Janus International Group Inc - Ordinary Shares - Class A Aktie

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 star zero on your telephone keypad. a reminder, this call is being recorded. I would now like to turn the call over to your host, Ms. Sarah Macioc, 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 Jackson, and our Chief Financial Officer, Ansem 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 Investor section of the of our website at janiceintl.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. Ansem 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, Sarah, 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's appropriate to reflect that reality in our outlook.

While we have updated our expectations to reflect current market conditions, our conviction and 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, performing 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 American 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 QE2 construction acquisition remains on track.

Ansem will speak further to our expectations for the business this year shortly. Next, ramping our smart security solutions through our Nokia Smart Entry platform, during the quarter, we reached a significant milestone of surpassing 500,000 installed Nokia 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, the scale has always been a critical component of the NOKI 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 NOKI continues to increase, reinforcing the meaningful value in the 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 Nokia Infinity, our on-door dual technology smart locking system we announced earlier this year.

We expect Nokia 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 in 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. 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 discipline 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 positions us to execute against expectations that we believe are achievable. With that, I'll now turn the call over to Ansem for a more detailed review of our financial results and to discuss our revised 2026 guidance. Ansem?.

Thank you, Rami, and good morning, everyone. Rami 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 $233.5 million increased 2.4% as compared to the prior year. Intergrantic revenues for the quarter were $19.2 million, reflecting contributions from KB2 construction. At the sales channel level, our self-storage business was up 15.4%, new construction increased 20.3%, while our through is up 6.6% for the quarter. The increase in revenues for new construction was driven by contributions from KB2 Construction and strength in our international business, which offset continuous 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 segments decreased by 21.2%. The decline was primarily driven by continuous 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. Decrease in margins year over year is primarily attributable to the impacts of geographic segment in product mix.

For the second quarter, we produced adjusted NIN income of $23.9 million compared to adjusted NIN 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 2.7 times within our target range of 2 to 3 times.

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 our common stock for a total of 17.6 million. We had 63 million remaining on our chain. share of purchase authorization at quarter end. Now moving to our 2026 guidance. As Rami noted, we continue to face a challenging operating environment. demand trends remaining more muted than expected. In light of current market realities, we have adjusted our expectations for the year to reflect 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 anticipate 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 to construction to be approximately $80 to $90 million. We now expect North America to organic self-storage revenues to be down high single digits compared to 2025, driven mostly by continuous office and new construction. In our commercial sales channel, we now anticipate revenue use 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 and support. 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. Janice continues to hold a strong position in an attractive industry,.

but it's clear that current market conditions remain challenging. Importantly, we continue to make meaningful progress against our strategic priorities. Surpassing 500,000 installed NOKI 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. 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 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.

Thank you. If you would like to ask a question, please 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. We'll pause for just a moment to allow everyone the chance to join the queue. Thank you. 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 QQ, frankly, if you strip out Kiwi, organic sales are kind of flattish. I guess to kind of kick things off, answering the revised outlook, the guidance we're forecasting a weaker demand environment. It feels like it's more new construction, maybe some of the projects getting pushed out in Kiwi, but can you expand a little bit?.

what you're seeing and how trends kind of progress at your quarter going into July and August? Yes, the markets, like we said, it's just similar. The first half we're expecting to the second half. And what we saw just unfortunately in our buildings, this is Kate, we saw some project pushouts. And that's why we kind of revised that piece of it. But that seems to be the similar trend that we've seen across the board in terms of just, you know, that pushout delays that we're seeing on those projects. The good thing is that what we've reviewed is that there's not been cancellation. It's just been a timing push-up.

Okay, but the weakness in new construction, did it progressively get worse as your quarter? I mean, Kiwi aside, it sounds like it's more timing related, but what about new construction on your quarter? No, it's about the same. What do you say? Yes, new construction is relatively the same, like we said. I think the biggest thing you saw was commercial just not getting... getting the upturn that we were expecting that we would get. Okay. Which was my next question, right? Commercial has generally been pretty benign, and this was a big drawdown, down 20%. Is this timing related? What's driving the big shortfall on the commercial side of things?.

Yes, I'll take that one. Morning, Phil. It's Ramey. Look, I think the biggest yes, 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 obviously has headwinds. And so that was really the biggest drag on the mist there. But when you think about the category, our rolling steel product is continuing to grow, continued to perform well. We mentioned our strategic strategies around architectural specifications. was super important and has been ongoing for over a year, and that's starting to pay off. We're kind of obviously in the data center space, which is in growth mode, so we're excited about that.

But to answer your question on the MIS, it's really, it's the commercial sheet door that.

product specifically. Okay. And sorry, just take one more in. R3 has been actually been a bright spot and it's been a bright spot for a few quarters. Raming, perhaps on that front, I suspect all the MNA activity from some of your larger We customers have contributed that. I'm 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 just give us a little more context on what you're seeing on the R3 side as we look at the back half this year.

Yes, there's a lot there. I think to your point around consolidation, look, that certainly plays an important role in the investment, but that's not 100% where we're seeing the uptick in R3. think about mostly institutional customers and they're just right-sizing and shoring up their facilities during this downtime, so we may have mentioned that conversions and expansions are, it's a growing piece of the business, and that's what we're seeing. So pretty, pretty happy with the progress there and the way that that's 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're in the right spot for, obviously, this ever-changing market. But we're pretty pleased with the R3 initiative.

Okay. Appreciate the color, guys. Thank you. Our next question will come from Jeff Heyman with KeyBank Capital Markets. Your line is open.

David Tarantino on for Jeff. Maybe just starting on the margins, could you just give us a little bit more color on the lower margin outlook? Is this just simply on the lower volumes? And then maybe give us some color on kind of the key buckets that support the second half improvement versus the first half.

Sure, thanks David. If you think about the margin, just the volume, the sales volume drop is really the big change that impacted the rate there. The first half to second half improvement, and you obviously saw it in Q2, is a lot of the optimization that we've been talking about. If you look at the factory consolidations and optimizations, we've been just looking at the volume and aligning the resources to fit with the volumes that we're seeing there. We're also looking at the back office, looking at just in general, we should be doing all the time, which we are doing all the time. And now we're finally starting to see some of that benefit come through. The other last big bucket is, as you saw steel prices been going up and we've been monitoring that, managing that well, and, you know, making sure that we maintain, um, our commercial actions to offset that piece of it. So that's why all those big buckets together.

walk you to 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. So maybe could you confirm whether kind of the core business is also maybe tracking a bit lower and kind of maybe give us some details of what you're seeing in the pipeline of construction activity here that's maybe in full.

kind of the color on NA tracking maybe a bit weaker than you expected? Yes, the core business is tracking, but similar. So I don't think there's been really a big change for the core business. Self storage piece. Yes, I think Kiwi is the more the bigger piece where we saw the timing on some of the timing of projects push out. And that's what the kind of bigger thing. And like, you just reminded the big piece of the adjustment forecast was more related to the commercial sheet door piece that we talked about earlier.

