Good morning once again, everyone. I'm Dan Moore, Director of Research at CJS. Welcome once again to our 26th Annual Winter New Ideas for the New Year Conference. Our next presentation is from Janus International. As I think most are familiar, Janus is a leading global manufacturer, supplier, and provider of turnkey, self-storage, commercial, and industrial building solutions, and by far the largest serving the self-storage industry. We're thrilled to have with us this morning Ramey Jackson, Chief Executive Officer, and Anselm Wong, Chief Financial Officer. We'll start with a brief 10 to 15 minute overview from the company. Following that, I'll ask a handful of questions. As a reminder, if you'd like to submit a question, feel free to do so through the portal, and we'll do our best to make sure that we cover it
With that, Ramey and Anselm, thank you very much for being here with us this morning, and the floor is all yours.
Yeah, glad to be here as well. Yeah, I'll just start with a company overview. I think you did a great job explaining it, but I'll kind of touch it at a high level, but we are a global company with manufacturing in the U.S. and internationally. We're in Europe, Australia, and the U.K. We focus on the customer experience, and we're a full solutions provider with a long history of serving the industry. We consider relationships our biggest advantage in terms of our sales channel and self-storage. We have new construction and then what we call R3, which is repair, rebuild, and replace, and that's two-thirds of our revenue. We're not just doors; we're a full lifecycle solutions provider. We do facility planning, construction, access control, conversions, expansions, and then remixing of units.
And typically here, we work directly with owners and operators, some of the larger blue-chip customers like Public Storage, Extra Space, and U-Haul. Then on the commercial side, which is the other third of our revenue, we have commercial sheet doors, rolling steel doors, along with a broader portfolio of products that serves a lot of different end markets like commercial warehousing and data centers. And then our go-to-market strategy is through the distributors on the commercial side of the business. In terms of our strategic position in self-storage, the industry is highly fragmented. Approximately 35% are public REITs, which we have a really high market share with that group, and the remainder is institutional and smaller mom-and-pops, which we have solid market share there as well. And then on the commercial side is the opportunity to grow market share and expand our products.
We're around less than 10% of the overall market, which represents a nice growth opportunity for Janus, and then in addition to that, part of our growth strategy is getting specified with architects. That's an ongoing process that is pretty much a long game, then in terms of the demand kind of growth drivers for self-storage, think about it as an event-based business, so we call it the Six Ds, which is dislocation, death, divorce, disaster, decluttering, and distribution. Again, it's an event-based business that is very unique to self-storage, and it really doesn't. It's not dictated by kind of the broader market, and then on the R3 side, it includes kind of the age of facilities, which 60% are more than 20 years old, and then another big driver on the R3 side is the consolidation, M&A and consolidation within the market.
So we're called in after whenever a REIT buys a small mom-and-pop. We'll go in and do rebranding, remodeling, and renovation, all the things to bring those stores up to company standards. And then in addition to that, we have our Nokē Smart Entry technology for self-storage. It's a keyless gate and door entry product. We are a first mover in the space with massive upside here. Really excited about this piece of the business, and I'll kind of remind everyone it is a recurring revenue model business. We're continuing to gain traction, and the opportunity for technology upgrades is accelerating. And then commercial, the rising growth of e-commerce at the expense of in-person retail. And then our TMC business, which we acquired last year recently, performs kind of terminal maintenance and services and renovations into trucking terminals.
And then our financial position and capital allocation, our top priorities are M&A and share repurchases. M&A is part of our DNA. We'll continue to seek value-added opportunities that have a strategic fit within the organization. And we recently announced, and we're really excited about the acquisition of Kiwi II, which expands and strengthens our building solutions capabilities. And our balance sheet enables our financial flexibility. Our net leverage at Q3 end is 2.3, which is within our target range. And then TTM free cash flow conversion of 171% at Q3 quarter end. So with that, I'll turn it over back to you, Dan, for Q&A.
Perfect. Greatly appreciate it. Why don't we start with where we finished, which is I'd love to chat about the most recent acquisition. Last week, you acquired Kiwi II Construction for $97 million, or announced that acquisition. Talk about what they bring to the table and why it kind of makes sense to buy versus build from your perspective.
