concern from your perspective?<\/p>\n

Ramey Jackson<\/span><\/strong><\/p>\n

Yes. I think we\u2019ve always said it\u2019s too good of an opportunity for others not to enter the market. And I think it kind of volidifies what we\u2019re doing at Nok\u0113. As you know, Dan, we\u2019ve been at this for a while. We have a lot of the first mover kind of ages and pains from growing and building it out. As you know, also, we\u2019re the leader in kind of doors and hallways and we\u2019re able to integrate that product into our manufacturing process.<\/p>\n

So there\u2019s certainly a heavy moat around that segment, but we couldn\u2019t be more bullish there moving forward. Our orders continue to accelerate in terms of customer adoption. We\u2019re seeing more of it becoming a standard to certain customers going from a test phase to kind of full portfolio adoption. So we\u2019re very happy with that progress. And as we mentioned on the last call, we\u2019ve added kind of bench strength to that segment. And so we\u2019re really pleased where we are from a scalability perspective and also customer care. So we\u2019re happy with where we are there.<\/p>\n

Daniel Moore<\/span><\/strong><\/p>\n

I\u2019ll speak in the last one. You\u2019re just thinking about the combination of Extra Space and Life Storage, \u2013 do you foresee any near-term disruptions in terms of their CapEx plans? And probably more importantly, looking out to 2024 and beyond that you could tell us about the potential opportunity in terms of rebranding, signage, et cetera? Thanks.<\/p>\n

Ramey Jackson<\/span><\/strong><\/p>\n

Yes. Look, both REITs are very good customers and have been for a very long time. They both have different models in terms of how they add capacity and how they go to market with refurbishment. We\u2019re in a really good spot to help them kind of integrate those two businesses together. I think they\u2019re on record kind of speaking to the allocation of dollars from a rebranding perspective. I don\u2019t know where they are with that. But what I can tell you is we\u2019re certainly in a good stock to really help them accelerate that integration.<\/p>\n

Daniel Moore<\/span><\/strong><\/p>\n

I\u2019ll get back in any follow-up. Thank you.<\/p>\n

Ramey Jackson<\/span><\/strong><\/p>\n

Thanks, Dan.<\/p>\n

Anselm Wong<\/span><\/strong><\/p>\n

Thanks, Dan.<\/p>\n

Operator<\/strong><\/p>\n

Thank you. Our next question is from Stanley Elliott with Stifel. Please proceed with your question.<\/p>\n

Stanley Elliott<\/span><\/strong><\/p>\n

Hey, good morning, everyone. Thank you for the question.<\/p>\n

Ramey Jackson<\/span><\/strong><\/p>\n

Thanks, Stanley.<\/p>\n

Stanley Elliott<\/span><\/strong><\/p>\n

Starting off, could you repeat what you said about the margin progression first half versus second half? I think I know what you said, but just to make sure.<\/p>\n

Anselm Wong<\/span><\/strong><\/p>\n

Yes. If you look at the margin statement, we had originally guided that the second half would be stronger than the first half, and you saw how our first quarter went much stronger coming in. So what we\u2019re looking at is that still the second half will be stronger, but it will be closer to the first half, and it\u2019s good news for us. It\u2019s driven by our commercial actions and our costs coming down faster than we thought, which is, again, good news for us from a margin point of view<\/p>\n

Stanley Elliott<\/span><\/strong><\/p>\n

And you guys have done a really nice job of kind of working on the commercial side of the organization given the volatility in steel started to see steel move up again here most recently. How should we think about the ability to kind of offset some of those costs when we start thinking about things six months a year out, et cetera?<\/p>\n

Anselm Wong<\/span><\/strong><\/p>\n

Yes. I think as you know, Stanley, we actually had previously revised all the contracts to give us the flexibility to adjust price win costs like steel move in that direction. So I think \u2013 the definite ability to do it is there. I think at the same time, we want to be smart about being competitive in all the deals that are out there. And I think the redoing of the contract just allowed that flexibility to do what we need to do.<\/p>\n

Stanley Elliott<\/span><\/strong><\/p>\n

Great. And then lastly for me, on Nok\u0113, a nice sequential pickup. What are you learning from your customers there? In the past, I guess, you\u2019ve talked about maybe potential add-ons for other products, other services down the road. Does that seem to be something that is of interest to them? Or is it more just kind of making sure we have the lock system in place and rolling that out on a kind of more industry standard?<\/p>\n

