Prepared remarks
Thank you for your continued patience. Your meeting will be shortly. If you need assistance at any time, please press 0 and a member from our team will be happy to help you. Thank you for your continued patience. Your meeting will begin shortly. If you need assistance at any time, please press 0 and a member of our team will be happy to help you. Thank you. Hello and welcome to the Janus International Group Second Quarter 2026 Earnings Conference Call. All participants are in a listen-only mode and a question and answer session will follow the formal presentation. If you should require operator assistance during the conference, you may press 0. As a reminder, this call is being recorded. I would now like to turn the call over to your host, Ms. Sara E. Macioch, Senior Director, Investor Relations of Janus. Please go ahead.
Thank you, operator, and thank you all for joining our earnings conference call. I am joined today by our Chief Executive Officer, Ramey Pierce Jackson, and our Chief Financial Officer, Anselm Wong. We hope that you have seen our earnings release issued this morning. 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. Our remarks in the press release, presentation and on this call contain forward-looking statements regarding the company's business, strategy, operations and financial performance. Please review the forward-looking statements section in today's press release and in our SEC filings for various factors that could cause our actual results to differ materially from our forward-looking statements and projections. The company expressly disclaims any obligation to update or revise publicly any forward-looking statements whether as a result of new information, future events, or otherwise. Additionally, non-GAAP financial measures will be referenced in this call. A reconciliation of these measures to the most directly comparable GAAP financial measure can be found in our earnings press release and presentation. On today's call, Ramey will provide an overview of our business, Anselm will continue with a discussion of our financial results and 2026 guidance, before Ramey shares some closing thoughts and we open up the call for your questions. At this point, I will turn the call over to Ramey.
Thanks, Sara, and good morning, everyone. Thank you all for joining our call today. Second quarter results reflected a continuation of the macroeconomic trends we have discussed throughout the year, as the operating environment remained challenging across many of the markets we serve. While we remain focused on execution and serving our customers, these factors had a greater impact on demand than we anticipated. As a result, total revenue totaled $233.5 million and adjusted EBITDA was $40.2 million. Based on our year-to-date performance and current visibility, we are revising our full-year guidance. Demand levels across our core business have not trended as we expected, and we believe it is appropriate to reflect that reality in our outlook. While we have updated our expectations to reflect current market conditions, our conviction in our strategy remains unchanged. We remain focused on executing against the priorities that we believe will strengthen the business and create long-term value. Let me take a few minutes to discuss our progress on those initiatives. As a reminder, we refer to our strategic framework as GROW: greater penetration of self storage, ramping adoption of smart security solutions, outperforming in the commercial market, and winning through strategic accretive acquisitions. Beginning with greater penetration of self storage, market conditions remain challenging during the quarter, predominantly in North America new construction, where project activity and customer investment levels continue to be constrained, particularly among our smaller customers. We continue to expand and refine our product offering in order to adapt to our customers' changing needs, including our R3 business, international presence, and design-build capabilities allowing us to deliver more comprehensive solutions. Integration of our Kiwi II Construction acquisition remains on track. Jason will speak further to our expectations for the business this year shortly. Next, ramping our smart security solutions through our Nokē SmartEntry platform, during the quarter, we reached a significant milestone of surpassing 500,000 installed Nokē units. This achievement reflects years of investment and execution and marks an important inflection point for the platform. As we have discussed in prior periods, scale has always been a critical component of the Nokē strategy. Reaching this stage marks an important step in that journey and supports our ongoing efforts to improve profitability and drive greater recurring revenue over time. Adoption of Nokē continues to increase, reinforcing the meaningful value in solutions that help our customers improve operational efficiencies, enhance security, and streamline facility management. As we continue to advance our product roadmap, we have been encouraged by the initial interest in Nokē Infinity, our on-door dual-technology smart locking system we announced earlier this year. We expect Nokē Infinity will be available for factory install on both roll-up and swing doors beginning in the fourth quarter. The third priority of our growth strategy is increasing our share of the market for commercial doors. While commercial sheet door demand remains soft, we are seeing benefits from our expanded distribution footprint and architectural specification initiatives. Our efforts in the data center space also continue to progress. We are exploring new product capabilities and continuing to position ourselves as a strategic manufacturing partner for OEMs. Our final priority is winning through disciplined M&A. Strategic acquisitions remain an important component of our strategy, and we continue to evaluate opportunities that enhance our capabilities, expand our solutions offering, and support long-term value creation. Combined with our scalable operating platform, this disciplined approach enables us to pursue growth while maintaining a relatively low capital intensity business model and strong cash flow generation. As we look ahead, we will continue to focus on what we can control: executing with discipline, supporting our customers while adapting to their changing needs, optimizing our operations, and advancing our strategic priorities. While market conditions remain challenging, our revised guidance reflects our best assessment of the current demand levels and positions us to execute against expectations that we believe are achievable. With that, I will now turn the call over to Anselm for a more detailed review of our results and to discuss our revised 2026 guidance. Anselm?
