Release Date: October 29, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Janus International Group Inc (JBI, Financial) has implemented proactive cost-cutting measures to align with current market conditions, aiming for $8 million to $12 million in annual pre-tax cost savings.
- The company maintains a robust balance sheet with strong cash flows, positioning it well for future capital allocation plans.
- Despite revenue declines, JBI continues to generate solid cash flow, with $43 million from operating activities in the third quarter.
- The NokÄ Ion offering, launched in early October, has shown promising results in beta testing and customer interest, indicating potential future demand.
- JBI has repurchased 4.3 million shares for $45.5 million as part of its $100 million share repurchase program, demonstrating confidence in its valuation.
Negative Points
- JBI is experiencing market uncertainty, leading to project delays and a near-term decline in backlog, particularly affecting mid-level non-institutional customers.
- Third-quarter revenue was down 17.9% year-over-year, with declines across all sales channels, including a 22.4% drop in self-storage.
- Adjusted EBITDA margin decreased significantly to 18.7% from 27.2% in the prior year, impacted by volume decreases and a provision for credit losses.
- The company has adjusted its full-year 2024 guidance downward, expecting revenue between $910 million and $925 million, and adjusted EBITDA between $195 million and $205 million.
- JBI faces continued project deferrals due to tighter borrowing standards and elevated interest rates, with expectations for these challenges to persist through the end of 2024.
Q & A Highlights
Q: Last quarter, you seemed confident about understanding project deferrals. What changed to warrant the guidance cut, and what are you seeing in terms of new orders and cancellations?
A: We did a thorough review, but projects we expected to release after the interest rate cut did not. The anticipation of further rate cuts has developers delaying projects. New orders remain steady with larger operators, but non-institutional and mom-and-pop operators are most affected. We are seeing some momentum in R3 and NokÄ Ion opportunities.
Q: Can you explain the impact of commercial actions on pricing and how it affects your long-term framework?
A: We haven't changed our long-term margin framework of 25% to 27%. The commercial actions will impact pricing in 2025, particularly in the storage segment, with a high single-digit impact. However, we expect cost offsets to maintain our margin targets.
Q: Are project delays occurring at the contractor level or end customer level, and how long can these delays last?
A: Delays are happening at both levels. Some projects have started but are paused, while others haven't started as planned. There is a shelf life to these delays, and eventually, they will need to be released.
Q: How are you managing the impact of credit losses, and are there any additional risks in Q4?
A: We took a thorough review of our customer accounts after a major customer bankruptcy, resulting in additional reserves. No further credit losses are assumed for Q4 based on current assessments.
Q: With the current market conditions, how do you plan to manage capital allocation, especially with share repurchases?
A: We believe our stock is undervalued and plan to continue share repurchases. Despite EBITDA pressure, we expect to remain within our net leverage target range of 2 to 3 times, allowing us to continue deploying capital effectively.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