Ramey Jackson<\/span><\/strong><\/p>\n

Yes. That opportunity still exists. But what I can say is we\u2019re uber focused on the product line that we have, helping customers integrate and understand the operational benefits of the system. And then from there, it\u2019s more of an education on data, right? We\u2019ve yet to really take advantage of the amount of data that results in this technology rollout. And I think there\u2019s a tremendous amount of opportunity, a lot of upside on the pricing side from a data perspective. So we\u2019re kind of staying tight where we are with deployment, but there\u2019s certainly opportunities as we move forward to expand kind of content.<\/p>\n

Stanley Elliott<\/span><\/strong><\/p>\n

And I guess one last quick one. Are you having any problems or seeing anything on the supply chain side that would keep you from continuing to accelerate the Nok\u0113 orders?<\/p>\n

Ramey Jackson<\/span><\/strong><\/p>\n

Yes. Kudos to the procurement team, we\u2019ve done a really good job in securing all of the equipment that we need for manufacturing. So we\u2019re in a good spot there as well.<\/p>\n

Stanley Elliott<\/span><\/strong><\/p>\n

Perfect. Thanks, guys. Best of luck.<\/p>\n

Ramey Jackson<\/span><\/strong><\/p>\n

Thanks, Stanley.<\/p>\n

Anselm Wong<\/span><\/strong><\/p>\n

Thanks, Stanley.<\/p>\n

Operator<\/strong><\/p>\n

Thank you. Our next question is from Jeff Hammond with KeyBanc. Please proceed with your question.<\/p>\n

Jeff Hammond<\/span><\/strong><\/p>\n

Hey, good morning, everyone.<\/p>\n

Ramey Jackson<\/span><\/strong><\/p>\n

Good morning, Jeff.<\/p>\n

Jeff Hammond<\/span><\/strong><\/p>\n

So maybe just \u2013 I want to go back on \u2013 it sounds like your backlog and pipeline visibility is still very good. Clearly, a lot of concerns around tightening lending standards. I\u2019m just wondering, one, if you\u2019re seeing any of that anywhere and maybe just speak to customer segmentation between the larger institutional and public REITs versus maybe the smaller organizations.<\/p>\n

Ramey Jackson<\/span><\/strong><\/p>\n

Great question. Look, as you know, we kind of break those up into institutional and non-institutional. There\u2019s no question around cost of capital, interest rates, things of that nature. But quite frankly, Jeff, we\u2019re not seeing that on our dashboard. We feel like certainly in our backlog, we verify funding in our backlog. So we\u2019re comfortable with those projects moving forward.<\/p>\n

And then on the pipeline side, there\u2019s just a tremendous amount of new opportunity coming in. And I think it\u2019s a testament to the end market. I think self-storage has proven to be resilient. I think lenders understand the asset class better. So yes, I mean, we\u2019re cautiously optimistic, notwithstanding the noise around what\u2019s going on with interest rates and lending the things of that nature. But as it relates to today and what we can see a year in advance, we\u2019re very optimistic.<\/p>\n

Jeff Hammond<\/span><\/strong><\/p>\n

Okay. Great. That\u2019s good to hear. Just for the commercial business, maybe level set us on the growth rate kind of decelerating. Is that just simply comps? Are you starting to see that warehouse market start to normalize? And just maybe \u2013 I know there was some share pickup and how you\u2019re thinking about kind of stability of that share gain.<\/p>\n

Ramey Jackson<\/span><\/strong><\/p>\n

Yes. Look, we had \u2013 that segment had a good quarter, and there\u2019s no questions, it\u2019s difficult comps, right? There is a tremendous amount of spend and availability from our perspective, we were able to manufacture where others weren\u2019t able to get product out in time. So we picked up a lot of new customers.<\/p>\n

And as I\u2019ve said kind of previously the opportunity for our business is to try to maintain that share as much as possible. There\u2019s no question that we\u2019ll give \u2013 we\u2019ll lose some of those top accounts. But at the same time, that\u2019s our opportunity. It\u2019s just to maintain the service model and our ability to get product out as quickly as possible and service our customers.<\/p>\n