Thank you, Ramey, and good morning, everyone. Ramey spoke to our strategy and results at a high level, and I will focus my remarks on financial performance in the second quarter and our updated 2026 guidance. For the second quarter, consolidated revenue of $203.5 million increased 2.4% as compared to the prior year. Inorganic revenues for the quarter were $19.2 million reflecting contributions from Kiwi II Construction. At the sales channel level, our self storage business was up 15.4%, new construction up 20.3% while R3 is up 6.6% for the quarter. The increase in revenues for new construction was driven by contributions from Kiwi II Construction and strength in our international business, which offset continued softness in North America. On an organic basis, new construction revenues were flat compared to the prior year. The increase in R3 revenue was driven by increases in door replacements and redevelopment activity as well as increased conversion and expansion activity. In the second quarter, total revenues in our international segment increased to $31.1 million, up 9.5% compared to the prior year period driven by growth in new construction and market share gains. For the quarter, revenue in our Commercial and Other segment decreased by 21.2%. The decline was primarily driven by continued softness in demand for commercial sheet doors. Second quarter adjusted EBITDA of $40.2 million was down 18% compared to the second quarter of 2025. This resulted in an adjusted EBITDA margin of 17.2%, a decrease of approximately 430 basis points from the prior year period. The decrease in margins year over year is primarily attributable to the impacts of geographic segment and product mix. For the second quarter, we produced adjusted net income of $23.9 million compared to adjusted net income of $28.2 million in the prior year period. Adjusted EPS for the quarter was $0.17. We generated cash from operating activities of $24.4 million and free cash flow of $21.6 million in the quarter. On a trailing 12-month basis, this represents a free cash flow conversion of adjusted net income of 129%. Capital expenditures in the quarter were $2.8 million. We ended the quarter with $205.3 million in total liquidity including $127 million of cash and equivalents on the balance sheet. Our total outstanding long-term debt at quarter end was $550 million and net leverage was 2.7x, within our target range of 2x to 3x. Our liquidity levels allow us flexibility in our capital deployment. During the quarter, we repurchased approximately 367,000 shares of our common stock for a total of $1.9 million. Year to date, we have repurchased approximately 3.2 million shares of common stock for a total of $17.6 million. We had $63 million remaining on our share repurchase authorization at quarter end. Now moving to our 2026 guidance. As Ramey noted, we continue to face a challenging operating environment, with demand trends remaining more muted than expected. In light of current market realities, we have adjusted our expectations for the year to the environment we are seeing today and to align with what we believe is a prudent and achievable set of expectations. We have yet to see the macro environment stabilize as we anticipated entering the year, which has contributed to slower activity across portions of our core business, reflecting ongoing inflationary pressures and stagnant housing demand across North America. As a result, we now expect full-year revenue in the range of $925 million to $945 million. Additionally, due to delays and extended project timelines on certain projects originally anticipated to be completed this year, we are adjusting our expectations for inorganic revenue from Kiwi II Construction to be approximately $80 million to $90 million. We now expect North America organic self-storage revenues to be down high single digits compared to 2025 driven mostly by continued softness in new construction. In our commercial sales channel, we now anticipate revenues to be roughly flat. On the international side, we expect high single digit revenue growth. From a profitability standpoint, we continue to manage costs and remain focused on operational efficiency, while optimizing our footprint to better align with current demand. While lower forecasted volumes, negative mix, and inflationary pressures across the supply chain have put pressure on margins year to date, we anticipate the benefits from these actions will result in a sequentially stronger back half. As a result, 2026 adjusted EBITDA is now expected to be in the range of $150 million to $170 million. This reflects an adjusted EBITDA margin of 17.1% at the midpoint. We continue to anticipate being around the higher end of the free cash flow conversion of adjusted net income target range of 75% to 100%. Our updated guidance reflects current market conditions and our best assessment of demand trends for the remainder of the year. Importantly, we continue to generate strong cash flow, maintain a healthy balance sheet, and invest in the strategic initiatives that we believe will drive long-term growth and shareholder value. Please refer to the presentation we have posted for additional details on the key planning assumptions for 2026. Thank you all for your time. I will now turn the call over to Ramey for his closing remarks. Ramey?