Yeah, great question. Look, you know our strategy. It's how can we grow within our markets? And we've always used the content per square foot method. What else can we do inside these facilities with our customers? What other things can we offer? And this really fits that description. It's great, and it enables our ability from an exterior building solutions opportunity to expand. I'll remind you of our BETCO business, which is a very similar business, but primarily operates on the East Coast and also has a different customer segment, which is kind of the mom-and-pops and non-institutional. What Kiwi represents is kind of the West Coast operation that also serves, Florida is a strong market, but primarily out in the West Coast.
And their customer segment is the institutional, the general contractors, the folks that are spending money in this cycle right now, which is a great marriage when you kind of integrate the two businesses together. We have a national footprint at this point in time, and we picked up a lot of new customers on the general contracting side. One of the core competencies for Kiwi II is they're really called upon to build very complex projects, multi-level. When you're building in California, there are seismic issues that you're designing into your engineering, and they're the pros at that, the leaders in that space. So it was a great accretive acquisition. And in addition to that, we can also-Kiwi II is typically not sold the door and hallway piece. They've always focused on the exterior solutions.
Now, these guys can offer a full end-to-end solution with exterior buildings and also the door and hallway piece, which is our Janus core business.
Really helpful, Ramey, and just kind of maybe drilling in a little bit further, if you just look from 30,000 ft, the West Coast, a little bit softer from a housing market perspective, but just talk about trends that you're seeing that Kiwi is seeing kind of growth in 2025 and maybe the near-term outlook a little bit in their markets, if you will?
Yeah, I'll give the founders of that business a lot of credit. When the pandemic hit and the migration pattern started to occur, they really made bets on areas that they believed would experience growth. I mentioned Florida, which is a growth story as it relates to the pandemic in terms of people moving there, and then the Sunbelt states, and they made a bet, and it resulted in a growth story in a down market, so very strategic. Kudos to them for making that bet and executing upon that strategy, but the markets, again, I'll go back to their core customers. They are the institutional, the folks that are spending the money during this cycle. I mean, we've talked about it with our Janus core business. That's the segment, the customer segment that continues to build today.
And so I'm not going to say they're 100% risk-free, but they made bets on the folks that are spending and it's executing.
Very helpful. Switch gears to the other acquisition you touched on. TMC, acquired in 2024 for $60 million. Now, that business has had a few project delays impacting near-term results. Just kind of take a step back as to why facility maintenance services is an attractive business from your perspective, and then we'll get into maybe some more of the recent trends.
Yeah, look, it's a great business. Again, it's a regional business, so we see kind of geographic expansion growth. High margin. When you think about what they do and where they work, they're in these trucking terminals where these LTL trucks literally abuse the bay. So there's always work. It's on the R&R side, and they've had steady revenue streams for decades. What happened in last quarter was basically when the tariffs hit, you have less LTL containers moving around the country, and it impacted their largest customers, which would be FedEx Freight, Saia, Old Dominion, all the big LTL providers that we're familiar with. And they basically just hit pause on all spending. I think that's as a leader of a business, you certainly would hit pause and reassess exactly what's going on and then move forward from there.
And that's what happened with that business, but I'm highly optimistic moving forward with that business. I think it's a great fit for what we're doing on the services side into self-storage. I think there's things to learn from them and vice versa on the service piece of it. So it's a great acquisition, and I think in more quarters to come, it'll continue to play out as a great acquisition.
Really helpful. And the delays that you just described, it sounds like more episodic than inherent in the business. Are there things that you can do to smooth it out? And just more importantly, your confidence in the long-term kind of growth and margin profile of that business and whether that is a likely candidate for additional inorganic growth.
Yeah, look, I think it was temporary. I think it was a decision just to pause everything. But like I said, in quarters to come, I believe you'll be happy with the progress of that business. They have to spend on these terminals. These terminals have to operate efficiently and effectively. And just the nature in terms of the abuse that the trucks cause on these terminals is a great kind of use case for the longevity of that business model.
Very helpful. Just looking back, the mix is a little bit of a drag on margins in Q3 and potentially Q4, given the guide. And international is displaying healthy growth, but at much lower margins. Just talk about steps you can take to bring margins international closer to in line with North America and what the margin profile ultimately should look like or is achievable in those markets.
