Janus International Group, Inc. (JBI) Q3 2024 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call highlights significant financial declines, with revenue, EBITDA, and net income all dropping substantially year-over-year. Despite share repurchases, the negative sentiment is reinforced by reduced guidance, economic challenges, and interest rate impacts. The Q&A reveals persistent project delays and uncertainty, with management providing unclear responses on key issues. The revised guidance and financial performance suggest a negative market reaction, especially given the company's small-cap status, which typically leads to stronger stock price movements.
Key Financial Performance
Revenue $230.1 million, down 17.9% year-over-year due to declines across all three sales channels, primarily driven by tighter borrowing standards and elevated interest rates.
Adjusted EBITDA $43.1 million, down 43.4% year-over-year, resulting in an adjusted EBITDA margin of 18.7%, down from 27.2% in the prior year, primarily due to volume decreases and an adjustment for credit losses.
Adjusted Net Income $15.7 million, a 59.8% year-over-year decline, with adjusted diluted earnings per share of $0.11.
Cash from Operating Activities $43 million, demonstrating robust cash generation despite revenue declines.
Capital Expenditures $3.7 million, slightly down from $3.9 million in the third quarter of 2023.
Free Cash Flow $39.3 million, representing a free cash flow conversion of adjusted net income of 134%.
Total Liquidity $226.7 million, including $102.1 million of cash and equivalents.
Total Long-term Debt $586.1 million, with net leverage at 2.0 times, within the long-term target range of 2 to 3 times.
Share Repurchase 4.3 million shares repurchased for a total cost of $45.5 million as part of a $100 million share repurchase program.
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Operating Highlights
Noke Ion Offering: The Noke Ion offering was rolled out in early October, with positive customer interest and expectations for healthy demand.
Market Conditions: The company is experiencing a persistent period of market uncertainty causing delays in customer projects, particularly among mid-level non-institutional customers.
Revenue Guidance for 2024: The company has adjusted its full-year 2024 revenue guidance to a range of $910 million to $925 million due to continued softness in demand and project delays.
Cost Reduction Plan: Janus has announced a structural cost reduction plan expected to generate approximately $8 million to $12 million of annual pre-tax cost savings, with one-time pre-tax charges estimated at $2 million to $4 million.
Share Repurchase Program: In the third quarter, Janus repurchased 4.3 million shares for a total cost of $45.5 million as part of a $100 million share repurchase program.
Long-term Outlook: Despite near-term challenges, Janus remains optimistic about long-term growth, driven by factors such as industry consolidation and the full-year contribution from TMC in 2025.
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Risk or Challenges
Market Uncertainty: Persistent market uncertainty is causing delays in customer projects, particularly among mid-level non-institutional customers.
Cost-Cutting Measures: Proactive cost-cutting measures are being implemented to align with current market conditions, with expected annual pre-tax cost savings of $8 million to $12 million.
Project Delays: Delays in new construction and R3 projects are expected to persist through the end of 2024 due to tighter borrowing standards and elevated interest rates.
Revenue Decline: Consolidated revenue decreased by 17.9% year-over-year, with self-storage revenue down 22.4%.
Credit Losses: An increase in provision for credit losses was noted due to a customer filing for bankruptcy, impacting adjusted EBITDA.
Economic Factors: Anticipation of multiple interest rate cuts has led developers to delay projects, contributing to a decline in demand.
Regulatory Issues: Uncertainty surrounding the upcoming election is causing customers to pause on investments.
Supply Chain Challenges: The company is facing challenges in the supply chain, particularly in the commercial segment, with decreased demand for carports and sheds.
Competitive Pressures: Increased competition is noted, particularly among non-institutional operators, although the company does not anticipate losing market share.
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Guidance & Outlook
Cost Reduction Plan: Janus has announced a structural cost reduction plan aimed at improving margins, simplifying the organizational structure, and enhancing operational efficiencies, expected to generate approximately $8 million to $12 million in annual pre-tax cost savings.
Noke Ion Offering: The company is optimistic about the Noke Ion offering, which was rolled out in early October, anticipating healthy demand due to its unique customization capabilities.
TMC Contribution: In 2025, Janus expects a full-year contribution from TMC in their commercial and other sales channels, which is anticipated to drive growth.
2024 Revenue Guidance: Janus has adjusted its full-year 2024 revenue guidance to a range of $910 million to $925 million.
2024 Adjusted EBITDA Guidance: The company anticipates adjusted EBITDA for 2024 to be in the range of $195 million to $205 million, equating to an adjusted EBITDA margin of approximately 21.8%.
