Hello and welcome to the Janus International Second Quarter 2022 Earnings Conference Call. Currently, all participants are in a listen-only mode. A question-and-answer session will follow the formal . 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 of Investor Relations and FP&A. Thank you. You may begin Mr. Rohlwing.

Thank you operator and thank you all for joining our second quarter 2022 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. As a reminder today's conference call may include forward-looking statements regarding the company's 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's actual results may differ materially from those anticipated. Factors that could cause actual results to differ from anticipated results are contained in the company's latest earnings release and periodic filings with the Securities and Exchange Commission and we encourage you to review those factors carefully. In addition we will be discussing or providing certain non-GAAP financial measures today including adjusted EBITDA, adjusted EBITDA margin, 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 measures. I'm joined today by our Chief Executive Officer, Ramey Jackson, who will provide an overview of our business and give an 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 to your questions. At this point, I will turn the call over to Ramey.

Thank you, John and good morning everyone. We had a remarkable quarter and continue to build out our record of incredible results. It's an exciting time to be at Janus. We recently had the opportunity to ring the bell at the New York Stock Exchange in July. This event celebrated our one-year anniversary since becoming a publicly traded company and our 20th year anniversary to delivering leading solutions, products, and services to our customers. Now, turning to the second quarter of 2022. Janus produced strong operation and financial results that included record revenues, sequential margin improvement, record backlog, and strong cash generation. Against a backdrop of macroeconomic uncertainties, the self-storage industry continues to flourish as it has in the past with persistently high demand and occupancy rates driving the need for new capacity additions in the form of expansions, conversions, relocatable storage units, and unit mix changes. Our customers are larger, better funded, and more strategically focused than at any point in our industry's past. As the leading provider of value-added solutions for customers across the self-storage, commercial, and industrial building industries, we believe we are uniquely positioned to continue benefiting from these market dynamics and to gain market share regardless of how that capacity is added. As a reminder, our margin profile was similar for greenfield new construction and for R3. We remain focused on a number of key growth strategies. In our commercial segment, we continue to build out the rolling steel product line at our ASTA business unit and are benefiting from additional opportunities that the DBCI acquisition brings to that segment. On the Noke front, we are leveraging the prior year acquisition of ACT to accelerate growth, which once again resulted in strong revenue quarter to-date. As we mentioned on our last call in April, we…

Thanks, Ramey and good morning everyone. In the second quarter, revenue of $247.7 million was up 42.2% compared to the prior year quarter and 27.4% on an organic basis, driven by solid execution in all three of our sales channels. Commercial and Other was up 81.6%. Restore, Rebuild & Replace or what we refer to as R3 was up 34.3%. And New Construction was up 17.3% versus the prior year quarter. The impressive 82% growth from our Commercial and Other segment was attributable to favorable market gains driven by the growing need for e-commerce logistics among the many end markets that this sales channel services along with share gains in both the commercial steel roll-up door market and in our ASTA rolling steel door segments product line. While the industry faces ongoing supply constraints, our lead times continue to be favorable, resulting in superior execution with our customers, particularly in the commercial sales channel. R3 growth of 34% in the quarter continues to be bolstered by new capacity additions in the form of conversion and expansion. The focus of new capacity additions remain weighted towards the R3 offerings as opposed to greenfield sites. But as Ramey alluded to previously, we are largely indifferent from a margin perspective. In New Construction, we continue to see growth in that sales channel, as we work through the pent-up demand caused by permitting and other construction delays that occurred during pandemic-impacted 2021. Our consolidated revenue growth continues to reflect improved demand across all our end markets. The benefits of commercial actions taken to address the inflationary pressures and contribution from the DBCI and ACT acquisitions which occurred in the third quarter of 2021. Adjusted EBITDA of $50.7 million was up 41.1% compared to the year ago quarter. Higher revenue was the primary driver of…

Great. Thank you again, Anselm. We are proud of how Janus has performed in the first half of 2022, particularly in such uncertain times. Our business delivered another quarter of outstanding growth and solid adjusted EBITDA margin contribution even as we were addressing cost pressures seen across the industry. These results are a testament to the execution by our team and the strength of our end markets, and I expect we will continue to build on this momentum as we look to deliver strong margin performance and earnings growth over the long term. Thank you again for joining us. Operator we can now open the lines up for Q&A please.

Thank you. Ladies and gentlemen, at this time we’ll be conducting a question-and-answer session Our first question comes from the line of Reuben Garner with The Benchmark Company. Please proceed with your question.