Okay, great. That's helpful. Thanks, guys. Thanks. Thank you. Our next question will come from John Lovallo with UBS. Your line is open.

Hey, good morning, guys. This is Matt Johnson for John. Appreciate the time here. If we could just talk about gross margin in the quarter, I think it was down, I don't know, somewhere around 650 basis points year over year, which was down a bit more relative to the first quarter. I know you guys called. out. I think it was some product and some geographic mix impacting that. I guess, could you guys just maybe talk a little bit about how we should think about the drivers in terms of mix versus Kiwi versus price cost versus just anything else in there? Yes, price, as you saw in the court, was minimal for this court, as we had said earlier in the last.

I think if you look at it, the biggest issue was just the mix. So obviously our smaller businesses that have a smaller, lower gross margin profile than, say, our big business, Janus Core, as you saw Janus Core, you saw the growth in the other ones, and that's what accounts for that margin decline year-over-year.

year as some of the smaller businesses are growing. Appreciate that. Now, I guess my second question, if we could just put a finer point on the outlook for Kiwi here. I think you guys lowered the sales outlook by about 10 million. I think it's about 11 percent. I think last quarter, you guys had said that Kiwi had a pretty strong backlog coming into the year, which gave them pretty good visibility. for 2026. Now it sounds like there were some delays, but I guess, could you just talk a little bit about what kind of what you saw with those delays, what's driving the expected ramp in Kiwi sales in the back half and maybe any color you can give on how the backlog for Kiwi looks now? Yes, I think the backlog is still pretty strong. Like we said, there's been no change.

the total backlog they were seeing. I think the biggest thing we just saw is just some of our customers are just time getting their facilities that we brought online to get those up to speed first before they start on some of these other projects that are in the pipeline. I think you'll see a little more step up there. But again, I think it's just more balancing of these are large projects. And we always say that it's hard to predict when they do start. But the good thing is we review them all, and the projects are still intact.

Appreciate it. Thanks, guys. Thank you. Thank you. Our next question will come from Dan Moore with CJS Securities. Your line is open.

Hey, this is Will. I'm for Dan. A lot of my questions have been answered, so I'll keep it short. Just can you talk about your expectations for working capital and free cash flow for the remainder of the year? And then 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? Sure.

I think if you think about cash flow, our guide is saying we'll be on the higher end of the conversion percentage as we've shown in the first half. So pretty good cash flow that we're expecting for the second half as well. I think in terms of capital allocation, honestly, you know, CAPEX is small for our business in general, so it'll stay relatively small. There's not any major investments that are coming up from that point of view, from the operations that are needed. And obviously the other two choices, if If you think about our debt, our debt has got another couple of years and probably refinance issues, so there's not a big push on that piece of it. I think the last lever in terms of share buyback, obviously at current prices are very attractive for us. see us continue that action that we've seen in the first half. Thank you.

Thanks. Thank you. Our next question comes from Ruben Gardner with The Benchmark Company. Your line is open.

Thank you. Good morning, guys. I was just wondering if you could – most of my questions have been answered. I just have one. Can you elaborate on the cost actions you're taking? Looked like there was some kind of lower SG&A maybe than we expected in this past quarter. Was that a start? or from the start in some of the cost actions you've taken to address the lower demand, is that where we would see it as the year winds down? Thanks, guys.

So, I think it's along the lines of what we've always said. We're always optimizing the entire business, not just the operations, but everything. So, what you're seeing is just us continue to look at, hey, where's the volume, where the revenue is, and let's take the right pruning ash to manage costs for the company. So, it is not just one area. It's across the board.

Thank you. This concludes our question and answer session. I'll now turn the meeting.

back over to Rami Jackson for closing remarks. Okay. Thank you all for joining us today. We appreciate your support of Janice 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.

This live transcript is auto-generated without human intervention or review.

[Call has ended.]

Hello, and welcome to the Janus International Group First Quarter 2026 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the call over to your host, Ms. Sara Macioch, Senior Director, Investor Relations of Janus. Thank you. You may begin, Ms. Macioch.

Thank you, operator, and thank you all for joining our earnings conference call. I am joined today by our Chief Executive Officer, Ramey Jackson; and our Chief Financial Officer, Anselm Wong. We hope that you have seen in 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. The first quarter reflected many of the same challenging macroeconomic dynamics we have discussed in recent quarters. Against this backdrop, our team remained focused on execution, safety and customer service. While overall demand remained subdued, our results for the quarter were ahead of our expectations. We delivered total revenue of $222.7 million and adjusted EBITDA of $33 million for the quarter.

From a financial standpoint, our liquidity position remains strong, providing flexibility to manage through near-term volatility while maintaining our strategic focus. Cash generation in the quarter supported continued balance sheet strength and disciplined capital allocation. During the first quarter, we repurchased approximately 2.9 million shares of common stock for a total of $15.7 million. As of quarter end, we had $65 million remaining under our share repurchase authorization.

Now I'd like to spend some time discussing our strategic priorities and recent progress towards these initiatives. While our strategy remains consistent, we are introducing the acronym Grove to refer to these priorities. 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, our recent acquisition of Kiwi II Construction announced earlier this year advances this priority by expanding our content and self-storage facilities. Key enhances our exterior solutions and design build capabilities, particularly with institutional customers on the West Coast in Florida.

Early integration efforts are progressing as planned, we are encouraged by the initial collaboration opportunities between Kiwi, Vedco, and our Janus core business. Leveraging our unique R3 capabilities, another important lever in increasing our penetration of self-storage. Ongoing consolidation within the self-storage industry is creating meaningful opportunities for our R3 business. As large operators acquire and integrate assets, they are increasingly focused on standardization, upgrades and operational efficiencies, areas where we believe Janus is uniquely positioned to serve as a long-term strategic partner. We continue to invest in and expand our R3 offerings to meet these needs.

To this end, during the quarter, we announced the release of Rapid replace, a mobile app designed to streamline self-storage, door replacement quotes and orders. The Janus Rapid replaced app was built for self-storage owner operators who need fast, reliable way to request quotes and submit orders, to replace damaged duals at their facilities. We also continue to be pleased with the performance of our international business as we expand our presence in the self-storage industry on a global scale. Our focus on refining our product offering and go-to-market approach over the past several quarters continues to produce results.

In the first quarter, international performance was supported by Noke adoption and targeted project wins. We remain focused on selectively expanding into additional geographies with favorable market conditions. Next, ramping smart security solutions to our Noke Smart Entry platform remains a central pillar of our long-term growth strategy. At the end of the first quarter, we had 477,000 total installed units, representing an increase of 24.2% year-over-year. Janus is the first mover in smart security and access control within self-storage, and we continue to solidify our competitive advantage through customer-led innovation. A recent example of this progress is the launch of Noke Infinity, an on door dual technology smart locking system, which represents an important milestone in the Noke product road map we are delivering this year.