Long-term Margin Outlook: Despite the near-term challenges, Janus maintains a long-term margin outlook of 25% to 27%, with expectations for improvement in 2025 driven by market recovery and cost-saving measures.
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Shareholder Return Plan
Share Repurchase Program: During the third quarter, Janus International Group repurchased 4.3 million shares for a total cost of $45.5 million as part of their previously announced $100 million share repurchase program. Year-to-date, they have repurchased 6 million shares for $70.9 million.
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Key Q&A
Q:What really changed here to warrant kind of the meaningful cut and then maybe just speak to what you're seeing on new order income -- incoming order activity and any cancellations?
A:A lot of the projects that we had hoped would release based on the interest rate cut did not release. We're seeing the same as what we saw in the prior quarter with stuff not moving. The REITs and larger operators continue to do business as usual, but the non-institutional operators are more impacted.
Q:Can you just talk about incoming order rates and any cancellations?
A:In terms of new orders, it's status quo. The REITs and larger operators continue to do business as usual. The most impacted segment is the non-institutional operator and the mom-and-pops.
Q:Anything else you guys can do to mitigate the decrementals versus some of the restructuring?
A:We're continuing to look at our structural cost adjustments. There was a bad debt that we had to take as one of our big customers went bankrupt that impacted that line.
Q:Can you remind us what the long-term framework is?
A:We haven't changed the margins 25% to 27%. We identified last quarter that we had taken some commercial actions that will impact us in 2025.
Q:Can you just help us understand how this works with project delays?
A:We're seeing both projects that have started and are on hold, and many projects that were planned to start have not started.
Q:Are you curtailing production in the fourth quarter because demand is obviously much weaker?
A:Yes, that's why you see that margin rate hit in terms of what Q4 is by itself because the volume is down a lot.
Q:How are your backlogs looking and how much visibility do you have?
A:We're not seeing cancellations, but there is a small decline in the backlog.
Q:How much latitude do these customers have in terms of delaying?
A:There's a shelf life to that. At some point in time, they'll certainly release.
Q:Are you losing share in that market by any chance?
A:There are more competitors, but I'm not concerned about losing share.
Q:Is there any incremental or additional built into the Q4 guide?
A:There's not an incremental assumed in Q4 at this point in time based on what we see.
Q:What is your appetite to continue to aggressively buy back stock?
A:We still feel the stock is undervalued, especially even at today's price.
Q:Do you expect a snapback in activity once we have more clarity on the outcome of the election?
A:When the macro gets better, there's tremendous tailwinds in self-storage.
Q:Was there any impact from recent hurricanes or weather in Florida and Southeast?
A:Just very small that we looked at. Most of the sites that we're working on are not in those major areas.
Q:Review of Unclear Management Responses
A:Management appeared to avoid giving a direct answer regarding the specific magnitude of the impact from project delays on Q4 guidance, as well as the exact details on how much commercial actions will reduce prices over the next year.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Hi question
Noke
SGA
TMC sale
action
adjustment
assumption
balance TMC
cancellation
change
contribution TMC
decrementals
deferral
delay
developer
election
factor
headwind
impact
interest rate
line Hi
macro
market condition
mom pop
opinion
optimism
point view
price
project hold
rate cut
reason
saving
scrub
share repurchase
storage industry
stuff
term challenge
term framework
JBI Transcript
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Janus International Group, Inc. (JBI) Q4 2024 Earnings Call Transcript
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The earnings call presents mixed signals. Strong Q4 revenue growth and cost-saving measures are positive, but weak guidance for 2025 and declining margins are concerning. The Q&A reveals uncertainties in new construction and R3 growth, with management not providing clear guidance on tariffs and recovery timelines. Share repurchases are a positive factor. Given the market cap, the stock is likely to remain stable with minor fluctuations, resulting in a neutral sentiment.
Janus International Group, Inc. (JBI) Q3 2024 Earnings Call Transcript
Unknown10-29
The earnings call highlights significant financial declines, with revenue, EBITDA, and net income all dropping substantially year-over-year. Despite share repurchases, the negative sentiment is reinforced by reduced guidance, economic challenges, and interest rate impacts. The Q&A reveals persistent project delays and uncertainty, with management providing unclear responses on key issues. The revised guidance and financial performance suggest a negative market reaction, especially given the company's small-cap status, which typically leads to stronger stock price movements.
JBI Slides
JBI Report
Frequently Asked Questions
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