Yeah, I'll kind of speak to some of the things we're doing Anselm if you want to chime in on margin and outlook. Look, we have a new leader for that business. We made some structural changes from looking at the go-to-market strategy. We've changed the go-to-market strategy in Europe. What we found is you have to be in-country to be successful. And so we've made a lot of those steps to make that happen. And so in addition to that, as part of a door and hallway supplier into that market, there's some additional you have to provide a scope. And that kind of drags the margin down, the overall margin down. So we're looking at ways to insource that and maybe manufacture it in-house and possibly kind of M&A opportunities there as well.
But Anselm, I'll let you talk about in terms of the margin and how it blends in moving forward.
Yeah, sure. Yeah. So Dan, great question on it. We've been happy about what we've seen. Obviously, they had closed 2024 much lower, much down, and they've really recovered in 2025, and you can see the year to date where they've been improving margins. I think one of the key things Ramey mentioned that they've been proactively doing is really reassessing the right product for the right customer in the right geography, and that does mean redesigning some of the products. And that's where some of the margin improvement comes from, is that we've had some products that were for some other markets that were a bit more expensive from a cost point of view, but was needed for those other markets. We have adjusted based on what the customers are looking for in terms of features and functions and materials for those other markets.
And that allows us to go into those markets and sell a lower-cost product, but not necessarily lower-quality product. It's a different product to meet those needs instead of trying to lower the price of a more higher-built product for those markets. So he's been working on that. He's also looking at insourcing, like Ramey said, in terms of some of the key items that we don't make. So mezzanines, as well as some other products that are needed for self-storage, multi-level facilities, where we currently outsource them. So obviously, it impacts the margin a little there. So as we look at how to either get insourced or change providers, we'll get some larger improvement there as well. And also, obviously, scale.
As we continue on the path of growing the country model where we're putting in-country salespeople, that's going to help us a lot in terms of managing the footprint in each of the countries that we have. And as we scale, we'll get leverage, fixed-cost leverage that way as well. So we've been very proud of that. And I think the last thing is, as you guys know, we made an investment due to the tariff situation in the U.K. and the European countries in a Poland factory. Obviously, that's still getting up to speed, getting volume there. And as we scale volume and improve it going into this year, that'll help improve the cost profile for that factory and the products that are made in that factory. So a lot of items that our leader there is working on to improve the margins.
And I think, like we said in the past, our goal is to get that business. I know maybe it won't get quite to the U.S. margins because of the complexity, but there's a possibility to get into the high teens, low 20s EBITDA rate for that business.
Really helpful. Greatly appreciated. Shifting back to self-storage, just starting with core REIT customers, maybe just review what we've heard so far about their CapEx plans and budgets. What does that tell you about the outlook for growth, both for new construction as well as R3 as we think about 2026?
Yeah, great question. As you know, the REITs are listed and disclose a lot of CapEx, which is kind of consistent with the data that we have internally. And you've heard us say, Dan, that we feel like our data is the best data because of our touchpoints and in terms of the time in which it takes to turn opportunities into revenue. So we're out on facilities well in advance before we get the orders in terms of scoping out whether it's a remix or renovation. I mean, we're literally months in advance on these projects. So we have high visibility into what's in the pipeline. And we're optimistic moving forward that that will continue to accelerate. I think what we heard last week at a self-storage event is M&A acquisitions. The REITs feel like will accelerate in 2026, which bodes well for our R3 business.
As you know, with the Life Storage acquisition that we've kind of some of the data points around that, that's been a big win for our R3 business and will continue to be for years to come. So when we hear about capital allocation with the REITs and their plans to not only with new construction, but they feel like the market will be poised to accelerate with M&A, that's certainly great for our R3 business moving forward.
Excellent. And just taking a down market, any green shoots among kind of smaller mom-and-pops or regional self-storage operators? A little harder to call data together there, but it's a challenging market. It has been. What are you seeing or hearing as we kind of turn the page into 2026?