Noke Infinity combines Bluetooth technology with near field communication or NFC power harvesting, allowing the lot to be securely accessed even after its 5-year battery life has exceeded. The dual technology meaningfully reduces operational risk and maintenance costs for owner operators. Designed with a slim on door profile, we expect Noke Infinity to be available for factory install on both roll up and swing doors beginning in the third quarter.

Importantly, we see Noke Infinity is highly complementary to the hardware Noke Ion solution and a meaningful step forward in driving adoption of smart entry solutions enabling customers to standardize on the Noke platform across environments suited for both hardwired and wireless solutions. As we advance the Noke platform, we remain focused not just on unit growth and new product launches, but also on driving efficiencies and margin improvement as the business reaches scale. Noke addresses real operational challenges faced by self-storage owner operators by reducing labor requirements and enhancing security through advanced access control and the deterrence.

As a result, we continue to be optimistic about the long-term opportunity in this business and its potential to drive increased recurring revenue over time. The third priority of our growth strategy is increasing our share in the market for commercial doors. Our expanded distribution footprint and architectural specification efforts are gaining traction, resulting in strong performance in our rolling steel business this quarter, and we are encouraged by the early success in segments such as data centers, where growth opportunities remain robust.

Our final priority is disciplined M&A. Strategic acquisitions continue to be a core part of our strategy as evidenced by our acquisition of Kiwi II construction I spoke to earlier. While our M&A approach remains selective, our pipeline continues to be active. We are maintaining our focus on opportunities that expand our capabilities, enhance our solutions offering and create long-term shareholder value. As we look ahead, we will focus on what we can control, execute with discipline support our customers and manage the business for long term.

While we expect many of the challenges in the operating environment we are facing will persist in the near term, we are confident Janus is well-positioned for the future as the industry leader in self-storage solutions with strong operational capabilities and attractive adjacencies for expansion.

With that, I'll now turn the call over to Anselm to walk through a more detailed review of our financial results and discuss our reaffirmed 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 our financial performance in the first quarter and our 2026 guidance. For the first quarter, consolidated revenue of $222.7 million increased 5.8% as compared to the prior year. Inorganic revenues for the quarter were $18.1 million, reflecting contributions from Kiwi II construction. At the sales channel level, our self-storage business was up 8.7%. New construction increased 10.9%, while ARPU was up 5.3% for the quarter. The increase in revenues for new construction was driven by solid performance from our Kiwi acquisition and continued strength in our international business, which offset continued softness in North America.

On an organic basis, New construction revenues were down 9.9% year-over-year. The increase in R3 revenue was driven by increases in redevelopment and renovation activity and a normalization in conversion and expansion activity. In the first quarter, total revenues in our International segment increased to $27.3 million, up $6.1 million or 28.8% compared to the prior year, driven by growth in new construction activity and market share gains. For the quarter, revenue in our Commercial and Other segment decreased by 0.5%. The decline was primarily driven by continued softness in demand for commercial sheet doors, partially offset by increases in rolling steel and freight terminal project activity.

First quarter adjusted EBITDA of $33 million was down 14.1% compared to the first quarter of 2025. This resulted in an adjusted EBITDA margin of 14.8%, a decrease of approximately 340 basis points from the prior year period. The decrease in margin year-over-year is primarily attributable to the impacts of geographic segment and sales channel mix. We remain focused on controlling our costs and continue to regularly evaluate opportunities to optimize operations and improve our efficiencies. We are seeing benefits from the consolidation of our 2 facilities in Houston earlier this year.

For the first quarter, we produced adjusted net income of $1.7 million compared to adjusted income of $17.7 million in the prior year period. Adjusted EPS for the quarter was $0.01. We generated cash and operating activities of $36.2 million free cash flow of $33.4 million in the quarter. On a trailing 12-month basis, this represents a free cash flow conversion of adjusted income of 155% and capital expenditures in the quarter were $2.8 million. We ended the quarter with $183.8 million in total liquidity, including $112 million of cash and equivalents on the balance sheet. Our total outstanding long-term debt at quarter end was $551 million and net leverage was 2.7x, within our target range of 2 to 3x following our acquisition of Kiwi II construction as expected.

Our liquidity levels provide us flexibility as we deploy our capital. As Ramey mentioned, during the quarter, we repurchased approximately 2.9 million shares for a total of $15.7 million. We had $65 million remaining on our share repurchase authorization at quarter end. In February, we are pleased to announce the repricing of our first lien term loan, reducing our interest rate by 50 basis points from SOFR plus 250 to SOFR plus 200 significantly lowering our cost of capital, enhancing our financial flexibility.

Now moving to our 2026 guidance. We continue to expect full year revenue in the range of $940 million to $980 million, this includes approximately $90 million to $100 million in organic room from Kiwi II Construction acquisition. As a reminder, our guidance does not include any embedded assumptions of an improvement in market conditions. We continue to expect North America organic self-storage revenues to be down mid-single digits compared to 2025, driven mostly by continued softness in new construction.

In our commercial sales channel, we anticipate a return of growth in 2026 driven by our asset business. On the international side, we expect high single-digit revenue growth. 2026 adjusted EBITDA is expected to be in the range of $165 million to $185 million. This reflects an adjusted EBITDA margin of 18.2% at the midpoint. Consolidated EBITDA margin will continue to be impacted by both geographic semi and sales channel mix. We expect that Kiwi II's EBITDA will be a drag on overall margins for 2026. Cash flow remains robust, and for 2026, 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%. Please refer to the presentation we have posted for 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 resilient industry. We serve our customers across the full life cycle of their facilities from design and build out to ongoing maintenance, modernization and technology upgrades. And to that end-to-end value proposition continues to differentiate us, particularly in periods of economic uncertainty. The new construction activity, particularly in North America, is likely to remain constrained this year. self-storage fundamentals continue to be supported by high occupancy rates and rising household utilization trends.

As housing market activity normalizes over time, we believe these strengths will support increased demand for both new development and investment in existing facilities. While operating conditions remain dynamic, we are focusing firmly on what we can control and are committed to achieving our reaffirmed 2026 guidance. We are executing with discipline, supporting our customers optimizing our operations and investing in areas of the business with the most durable demand and long-term opportunity, supported by our strong balance sheet and consistent cash generation I remain confident Janus is well equipped to build upon our industry leadership position, expand into adjacent markets with attractive fundamentals and deliver long-term value for our shareholders.

In closing, I want to express my appreciation to our team, customers and shareholders for your support. We thank you for your participation on today's call.

Operator, we would now like to open up the line with Q&A, please.

[Operator Instructions] We'll take our first question from Jeff Hammond with KeyBanc Capital Markets.

This is David Tarantino on for Jeff. Maybe starting with the demand trends. It sounds like both self-storage and commercial are tracking in line with initial outlook. Correct me if I'm wrong, but could you give some color around how the pipeline of opportunities has evolved to date and how the underlying demand trends that you're seeing today compares to what you have implied in the guide.