Thank you, Anselm. Janus continues to hold a strong position in an attractive industry, but it is clear that current market conditions remain challenging. Importantly, we continue to make meaningful progress against our strategic priorities. Surpassing 500,000 installed Nokē units marks an important milestone for the platform and demonstrates continued adoption of the technology-enabled solutions across the self storage industry. While new construction activity, particularly in North America, remains constrained, and we expect market conditions to remain challenging in the near term, we are encouraged to see improving sentiment from some of our larger customers. The long-term fundamentals of self storage remain favorable. Industry occupancy levels remain healthy. Household utilization continues to grow. And ongoing consolidation among operators continues to support investment in facility upgrades, modernization and operational efficiency. Although we cannot control the macroeconomic environment, we can control how we respond. We remain focused on serving our customers, optimizing our operations, managing our costs with discipline, and allocating capital responsibly. Supported by a strong balance sheet and healthy cash generation, we believe we are well positioned to emerge even stronger when market conditions improve. In closing, I want to thank our team, customers, and shareholders for your support. We appreciate your participation on today's call. Operator, we would now like to open up the lines for Q&A, please.
Questions and answers
Thank you. Press star 1 on your keypad now. To leave the queue at any time, please press star 2. Once again, that is star 1 to ask a question. Our first question today comes from Phil Ng with Jefferies. Your line is open.
Hey, guys. Appreciate all the color. If I look at your new construction business in 2Q, frankly, if you strip out Kiwi, organic sales were kind of flattish. I guess, can I kick things off? Anselm, anything to revise outlook — the guidance we are forecasting a weaker demand environment — it feels like it is more new construction, maybe some of the projects getting pushed out in Kiwi, but can you expand a little on what you are seeing and how trends kind of progress each quarter going into July and August?
Yeah. The markets, like we said, are similar to the first half as we expect into the second half. What we saw, just unfortunately in our billings business, Kiwi, we saw some project push-outs, and that is why we revised that piece of it. That seems to be the similar trend that we have seen across the board in terms of those push-out delays on projects. The good thing is that what we reviewed is that there have not been cancellations; it has just been a timing push-out.
Okay. But the weakness — did it progressively get worse into the quarter? I mean, Kiwi aside, it sounds like it is more timing related. But what about the construction on your end?
It is about the same. New construction is relatively the same as we said. I think the biggest thing you saw was commercial just not getting the upturn that we were expecting we would get.
Right. Commercial has generally been pretty benign, and this was the big drawdown down 20–21%. Is this timing related? What is driving the big shortfall on the commercial side of things?
Morning, Phil. I think the biggest drag on our commercial revenue is specifically the commercial sheet doors, which predominantly are installed in pre-engineered metal buildings, and that end market has obvious headwinds. That was really the biggest drag on the miss there. But when you think about the category, our rolling steel product is continuing to grow and perform well. We mentioned our strategies around architectural specifications; that has been ongoing for over a year and is starting to pay off. We are also active in the data center space, which is in growth mode, so we are excited about that. But to answer your question on the miss, it was really the commercial sheet door product specifically.
Okay. And sorry to sneak one more in. R3 has been a bright spot for a few quarters. Ramey, perhaps on that front, I suspect all the M&A activity from some of your larger customers have contributed to that. Just curious: how's the outlook looking for R3 in the back half? Is there going to be a smooth handoff from one large deal to that, or can you give us more context on what you are seeing on the R3 side as we look out to the back half this year?
There is a lot there. I think to your point around consolidation, that certainly plays an important role in the investment, but that is not 100% where we are seeing the uptick in R3. Think about mostly institutional customers, and they are right-sizing and shoring up their facilities during this downtime. Conversions and expansions are a growing piece of the business, and that is what we are seeing. We are pretty happy with the progress there and the way that is trending on the backlog and pipeline as it relates to R3. We just have to continue to refine our products to make sure that we are in the right spot for this ever-changing market, but we are pretty pleased with the R3 initiative.
Okay. Appreciate the color, guys. Thank you.
Our next question will come from Jeffrey David Hammond with KeyBanc Capital Markets. Your line is open.