So that\u2019s really it. We don\u2019t really focus on the end market because, as you know, that\u2019s more of an R&R. That\u2019s where we found our sweet spot with a lot of the replacement work that has less to do with architectural specifications and more to do about service and on-time delivery, and that\u2019s kind of where we\u2019re focusing.<\/p>\n

Jeff Hammond<\/span><\/strong><\/p>\n

Okay. Great. And then just a housekeeping item, just maybe level set us on how you\u2019re thinking about GAAP interest expense for the year.<\/p>\n

Anselm Wong<\/span><\/strong><\/p>\n

Yes. If you looked at what we had in Q1, you saw that the amount was approximately about $16 million of interest expense. You saw the pay down about $50 million. So if you do the math, you\u2019d see a slight adjustment down for the other quarters. Our expectation is that like everyone else is another quarter of rate increase there and maybe a whole thing there. But again, I can\u2019t predict the future there. But kind of if you do the math there, it should be in and around that same Q1 number you saw a little lower than that.<\/p>\n

Jeff Hammond<\/span><\/strong><\/p>\n

Okay. Thanks, guys.<\/p>\n

Ramey Jackson<\/span><\/strong><\/p>\n

Thank you.<\/p>\n

Anselm Wong<\/span><\/strong><\/p>\n

Thanks.<\/p>\n

Operator<\/strong><\/p>\n

Thank you. Our next question comes from John Lovallo with UBS. Please proceed with your question.<\/p>\n

Spencer Kaufman<\/span><\/strong><\/p>\n

Hey guys, good morning. This is actually Spencer Kaufman on for John. Thank you for the questions. The first one, if we just take a look at your updated revenue and EBITDA guidance for the year, how should we think about the puts and takes versus your prior expectations? Are you essentially just taking the 1Q beat and leaving your prior assumptions for the second through fourth quarter unchanged? Has anything gotten better or worse since mid-March?<\/p>\n

Ramey Jackson<\/span><\/strong><\/p>\n

Yes. I think we \u2013 as you saw the Q1 beat we got there. And I think yes, essentially, we\u2019re seeing the rest of the balance of the year still pretty good. And like we said, our visibility in the backlog helps us confirm that. So we\u2019ve kind of raised for what the beat in Q1 was.<\/p>\n

Spencer Kaufman<\/span><\/strong><\/p>\n

Okay. That makes sense. And just to the extent that interest rates settle lower as we move through the year in existing home sales potentially reaccelerate, I mean would you expect the demand for self-storage to benefit from that? How should we think about that?<\/p>\n

Ramey Jackson<\/span><\/strong><\/p>\n

Yes. Look, that\u2019s hard to say. But keep in mind, it\u2019s an event-based business. It thrives off of the events regardless if it\u2019s new housing interest or things of that nature. So hard to answer that question specifically, but we\u2019ll point you to the kind of drivers of self-storage.<\/p>\n

Spencer Kaufman<\/span><\/strong><\/p>\n

Okay. And last one, if I could sneak this in. For the outlook on EBITDA margins for the full year would imply about 24.8%. Can you just discuss the path to how you expect to get there? And a follow-up to that, do you expect that the 1Q gross margin of 39.7% will be the low for the year? How should we think about that piece? Thanks.<\/p>\n

Anselm Wong<\/span><\/strong><\/p>\n

I think the way I would think about it is that, like we\u2019ve already discussed that we should still see some drivers in terms of cost improvement going through the \u2013 into the second half that will benefit. The first half we said is driven by still a lot of pricing that something is there. And then we\u2019ll get volume in the back half. But I think from a margin rate point of view, our expectation is that it would be in and around that rate [indiscernible] for Q1 with probably some improvement due to the cost benefits we\u2019re seeing going into the second half.<\/p>\n

Spencer Kaufman<\/span><\/strong><\/p>\n

Okay. Got it. Thank you, guys. Good luck.<\/p>\n

Ramey Jackson<\/span><\/strong><\/p>\n

Thanks.<\/p>\n

Operator<\/strong><\/p>\n

Thank you. [Operator Instructions] Thank you. Our next question comes from Cullen Rose with Stoic Point. Please proceed with your question.<\/p>\n