Yes. Look, I don't -- yes, thanks for the question. I don't think there's been a lot of change quarter-over-quarter. Obviously, new construction demand in North America is impacted by interest rates, liquidity, all the things we've been talking about, mobility around housing, and I don't see that changing until we get some repreve on interest rates, quite frankly, R3 is a bright spot for us. We continue to perform well, obviously, with M&A and consolidation that's happening in the marketplace that's driving revenue for us. And then on the commercial side, is the commercial sheet door product line that's really been impacted and that has everything to do with the metal building end market, pre-engineered metal building end market.

The bright spot on the commercial side is our rolling steel door business again, which is Asta. We've been talking about our initiatives around architectural specification initiatives in addition to growing market share, and that's certainly paying off and is a green shoot for us on the commercial piece.

Great. That's helpful. And then maybe on the margins, could you just give us some color on price cost with around rising inputs? I know if I recall, it typically shows through on a lag. So does this give you the opportunity to push more price? Or how should we think about kind of the buckets of the margins going forward?

Yes. You think about what happened in Q1 margin. We had always talked about the lag in terms of the backlog of price adjustment that we had done prior to just bleeding through into the quarter now. If you look at the steel trend, it's on its way up as we had said last quarter, so you would expect commercial actions the other way going into the rest of the year. So I think I would say you probably have a little more commercial action adjustments in the back half a little more price negative blending into this quarter and then it goes back up the other way. As a reminder, we -- our contracts allow us to adjust where we need to based on input cost changes.

Great. And maybe if I could sneak one more in. Could you just give some color on the tax rate and why was it so much higher in the first quarter and tracking higher in 2026? And maybe what is the cash tax rate look like?

Sure. There's a lot of, obviously, onetime adjustments in there due to the acquisition as well as the refinancing that occurred. So if you look at the reconciliation that's included in the earnings materials, you'll see that there is approximately $2 million related to the debt refinancing. Obviously, way better rate going forward, so it's a benefit for us. But we have to take the charge for the prior cost and then the other piece is the cost related to the acquisition.

As you go through, obviously, great actions, we're happy with Kiwi II. But obviously, related to that, there's acquisition costs as well as compensation. As we paid -- as you know, we closed that we paid some of the purchase price and equity compensation. So that drives some tax differentials for what is not as disallowed to the compensation. But I think those are the main items if you walk through that impacted the tax rate. And obviously, a few of them are one-timers.

Next question will come from Daniel Moore with CJS Securities.

Just maybe in terms of the cadence, we just talked about price cost and how that may flow through guidance for the full year implies a little over 18% adjusted EBITDA margin midpoint Q1 just below 15%. So just how do we think about the cadence in terms of either sequential improvement into H2 or split of EBITDA dollars between H1 and H2, how we kind of think about that walk starting with Q2, I guess?

Yes, sure. Thanks for the question, Dan. So if you think about it, we always talked about it as last quarter is that a step up every quarter. So Q2 will be better than Q1 a little better, probably a little less of the overall average for the year and then back half obviously higher than the average for the year to blend it to a year. The reason for that is that we're always constantly looking at optimizing our footprint in terms of costs. You saw the announcement in Houston. So if you look at the timing of some of those cost savings, those blend up a bit in Q2 and then obviously, full savings in Q3 and Q4. So that's why you see a blend of it stepping up every quarter.

Got it. And I know it's early days, but can you talk a little bit more about the whether it's cross-selling or best practices between Kiwi, Betco, how is the integration going? And maybe some early learnings from that acquisition?

Look, we're really happy with the progress. I guess the collaboration between Janus core and Petco and Kiwi, the focus, like you said, is cross-selling. We've had some early wins on that front in terms of combining the door and hallway through the total building envelope and then in addition to that, Dan, the customer segment, the additional customers that we now have visibility to and that are now on the Janus platform. We're super excited about where it's going and happy with the integration efforts thus far.

Got it. If I might sneak one more in. Just talk a little bit about obviously the -- I guess, the second of your ramp smart security solutions. Just talk a little bit more about how Infinity helps in that. How is it complementary to Ion, do you -- are you seeing more traction? What kind of expectations for sequential growth, maybe not for the next quarter but over the next year or 2 relative to what we've seen in terms of adoption.

Sure. Thanks, Dan. Great question. And we're very excited about the new product launches we have for our Noke business. If you look at the new product that we launched, it's an upgrade to the Noke One. So there is use cases where cutters want to install that is quicker for with a battery product as well as wireless. So that's what it does. The beauty of that product is that even if the battery, which we're seeing now in the last about 5 years, even when that battery dies, it will still work with the NFC technology that we put in it. So you've got back up there. So it's a beautiful product in terms of fitting that use case where you want that quicker install, especially on retrofits and a Noke ion further updates to that product.

Everyone's been happy with that product in terms of performance as well as battery free when you can actually install it with a wire in what it allows for is further use case further sensors that we can add to the portfolio that we're getting a lot of requests for from a customer. So very excited about the new platform and obviously helping drive sequential growth in Noke business.

I think Anselm covered it well. I just want to kind of point out these -- this road map that we'll continue to launch throughout the year and next year, it's 10% innovated around voice of the customer. We're not guessing we're in terms of what the industry needs. We're actually listening to our customers and investing in those innovations to bring the market.

Perfect. And then last housekeeping, just following up on the first question, tax rate, what should we expect for kind of the balance of the year?

Yes. I think if you look at the guidance, we put in 29% to 31% for the full year. And again, obviously, it is an increase from last time, but it's a function of those items I just mentioned in terms of the impact of the rate in Q1. So I think you get a more normalized rate in the other quarters that blend to the average for the year.

Our next question will come from Phil Ng with Jefferies.

This is Fiona on for Phil. Just curious on the cost side, I know you guys are probably more insulated with the tariff, but -- how do you think about the changes to Section 232 tariffs? And how is that going to impact your business relative to your competitors?

Sure. I think, as you know, obviously, most of the steel we purchase is domestic seals. So obviously, it doesn't have an impact -- a direct impact to the domestic steel I think, honestly, if you go down deeper into the details of the regulation, it will impact that certain types of products metasteel. So I would expect that there'll be some, obviously, negative impact on some of our competitors. But I think you have to go into detail in terms of the specific item that's impacted.

Okay. That's helpful. And then inflation start picking up again. So we're curious about are you looking to pass through some of the higher costs through your surcharges or any mitigating actions you're thinking about for the rest of the year?

Yes. So definitely, absolutely fuel is 1 of the top ones. We've already just like a lot of other industries, fuel surcharges to cover that piece. And then in terms of steel, obviously, we track that on a daily basis and we've always said that we have the ability to adjust. And there will be some commercial actions related to that trend the steel is happening that you're seeing out there, and we're closely watching it whether or not we do more.

Okay. And maybe if I can just sneak into one last one. Can you also talk about your mix dynamics? I think in the quarter, it was a little bit of a headwind.