Thank you. Good morning, everybody.

Good morning, Reuben.

Good morning.

So I think in the broader building products space inventory risk has been a topic of late. Can you just talk about why that doesn't impact you guys as to what you're building in both sides of your business are custom made to order but can you just kind of confirm that? And I guess in the same vein talk about the visibility you have into the second half if you could.

Yes Reuben, thanks for your questions. It's Ramey. Yes. Good question. I think the best way to look at it from an inventory perspective is considering the end market, the robust kind of end market that we're in today in storage, we've chosen to invest in inventory to make sure we have enough supply for our customers. But as you mentioned, we are a build-to-order solutions provider. So we're not seeing a lot of those headwinds that others that are speaking to. And then in addition to that our backlog remains at an all-time high. So when you think about visibility, all of our early indicators into our business are at all-time highs right now. So tremendous amount of confidence in terms of the momentum – to continue the momentum through the second half of the year.

And I appreciate the color on the second half EBITDA margin. You talk more specifically about the gross margin line, do you stand from a price cost standpoint contracts being virtually all – how should we expect kind of a step function higher? And when do you start to see the benefits of the lower steel costs roll through?

Sure. Thanks for the question. If you look at the prior guidance we talked about is that we said that the first two quarters would be at a certain margin and the second half would be at an increased margin. That's due to the commercial activities and actions that we put in place in those – the last one ended at end of Q2. So we'll start seeing the benefit, it was starting at the end of Q2 into the second half. In terms of your question about steel prices, as we said in prior calls, the lead time for our – from our coil steel to our doors is a fairly significant time. And if you actually factor it in for us, we'll most likely not see a large benefit until the end of the quarter four and then into the 2023 is when we'll see the benefits from the steel.

Okay, great. And just a quick -- so directionally, can you help us on where gross margin is kind of like the midpoint of what your EBITDA margin guided? Is most of the sequential margin improvement or all of it coming at the gross line?

Yes. It's approximately about 60%. It is going to be about price and the balance is going to be about volume.

Okay. Perfect. Thank you, guys. Congrats on the quarter .

Thanks, Reuben.

Thanks.

Our next question comes from the line of Jeffrey Hammond with KeyBanc. Please proceed with your question.

Hey, good morning, everyone. This is David Tarantino on for Jeff.

Hi, David.

Hey, David.

Good morning.

Hey, yes. So given the improvement in commercial was specifically impressive, could you give us some more color on the raised guidance more broadly by each of the sales channels in both self-storage and commercial and kind of how that plays out in the second half?

Yes. Our actual growth was spread actually among all three of our major channels. That's what we saw. So it wasn't in just the commercial. We actually saw the growth across all the major channels.

Great. And then kind of looking out more specifically, kind of, on the back of the margin question, kind of, how do you see that playing out sequentially through the second half?

Yes. We'll see a bump in Q3, as we guided and obviously another bump in Q4 as the commercial actions take hold.

Great. Thanks, guys.

Thank you.

Thanks.

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

Good morning, guys. And thank you for taking my questions. The first one is kind of dovetailing off the last question there. As we move forward, how are you thinking about business mix? I mean, do you still -- I know it's been pretty even in this most recent quarter, but do you expect particular strength in any segment as we move forward?

Yes. Good question. Good morning, John. I think, to answer your question, we see consistency in growth with all the sales channels. I think what you'll see kind of in the back half of this year, as new construction will start to pull through more on the self-storage side. As you may remember, kind of, permitting issues as it relates to the pandemic, those are starting to cycle through our backlog as we speak and I see that to be relatively strong in the remainder of the year.

Okay. That's helpful. And then, just getting back to the steel flow through into the P&L. Is that timing pretty consistent with what you've seen historically? Has it been kind of expanded or extended, given what's going on in Russia, Ukraine, maybe in the lockdowns in China, anything like that?

I think, it's been relatively consistent. If anything, a little bit longer. I think, if you'll remember back last year, there's a scarcity of supply of steel. So we chose to buy ahead and make sure we had enough inventory to satisfy our end markets and the growth that they're experiencing. So I would say, a little bit longer than normal.

Great. Thanks very much, guys.

Thank you.

Thank you.

There are no further questions in the queue at this time. I'd like to hand the call back to Mr. Jackson for closing remarks.

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.

Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time and have a wonderful day.