Look, I think interest rates matter. Well, first of all, let me go back. Self-storage is local. I mean, we look at it and we report on a national level, but we often forget that self-storage is local. We certainly have regions, states, areas within a state that are growing from a new construction perspective, and that's just the way self-storage is. It's local. But from a broader perspective with interest rates, I mean, obviously, we're getting some movement there. And optimism around further decreases in rates, whether we believe that or not, doesn't matter. And then the overall kind of, I guess, their position in terms of making the investment, which is around their confidence in, I guess, the economy moving forward. We're starting to hear some positive things from that front, but I still think from an interest rate perspective, it's too early to tell.
Understood. Kind of similar in commercial beyond what we talked about as far as TMC, what is the kind of outlook for growth over the next 12-24 months?
Yeah, look, I think with TMC, you'll continue to see strong momentum with that business. And then on the broader commercial, you hear us talk about various segments, which is kind of the pre-engineered metal building commercial warehousing that has been stagnant. That's really been impacted our volumes in that space, and we believe that's interest rate driven. There is kind of an R&R component to that in terms of CapEx, which is relatively positive. But the biggest, I guess, laggard, if you will, from a segment perspective, is the carport and shed sector of the business, which you saw that grow at a meaningful pace during the pandemic. And we feel like we're pretty close to a bottom. I can't imagine it can go down any further at this point in time.
Really helpful. Did have one question come in as it related to the LSI acquisition. I think you stated five times EBITDA multiple, including synergies. It's just to give us a sense for the size of synergies, timing and therefore what the sort of implied trailing 12-month EBITDA multiple looks like.
LSI?
I'm sorry. The Kiwi II Construction acquisition.
Oh, Kiwi. Okay.
I apologize. Thanks.
Got it. Yeah. Anselm, you want to speak to that?
Yeah, sure, so we only disclose the kind of the forward-looking 12-month, the annualized kind of synergies for the deal in about five times there. What the synergies are is a couple of two things. One, half of it is procurement, so you think about it, they're a big steel buyer user. Obviously, we are as well bigger, so there's a lot of good synergies that we see from procurement there. On the other side of it, there's a number of items. As you know, we have the BETCO business on the East Coast where we make components for the building segment. They currently outsource when they do deals on the East Coast, so there's opportunities for us to insource those building materials. And then also the door and hallway piece, they don't make it a big thing to push the door and hallway piece as they're doing the buildings.
But we see opportunities to align up and do just one overall deal for a lot of our customers with a building package and a door and hallway package. And the last thing we see still, we haven't really even factored in, but obviously, Nokē plays a big part here as well, as well as other parts of our business that we can sell with their contacts and vice versa. So I think there's a lot of opportunities for cross-selling further for this deal.
Got it, and then Nokē, just talk about an adoption and profitability perspective. Are you seeing larger customers start to increase their testing and experimentation, or is adoption still largely kind of at the small regional player level?
Yeah, good question. So the answer is yes. We're certainly seeing an uptick in larger institutional operators' involvement from an adoption perspective. And then just an interest level around use case. I think security is becoming an issue. Well, obviously, it's been an issue, but I think the use cases are building with the Nokē Ion product. Very secure, and it's proving out to deter theft in a lot of areas. And so we're kind of getting interest not only from a facility automation perspective, but from a security perspective as well. And then in addition to that, I think we found a sweet spot in price with our Nokē ONE product. It was, quite frankly, too expensive for some of the operators. And I think, like I said, we found a sweet spot with Nokē Ion.
From a stability perspective, we found that Nokē Ion, I mean, it's truly enterprise grade. I mean, we're operating from uptime and efficiencies around over 99.9%, which is what you would expect with technology. I think the stability and the way that it's kind of resonating throughout the industry, and we're building on that. To answer your question, yes, we're seeing more of that. We're super optimistic that this year, hopefully, we'll hit scale so there'll be less of a drag on overall margins, and then we can build from there.
Perfect. It dovetails into my next question, which is just anything you can describe as it relates to the implication for EBITDA and profitability as we get closer to break-even and shift toward potential positive profitability over the next one, two-plus years for Nokē specifically?
Yep. Go ahead.