Yes. So if you look at the breakout, when the Q comes up, obviously, International had a very strong quarter again. They did have a bit lower margin compared to their ending trailing margin just because of customer mix and product mix. But I think that was kind of one of the big drivers that you saw in the quarter where a lot of our smaller BUs, which have lower margins compared to the Janus core blended into the quarter that drove a lot of the mix -- negative mix impact in the quarter.

Our next question will come from Reuben Garner with the Benchmark Company.

This is John McGlade on for Ruben. I just wanted to start out, maybe we could follow up on Noke. It looks like you guys added about 20,000 new units this water. I know the previous breakeven target was $500 million. I guess, with the launch of the new Infinity platform, does that change your breakeven? And then at this point, getting closer, is there any estimates you're willing to share on really how much of a contribution hitting that breakeven milestone could be for the bottom line?

Yes. We haven't disclosed that yet, but what I can tell you is we've got a couple of things that happen. Obviously, the unit volume getting to that breakeven point, but also AI is coming in and really helping us manage developing software costs, it's really impacting the team where we don't need as many engineers to do the equivalent work. So that is helping move that breakeven point lower. So I think we're excited about it, and we've all talked about getting to scale for that Noke business, and these new products are going to help drive the incremental growth to get there quicker.

Okay. That sounds great. I guess the one other question I have, obviously, international is doing well, and I know that there were some changes in the go-to-market strategies that you've implemented there over the past year or so. Could you maybe dive into how those have helped you gain share? And maybe what market specifically internationally, you're seeing kind of outsized growth in?

Yes. Good question. Look, we've been pretty consistent there and laser-focused on our strategy what we're actually driving to is the Noke smart entry offering is driving a lot of door and hallway opportunities. And so we've been super happy with that on the execution piece, also looking in countries that have more of a robust development pipeline, which would be Germany and Spain to answer a couple of them. So just really proud of the team, the management the execution across the board and see a lot of continued tailwinds on the international side of it. But like I said, I just kind of want to highlight Noke smart entry is really driving adoption in a meaningful way and is making -- is influencing owners and operators in terms of their door and hallway selection.

Our next question will come from John Lovallo with UBS.

Matt Johnson on for John. First off, if we could just put a finer point on it, I think there's obviously a few moving pieces, but at the midpoint of the full year outlook, you guys are talking about EBITDA margin of about 18.2%, which would be down about 80 basis points year-over-year. I guess just any thoughts you could give on how much of that you see coming from gross margin versus SG&A? And then if you guys expect 1Q to be kind of the low point of the year on gross margin, specifically?

Yes. 1Q is the low point. Like we said every quarter, it will sequentially move up until obviously a big quarter in Q3 and then usually we have a little seasonality that adjust for I think if you look at it, we don't disclose kind of the split, but if you think about it, a lot of the restructuring actions at least that we've announced, we'll have a blend of hitting into the cost of goods sold as well as [indiscernible].

That's great. I appreciate it. And then just on capital allocation, I think you guys bought back about $16 million of stock in the quarter, which was encouraging. Stock has been under a bit of better here recently. I guess how attractive do you think repurchases are at these levels? And I guess with net leverage, I think it's at 2.7x, which is kind of approaching the higher end of your target range. I guess how comfortable are you repurchasing more stock moving forward at the risk of your net leverage potentially moving a bit higher from here?

Yes. I think the -- first of all, I think you're right. I think it's -- we've got a lot back in Q1. We think it's undervalued then we think it's undervalued now. I think with the cash generation that we show that we consistently deliver provides us the flexibility to continue kind of purchasing more shares and obviously, at the current price, even more attractive.

We do have a follow-up question from Jeff Hammond with KeyBanc Capital Markets.

David following up. Could you just give us some more color on what's embedded in the guide from a cadence perspective? How do we expect 2Q to shape up? And any general framework for the back half on kind of both the top and margin lines?

Yes. We don't provide specific guidance, but I think the way to think about it is just sequentially moving up for revenues sequentially for EBITDA, and that's what you would expect to do to hit the full year guide. And like I said earlier, Obviously, second half larger than the first in terms of EBITDA to get to the overall rate that we had in our guide.

Okay. Great. And maybe following up on R3. Could you just expand on the pipeline opportunities here a little bit more, just particularly following some large M&A deals from the operators. Are you seeing any of that yet? Or how much of it is embedded in the guide today? Any color there would be helpful.

Yes. Look, I'm not going to comment on the specific one. They're a public company. But what I can tell you is we're pleased with the R3 pipeline in backlog and also the performance. We've been very clear in terms of the market dynamics around consolidation. It's happening. It continues to accelerate and we're in a really good spot to take advantage of that market trend. So super excited about the opportunity.

It appears we have no further questions at this time. I'll turn the program back to the speakers for any additional or closing remarks.

Okay. 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.

This concludes today's program. Thank you for your participation, and you may disconnect at any time.

Good morning, everyone. Welcome to the Janus International Group Fourth Quarter and Full Year 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Ms. Sara Macioch, Senior Director, Investor Relations of Janus. Please go ahead, ma'am.

Thank you, operator, and thank you all for joining our earnings conference call. I am joined today by our Chief Executive Officer, Ramey Jackson; and our Chief Financial Officer, Anselm Wong. We hope that you have seen our earnings release issued last night. 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.

Before we begin, I would like to remind you that today's call may include forward-looking statements. Any statements made describing our beliefs, plans, strategies, expectations, projections and assumptions are forward-looking statements. The company's actual results may differ from those anticipated by such forward-looking statements for a variety of reasons, including, but not limited to, tariffs, interest rates and other macroeconomic factors, many of which are beyond our control. Please see our recent filings with the Securities and Exchange Commission, which identify the principal risks and uncertainties that could affect our business, prospects and future results.

We assume no obligation to update publicly any forward-looking statements, and any forward-looking statement made by us during this call is based only on information currently available to us and speaks only as of the date when it is made. In addition, we will be discussing or providing certain non-GAAP financial measures today, including adjusted EBITDA, adjusted EBITDA margin, adjusted net income, adjusted EPS and net leverage. Please see our release and filings for a reconciliation of these non-GAAP measures to their most directly comparable GAAP measure.

On today's call, Ramey will provide an overview of our business. Anthem 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.

Thank you, Sara, and good morning, everyone. Thank you all for joining our call today. To begin, I'd like to express my appreciation for our team at Janus for their hard work and dedication. 2025 was a challenging year as our markets remain constrained due to macroeconomic concerns and sustained high interest rates. We focused on execution, operating safely and serving our customers as we work to stabilize the business, delivering $884.2 million in revenue and $168.2 million in adjusted EBITDA for the year.

Despite an unfavorable backdrop, we realized several key wins in 2025 as we work to position the business for long-term success. On the self-storage side, Janus or Noke products were present in 5 out of 6 facilities, Earnings Facility of the Year awards from modern storage media. Our BETCO business announced a comprehensive expansion of its metal decking product line and received a certification from the Steel Deck Institute achieving an exceptional score and reinforcing our commitment to quality. We also unveiled a redesigned web portal for our Noke Smart Entry platform. And in Europe, we launched a new high-security swing door.