Cullen Rose<\/span><\/strong><\/p>\n

Hey guys, good morning.<\/p>\n

Ramey Jackson<\/span><\/strong><\/p>\n

Good morning.<\/p>\n

Cullen Rose<\/span><\/strong><\/p>\n

Congrats on a strong start to the year. I guess the question was you have continued to beat and raise past expectations. I think you get about 10 questions per call about the state of the industry. And can you say it\u2019s strong end market demand is stable. It looks like you guys will be either at or below your leverage target \u2013 low end of your leverage target by the end of this year at this pace.<\/p>\n

And yet the stock doesn\u2019t really react. Nobody seems to care. It trades at a pretty healthy free cash yield and probably a pretty serious discount to the average buildings product company probably a serious discount to the higher quality buildings product companies with margins and returns like this.<\/p>\n

So I\u2019m curious on capital allocation, how you guys factor that in and think about the trade-off of the M&A strategy, which I think you\u2019ve been consistent about and has been successful versus buying back your own stock at these levels given what seems to be a pretty material discount for the quality of this business and the stability of the numbers that you guys continue to put out.<\/p>\n

Ramey Jackson<\/span><\/strong><\/p>\n

Yes. Thanks for the question. There\u2019s a lot to unpack there, certainly and agree with your sentiments around share price and comps. And I\u2019ll just kind of leave that there. And as it relates to capital deployment, yes, we are deleveraging in a meaningful way. This business generates a lot of cash.<\/p>\n

And in terms of allocation, that\u2019s something that we\u2019re certainly working with our Board of Directors super focused on our options, but that puts us in a really good spot, not only from paying down debt or buybacks or also M&A, and that\u2019s part of our DNA. That\u2019s certainly something that we\u2019re always looking at. Anselm, do you have anything to add?<\/p>\n

Anselm Wong<\/span><\/strong><\/p>\n

Yes. No, I think Ramey is right. We\u2019re constantly looking at it. I think you\u2019re right. You kind of do the forward-looking forecasts where in the leverage ratio puts us in a much even better place than we\u2019re at even currently for this quarter. I think at the same time, I just had a reminder just from a cash flow point of view, we have some key investments in production within our factories in our West Coast as well as in Europe to actually improve capacity for us there.<\/p>\n

So there is some use of the cash there that is the right thing for us to grow the business, and we\u2019ll continue to look at M&A like Ramey said, is that it\u2019s just \u2013 as you know, it\u2019s a tough market for deals out there right now, but it doesn\u2019t mean we\u2019re not still looking.<\/p>\n

Cullen Rose<\/span><\/strong><\/p>\n

Yes. Appreciate that. Well, there\u2019s one company for sale every day that you could supply. So I would encourage you to consider that in the range of options. But congrats again on a great start to the year. Thanks.<\/p>\n

Ramey Jackson<\/span><\/strong><\/p>\n

Thank you.<\/p>\n

Anselm Wong<\/span><\/strong><\/p>\n

Thanks.<\/p>\n

Operator<\/strong><\/p>\n

There are no further questions at this time. I would like to turn the floor back over to Ramey Jackson for closing comments.<\/p>\n

Ramey Jackson<\/strong><\/p>\n

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.<\/p>\n

Operator<\/strong><\/p>\n

This concludes today\u2019s teleconference. You may disconnect your lines at this time. Thank you for your participation.<\/p>\n<\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Janus International Group, Inc. (NYSE:JBI) Q1 2023 Earnings Conference Call May 11, 2023 10:00 AM ET Company Participants John Rohlwing \u2013 Vice President-Investor Relations and FP&A Ramey Jackson \u2013 Chief Executive Officer Anselm Wong \u2013 Chief Financial Officer Conference Call Participants Daniel Moore \u2013 CJS Securities Stanley Elliott \u2013 Stifel Jeff Hammond \u2013 KeyBanc Spencer […]<\/p>\n","protected":false},"author":1,"featured_media":613,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"gallery","meta":{"footnotes":""},"categories":[236],"tags":[83],"class_list":["post-8388","post","type-post","status-publish","format-gallery","has-post-thumbnail","hentry","category-news","tag-featured","post_format-post-format-gallery"],"yoast_head":"\nJanus International Group, Inc. (JBI) Q1 2023 Earnings Call Transcript | iFintechWorld<\/title>\n<meta name=\"description\" content=\"Janus International Group, Inc. 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