Hey, good morning, everyone. This is David Tarantino on for Jeffrey. Maybe just starting on the margins, could you just give us a little bit more color on the lower margin outlook? Is this simply on the lower volumes? And then maybe give us some color on the key buckets that support second-half improvement versus the first half?
Sure. If you think about the margin, the sales volume drop is really the big change that impacted the rate there. The second-half improvement, which you saw in Q2, is a lot of the optimization that we have been talking about. If you look at the factory consolidations and optimizations, we have been aligning resources to fit the volumes that we are seeing. We are also looking at the back office and general overhead — things we should be doing all the time — and now we are starting to see some of that benefit come through. The other bucket is steel prices, which have been rising; we have been monitoring that and managing it, taking commercial actions to offset that pressure. All those big buckets together explain the second-half improvement.
Okay. Great. And then maybe following up on the new construction market, it looks like Kiwi is tracking a bit lower. Could you confirm whether the core business is also tracking a bit lower? And give us details on what you are seeing in the pipeline of construction activity that is informing your color on North America tracking maybe weaker than you expected?
The core business is tracking about the same, so I do not think there has been a big change for the core self-storage piece. Kiwi is the bigger piece where we saw timing on some projects push out, and that is the larger factor. The larger piece of the adjustment to the forecast is more related to the commercial sheet door piece that we discussed earlier.
Okay. Great. That is helpful. Thanks, guys.
Our next question will come from John Lovallo with UBS. Your line is open.
Hey. Good morning, guys. This is Matthew Johnson on for John. Appreciate the time here. If we could talk about gross margin in the quarter: I think it was down somewhere around 56 basis points year over year, which was down a bit more relative to the first quarter. You called out product and geographic mix impacting that. Could you talk about how we should think about the drivers in terms of mix versus Kiwi versus price/cost versus anything else in there?
Price was minimal for this quarter, as we had said on the last call. The biggest issue was mix. Some of our smaller businesses have a lower gross margin profile than our core Janus business. As you saw Janus Core grew while the smaller businesses also grew, and that mix is what accounts for the margin decline year over year.
Appreciate that. My second question: could you put a finer point on the outlook for Kiwi here? I think you lowered the sales outlook by about $10 million. Last quarter you said Kiwi had a pretty strong backlog coming into the year, which gave them good visibility for 2026. It sounds like there were some delays; could you talk about what you saw with those delays? What is driving the expected ramp in Kiwi sales in the back half, and any color on how the backlog for Kiwi looks now?
The backlog is still pretty strong; there has been no change to the total backlog. The biggest thing is some customers are getting their existing facilities up to speed first before they start other projects in the pipeline. You will see more step-up, but these are large projects and timing is hard to predict. The good thing is the projects are still intact.
Appreciate it. Thanks, guys.
Our next question will come from Dan Moore with CJS Securities. Your line is open.
Hey. This is Will on for Dan. A lot of my questions have been answered. Keep it short. Can you talk about your expectations for working capital and free cash flow for the remainder of the year? And what are your near-term priorities for capital allocation? How are you thinking about the desire to deleverage versus further M&A and share repurchases?
Working capital has been fairly steady and we have continued to look at optimizing it. If you think about cash flow, our guidance anticipates we will be in the higher end of the conversion percentage as we showed in the first half, so we expect pretty good cash flow for the second half. CapEx is small for our business and will stay relatively small — there are no major operational investments required. Regarding debt, we have another couple of years until a probable refinance, so there is not a big push on that front. Share buybacks at current prices are very attractive for us, and you will see us continue that action as we did in the first half.
Thank you.
Thank you. Our next question comes from Reuben Garner with The Benchmark Company. Your line is open.
Thank you. Good morning, guys. Most of my questions have been answered. I just have one. Can you elaborate on the cost actions you are taking? We saw some lower SG&A maybe than we expected in this past quarter. Was that the start of some cost actions you've taken to address lower demand? Is that where we would see it as the year winds down? Thanks, guys.
Yes. We are always optimizing across the entire business, not just operations but everywhere. What you are seeing is continued actions to align costs with where the volume and revenue are. We take prudent actions across the board, so it is not just one area.
Thank you. This concludes our question-and-answer session. I will now turn the meeting back over to Ramey Pierce Jackson.
For closing remarks: Thank you all for joining us today. We appreciate your support of Janus and look forward to updating you on our progress. Have a great day.
Thank you. That brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.