On the commercial side, our ASTA business rolled out its high-performance product offering and achieved Miami-Dade certifications, further strengthening its portfolio. From a financial standpoint, our strong liquidity and cash generation allowed us flexibility to be opportunistic with regards to our capital allocation priorities in 2025.

We completed a voluntary prepayment of $40 million on our first lien term loan in the first quarter of 2025 and repurchased 1.9 million shares for $16 million throughout the year under our share repurchase program, which had an $80.5 million of remaining authorization at year-end. We were also pleased to receive an upgrade of our credit rating from S&P in October. While we anticipate market conditions will continue to be constrained, principally in new construction in North America in 2026, we will continue to execute and focus on what we can control.

As a diversified solutions provider with a global network of manufacturing and installation capabilities, we are committed to executing our strategy of further penetrating the Self-Storage market increasing our share in commercial market driving adoption of access control technology and pursuing strategic accretive acquisitions. I'll now expand on each of these priorities. First, in the self-storage market, we have shared our strategy of increasing our content and facilities. Our acquisition of KIT Construction announced in January exemplifies this approach by expanding and strengthening Janus' exterior solutions offering and design build capabilities.

Kiwi II is a premier self-storage buildings provider is well respected within the industry for their high-quality service and engineering products. They have an established active base of institutional customers and a solid presence on the West Coast and in Florida. The Kiwi business is complementary to our design-build business BETCO, which has a stronger geographic presence on the East Coast and is primarily serves noninstitutional customers.

Kiwi also aligns well with our Janus core business, which focuses on interior self storage solutions, including doors and hallways. And this integration will allow KIWI to offer a full end-to-end solution for Self-Storage. We're very pleased to welcome Kiwi to the Janus family, and our early integration efforts are progressing well. Another key driver of our self-storage market penetration is leveraging our differentiated R3 platform. We estimate that nearly 65% of the facilities in the United States are over 20 years old, supporting sustained renovation activity.

Industry consolidation is further accelerating this trend as large operators invest to bring aging assets to modern standards. Janus is uniquely positioned to meet these needs as the category creator for self-storage restore, rebuild and replace services. Our International segment represents another important lever in advancing our self-storage penetration. Over the past several quarters, we have carefully refined our product offering and go-to-market strategy to better serve our customers, which has been a driver of our international revenue growth this past year.

We are committed to continuing the momentum we saw in 2025 by focusing on increasing scale in our Noke product as well as pursuing targeted geographic expansion into new countries that will support strategic growth moving forward. The second priority of our growth strategy is increasing our share in the market for commercial doors. The commercial door market is vast and as a smaller player in the space, we see plenty of opportunity to drive growth over time.

As demand for commercial construction continues to grow, we are working to refine our offering and leveraging our manufacturing expertise to provide a robust suite of commercial door solutions. We are seeing positive results from our expanded distribution footprint as well as our multiyear efforts to secure product specifications. We are pleased to share some of our rolling steel doors are now being specified in data centers, representing a meaningful step forward for Janus in a fast-growing segment.

Next, on the access control front, adoption of our Noke Smart Entry System continues to progress. Our industry-leading smart security system improves efficiencies for operators by streamlining labor needs, reducing theft and increasing unit level security. Noke also offers operators high-value customer insights such as usage trends and other unit level data. At the same time, the smart locking solution enhances the customer experience, allowing for a seamless access solution and features such as remote monitoring and digital key sharing that provide a competitive advantage for operators.

As of year-end, we had 458,000 installed units, representing an increase of 25.5% year-over-year. As I shared on our last earnings call, we have seen an increase in interest from large institutional customers for our Noke products. We are encouraged by this momentum as we continue to enhance our offering and move towards scale and improve margin performance in our Noke business this year.

And finally, we will continue to pursue strategic acquisitions to build on our track record of identifying executing and integrating acquisitions to support our growth. As we've stated, M&A is part of our DNA. We will continue to seek value-added opportunities that have a strategic fit within our organization in order to expand our product and solutions offerings.

Consistent with the priorities I just outlined, we are initiating our 2026 guidance range. We expect revenue in the range of $940 million to $980 million, which represents an 8.6% increase at the midpoint from 2025. Adjusted EBITDA is expected to be in the range of $165 million to $185 million, a 4% increase at the midpoint from 2025.

As I conclude, I'd like to emphasize that our strategic priorities remain intact. Despite the near-term challenges, household utilization for Self-Storage continues to grow. With the sustained high occupancy rates in the industry, we believe demand will only increase when the housing market improves. While the market headwinds we are facing, particularly in new construction may persist, we are committed to focusing on what we can control in the near term. We are the industry leader in Self-Storage solutions with significant scale, financial discipline and attractive adjacencies for expansion. As we look ahead, we believe we will be well positioned in the markets we serve when macro conditions improve.

With that, I'll turn the call over to Anselm for a further review of our quarterly financial results along with more details on our initial 2026 guidance. Anselm?

Thank you, Ramey, and good morning, everyone. Ramey spoke to our full year results at a high level, and I will focus my remarks on our financial performance in the fourth quarter, followed by a discussion of our initial 2026 guidance. For the fourth quarter, consolidated revenue of $226.3 million declined 1.9% as compared to the prior year quarter. In total, our Self-Storage business was down 0.4%. New construction decreased 8.1% and [ R3 ] was up 12.7% for the quarter. The decline in revenues for new construction was driven by weaker demand for development in North America from our noninstitutional customers, partially offset by strength in our international segment. The increase in R3 revenue was driven by increases in door replacement and renovation activity.

In the fourth quarter, our International segment saw total revenues increased to $26 million up $6.5 million or 33.3% compared to the prior year, driven by growth in new construction and market share gains as well as positive foreign exchange rates.

For the quarter, revenue in our Commercial and Other segment decreased by 5%. The decline was primarily driven by softness in demand for commercial sheet doors, partially offset by strength in rolling steel and TMC. On a consolidated basis, the impact to revenues for the quarter was roughly 90% price and 10% volume. Fourth quarter adjusted EBITDA of $37.2 million was up 7.5% compared to the fourth quarter of 2024. This resulted in an adjusted EBITDA margin of 16.4%, an increase of approximately 140 basis points from the prior year period. The increase in margins year-over-year is primarily attributable to the prior year being negatively impacted by adjustments to our provision for credit losses and an additional warranty reserve, which was partially offset by volume declines and the impact of geographic segment and sales channel mix.

We are seeing benefits from our previously announced cost reduction program, achieving the targeted $10 million in annual pretax cost savings in 2025, and we continue to regularly evaluate opportunities to improve our efficiencies. To this end, in early 2026, we successfully completed an expansion of our facility in Surprise, Arizona. With the additional capacity now available at our Arizona facility, we were able to optimize our manufacturing space by combining 2 of our facilities in Houston. This streamlining of our operational footprint will not affect our product offerings, quality standards or customer service levels.