I'll take that, Ramey. So Dan, great question. I think we're excited about it because it's been a long journey for Nokē to get to where we're comfortable, like Ramey said, enterprise-grade and just performing. If you think about the profitability of it, obviously, it's a drag right now because we're still below what we feel about the 500,000 unit level that gets us to break-even level. But what it does for the future, if you think about it, it is, at least for the software revenue piece of Nokē, it's similar to any other software revenue business where once you get past the fixed-cost piece, your margins are fairly high. So you should expect at least gross margins on the software side into the, call it, 60% and higher range, if not higher, for that piece of it.
Just keep in mind, also the drag for us has been what Ramey was referring to earlier, is that we've been slowly really going back to a lot of installs that we've had in the last couple of years to really fix the uptime and connectivity issues of the Nokē ONE and older products. So there's been a lot of cost that we've been spending to make those businesses work the way they should work. And we're nearing an end there. So those costs, in addition to the other costs, will go away. So that's why we're pretty excited about the go forward where you'll see Nokē get into the normal margins you would expect for a recurring revenue business.
Got it. As a reminder, if you do have any questions, feel free to submit them through the portal. As we talk about margins and the P&L, what's the latest in terms of steel, other input costs, and how that might translate to margin benefit or headwinds relative to as kind of we think about 2026 relative to what we experienced over the last 12 months?
Sure. If you think about steel, it's like 2025 was, I would say, surprisingly fairly steady in terms of steel moving in a tight band range. I think a lot of the forecasts as we go into this year, at least the first half, is still saying steady, but we're starting to see the forward still showing increases. So I will tell you, I wish I could forecast great, Dan, but I think at least in the current time, if you ask me today, it just looks at least steady for the kind of immediate quarter. But there's indications that a lot of steel providers are looking to raise prices, and we'll see what ends up happening. I think, as you recall, last year, a lot of the steel producers tried to do that, but the demand was just not there, so the prices never held.
So we'll see what happens this year.
Got it. Very good, again, appreciate the color. Turn to balance sheet, you talked about. Ramey mentioned kind of priorities for capital allocation, net leverage, still comfortable in the kind of low to mid-twos, including the acquisitions. Last year, you bought back, I think this is going back to 2024, seven million shares through the first three quarters of this year, around two million or just under. How aggressive do you intend to be at or near current share prices? And talk about capital allocation priorities. Do you want to get back down closer to two? How are you weighing buybacks versus potential M&A on a go forward basis?
Go ahead, Anselm.
Sure, so Dan, I think obviously M&A has always been our number one priority, and I think obviously we can never predict timing of when we could do the M&A. I think obviously finally we got one over the line because the market was just getting enough where the multiples were getting to a point where they were attractive enough to do. I would say it'll really depend on kind of what other targets are available. I think Ramey and I have always kind of reviewed before we actually do the acquisition, the comparison between buying back our stock at whatever the share price is at versus what the M&A will do for strategically, and you've seen our bias. I think if there's just really nothing in sight, then we favor the stock buyback, but I don't think we would have a call at this point.
We do have more targets that we're looking in the pipeline, Dan, that we're excited about if we can bring them over the line. It's just following along the strategy that we've always talked about. Is that how do we add more content and diversify the portfolio?
Sorry, I just had to unmute. Very helpful. Thank you. I think that covers most of the questions that I had prepared. Certainly look forward to an update over the next several weeks as we get into late February, early March. But with that, I'll turn it back over to you, Ramey and Anselm, for any final remarks. And once again, if we can help follow up with Janus and/or any of the other companies that you meet with today, please do let us know. But I'll turn it back over to you for any closing remarks.
No, I appreciate the opportunity to talk about the business. Super excited about the opportunities moving forward. I feel like when you listen to our customers, they're cautiously optimistic about 2026. I think 2025 was a reset year, to use their terms. And so no, I'm super excited about the drivers that we intend to pull in terms of growth, and not only on the self-storage side with R3 and Nokē, but also the commercial piece of the business with ASTA. It was a growth story this year, and we continue to build on that. And we're super excited, and we appreciate the opportunity to talk about it.
Fantastic. Thank you again, and look forward to speaking in a few weeks. Thanks.
Thanks, Dan.
Thanks, Dan.