For the fourth quarter, we produced adjusted net income of $15.6 million, down 15.2% compared to the prior year period and an adjusted EPS of $0.11. We generated cash from operating activities of $24.8 million and free cash flow of $19.2 million in the quarter. On a trailing 12-month basis, this represents a free cash flow conversion of adjusted net income of 137%. Capital expenditures in the quarter were $5.6 million.

We ended the quarter with $260.5 million in total liquidity, including $194.4 million of cash and equivalents on the balance sheet. Our total outstanding long-term debt at year-end was $551 million and net leverage was 2.1x. Following the acquisition of Kiwi II Construction, as stated in the press release, our net leverage is expected to remain within our target range of 2 to 3x. These liquidity levels provide us optionality with regard to capital deployment, and we had $80.5 million remaining on our share repurchase authorization at year-end.

In February, we were also pleased to announce a repricing of our first lien term loan, reducing our interest rate by 50 basis points from SOFR plus 250 to SOFR plus 200, significantly lowering our cost of capital and enhancing our financial flexibility.

Now moving to our 2026 guidance. As Ramey mentioned, full year revenue is expected to be in the range of $940 million to $980 million. This includes approximately $90 million to $100 million in inorganic revenue from the Kiwi II construction acquisition. Our guidance does not include any embedded assumptions of an improvement in market conditions.

We expect North American organic Self-Storage revenues to be down mid-single digits compared to 2025, driven mostly by continued softness in new construction. In our commercial sales channel, we anticipate a return to growth in 2026 driven by our ASTA business. On the international side, we expect high single-digit revenue growth.

2026 adjusted EBITDA is expected to be in the range of $165 million to $185 million. This reflects an adjusted EBITDA margin of 18.2% at the midpoint. Consolidated EBITDA margin will continue to be impacted by both geographic segment and sales channel mix. We expect that Kiwi II's EBITDA will be a drag on overall margins for 2026 and synergies from the acquisition are expected to be back-end loaded for the year.

Cash flow remains robust. And for 2026, we anticipate being around the higher end of the free cash flow conversion of adjusted income target range of 75% to 100%. Please refer to the presentation we have posted for details on the key planning assumptions for 2026. Thank you for your time. I will now turn the call over to Ramey for his closing remarks. Ramey?

Thank you, Anselm. Janus has a solid position in a great industry. We are the partner of choice for our customers through the full life cycle of their projects from design and build-out to maintenance and facility upgrades. While we face a dynamic operating environment, we continue to focus on the factors we can control. Consistent with our growth strategy, we are optimistic about our recent acquisition of Kiwi II Construction and we are confident in our plan to achieve our 2026 guidance of total revenue in the range of $940 million to $980 million and adjusted EBITDA in the range of $165 million to $185 million, reflecting growth of 8.6% and 4% at the midpoint, respectively.

As I mentioned, household utilization for Self-Storage continues to grow. This, coupled with sustained high occupancy rates in the industry is a positive signal for increased future demand with a recovery in the housing market. Our strong balance sheet and cash flow foundation position us to further build upon our industry leadership position, expand into adjacent markets with attractive fundamentals and support our future growth. Taken together, I remain confident in our strategy and in our ability to deliver long-term value for our stakeholders.

In closing, I'd like to thank our team, customers, 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.

[Operator Instructions] We'll go first this morning to Dan Moore with CJS Securities.

This is Will on for Dan. You've always described the core self-storage business as having 2 to 3 quarters of visibility. How does your visibility today compare to historic averages?

Yes. So I think we still have similar visibility from what we see in that 2 to 3 quarters based on the backlog that we have. So it's been similar in terms of visibility.

Yes. But I think we reflect that in our guide in terms of new construction. We're going to continue to see pressure there, but certainly optimistic around R3 and some of the things that the initiatives that we're focused on like Noke, the R3 efforts and just remaining super competitive and having that dominant strength that strength in new construction and commitment to our customers. But it's all reflected in the guide.

And just a follow-up, what are the 1 or 2 key metrics your REIT customers are looking for that would give them confidence to start to invest and build out new capacity once again?

Look, it's 100% interest rate driven. We've been very consistent in terms of the driver, the #1 driver of self-storage is mobility around housing. That's on the sidelines today. And when you look at how operators are performing, there's certainly some noise around pricing, but it's a very stable operating environment, lacking the largest driver, which is mobility around housing. So once people start moving around, you're going to see a different operating environment.

We'll go next now to Jeff Hammond of KeyBanc Capital Markets.

This is David Tarantino on for Jeff. Maybe starting with margins. Could you give us a bit more color on the degree of headwind from the higher international mix in 4Q? And what you have assumed in the guide on the margin line from an organic perspective? And then maybe any thoughts on how long you expect these mix headwinds to last would be helpful.

Yes. Thanks for the question. I think if you saw what we printed for the quarter, you saw international continue to grow pretty strongly as it did for the full year. And if you look at their EBITDA margins, obviously, it's improved year-over-year, but it's still significantly down versus our North America. If you look at going into next year, like Ramey said in his remarks is that we're still seeing softness in our new construction in our Janus core Americas business, which is a meaningfully higher margin rate. So we can't predict when that turn is going to be. But I think as long as we're going to see some of that pressure on the new construction piece in the Americas, we'll probably have some margin and mix headwinds from that.

And just to follow up quickly there. Is it fair to assume that the guide assumes that these mix headwinds persist through...

Correct. Yes, definitely.

Okay. Great. And then on commercial, it seems like it weakened if you adjust for the TMC catch-up and you called out some commercial sheet door decline. So could you give us some color on the softness here? And I just want to clarify on the guide. Is it high single digits just for ASTA? Or what are we thinking for the whole business?

Yes. For commercial, the way we're saying is that if you include everything together, it's in the high single-digit range, but not if you actually back out the TMC piece. So I think it's just looking at Kiwi and there looking at the other pieces to balance it over. But I think if you look at it, the overall -- if you look at the guide, we're probably mid-single digit for commercial for the full year.

Just additional color. A lot of the softness in commercial is coming from commercial sheet. We're actually seeing growth in our ASTA business, which we highlighted and have been consistent in terms of the messaging around architectural specifications effort. And we've certainly secured some work around the data center space, which is an exciting space to be in, and we've worked really hard to get spec. So we're excited about that and expect growth in the rolling steel business.

We'll go next now to Reuben Garner of The Benchmark Company.

So I think that you're roughly implying low single-digit organic revenue declines if we strip out an assumption for Kiwi. One, is that accurate? And two, can you break down the components of that price and volume? And then you mentioned commercial, but what about -- what are your assumptions for new versus R3 on the Self-Storage side as we sit today?

Yes. So that's about right, Reuben, is that we're looking at organic decline in the core business. The biggest piece, as we described, was really in that new construction America piece. That piece is going to continue to be a drag in terms of what we're seeing in the environment today. So that's what brings down the revenue year-over-year for the organic piece.

And in terms of price versus volume?

Yes. Price right now, if you look at what we described is that we had more price in the second half of 2025, that will roll into the first half of this year. So I think if you think about a price, similar type of price range impact in the first half, barring anything that happens with steel in the back half.

Okay. And then can you -- you've talked about the margin profile a little bit of Kiwi, but can you break out what gross margin looks like for that business? And then on the synergy front, what kind of synergies -- or can you go into detail on the synergies? And I assume that there's some top line potential synergies at some point as well. So just can you just refresh us on the opportunities there?

Yes. We haven't disclosed any of the details on the synergies, Reuben. But I think if you think about at least EBITDA margins, we've kind of at least given a range where it would be in that low teens range to start with because of integration costs and getting that business integrated into Janus. But I think longer term, we said that it has potential to get into the high teens as a business.

Just add to that, Reuben. As a stand-alone, I think you're asking the question as a stand-alone, but part of the acquisition strategy was Kiwi had never gone to market with the full solution, meaning door and hallway. So now they can offer their customers end-to-end both buildings and interiors. And as you know, the Janus core business is higher margin. So we expect to see some pickup in the Janus core sales by going to market with Kiwi. So we'll experience some higher-margin stuff at core with the acquisition.

We go next now to Phil Ng of Jefferies.

I guess -- I mean, the outlook, you're not assuming much of an improvement here, which seems more than reasonable. But Ramey, you talked about what's going to drive volumes perhaps reaccelerating its housing turnover, right, housing mobility. So we could look at that from an existing home sales and certainly rates coming down, all good guys. So just kind of help us unpack what's the lag if we look at that turnover inflecting, how does that impact your business where it's R3 on new construction? And then the other piece you guys have teased out in the past on rates was really more for your noninstitutional customers, maybe credit has been more challenged and less mortgage rates, it's more, I guess, shorter-term rates and maybe their ability to kind of be able to pursue more projects. Any color on that front if the credit markets have loosened up a little bit?

Look, that's a great question. I don't know that I can answer a lot of that. But what I can say from a confidence perspective, when things start to turn and things feel better, you'll see increased activity and investment. As we sit today, the mom and pops are essentially on the sideline. And that's a big -- that's 70% of the market. And so any momentum we can get with that segment will certainly have increment value. So when you think about R3, obviously, acquisitions matter. And I think we're hearing from the REITs that this should be a good year for acquisitions, which should bode well for R3. I can't predict the interest rate and what's going to get people moving around, have no early idea. You guys probably know that better than me. But we're just focused on being in the right position to when this thing turns around to take advantage of it and just sticking to our corporate strategy and making sure that we're lean and we're focused on being able to optimize everything and take advantage of what the market has to offer.

That's great color, Ramey. And then your outlook on R3 sounds a little more upbeat. I may have missed it if you quantify what you're assuming for RI. Is that just mostly M&A that you're talking about big REIT guys doing more renovation work that's driving that? Or you're seeing other avenues that gives you enthusiasm on that inflection in R3. Certainly, you've had some headwinds with the retail side of things that seems to have kind of bottomed out. But just give us a little more perspective on what's driving the inflection in R3.

Yes, you hit it. It has a lot to do with acquisition. Obviously, some of the big names we all know, we kind of track that activity, and that's been a big driver. What we're finding with our Noke product line is folks that are interested in adopting Noke, they're taking advantage of that opportunity to disrupt the unit, disrupt the tenants and doing full door replacement. So that's kind of a newer use case that's driving the R3 kind of renovation door replacement. And keep in mind, the fact of the matter is, is 60% of the installed base is over 25 years old. So there's still a meaningful replacement cycle that exists, and we just have to continue to put ourselves in a position to take advantage of that.

Okay. And Ramey, since you brought up Noke, good milestone this past year, up quite a bit. I believe we're not far away from that breakeven threshold of 500,000 units where I believe it swings to a much bigger kicker to your profitability. What are you assuming this year, I guess, in terms of Noke contribution? And any big wins you want to call out in terms of some of these bigger REITs that have perhaps adopted or committed to more Noke units for this year?

Yes. I'll let Anselm talk about kind of the metrics. But look, we remain super optimistic with Noke. Noke is addressing a few industry issues right now. A lot of the customers are experiencing kind of increased operating costs. Our Noke customers are actually watching those operating costs go down. There's an issue in the industry around theft and security. Our Noke customers are addressing that and eliminating that element. So it's really resonating and building out additional use cases. I'm not going to mention names at this point in terms of the larger folks who are working with the solution, but it continues to increase. We are in a much better place in terms of enterprise-grade software. The team has done a phenomenal job on uptime stability. We plan on rolling out additional products this year. And so we're excited. And you hit the nail on the head. We're going to hit 500,000 units this year, and that scale. So anything past that, we're going to start to generate -- it's going to help improve the bottom line. So even more optimistic today than I was in the past.

We'll go next now to John Lovallo of UBS.

This is Matt Johnson actually on for John. I guess first off, so I guess sales in the quarter were a bit stronger than we were expecting. I think they're above the top end of the outlook as well, while EBITDA was closer to the midpoint. So margin was a bit lower than we were expecting. I guess I think you mentioned it a little bit in the prepared remarks, but were there any mix impacts to call out, particularly on the gross margin side? And then kind of how should we think about the trajectory of gross margin as we move into '26?

Yes. As we said earlier, I think it's just the trend of the mix of the North American business being down a bit more than the other BUs that we have. And as you know, the margin rate is a lot different. You saw international, like I said earlier, continue to be strong in the quarter and obviously, their margin rate is lower than the Americas. So that's really that trend that we saw, and that's what we had indicated that's going into '26 in our guide.

That makes sense. And then I guess if I could also just follow up there. I guess within the context of the '26 outlook, how should we think about sales and EBITDA in the first quarter? And how impactful was adverse weather in January?

Yes. I think if you look at the trend, obviously, the trend we've talked about continues into Q1 where new construction in the Americas is a bit softer. Obviously, there's a little weather impact that we've seen as well. So I would expect a slower start for the year.

And gentlemen, it appears we have no further questions today. Mr. Jackson, I'd like to turn the things back to you, sir, for any closing comments.

Okay. 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, Mr. Jackson. Thank you, Mr. Wong. Again, ladies and gentlemen, that will conclude the Janus International Group fourth quarter and full year 2025 earnings call. Again, thanks so much for joining us, everyone. We wish you all a great day. Goodbye.

Hello, and welcome to the Janus International Group Third Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.

I would now like to turn the call over to your host, Ms. Sara Macioch, Senior Director, Investor Relations of Janus. Thank you. You may begin, Ms. Macioch.

Thank you, operator, and thank you all for joining our earnings conference call. I am joined today by our Chief Executive Officer, Ramey Jackson; and our Chief Financial Officer, Anselm Wong.

We hope that you have seen in 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.

Before we begin, I would like to remind you that today's call may include forward-looking statements. Any statement made describing our beliefs, plans, strategies, expectations, projections and assumptions are forward-looking statements. The company's actual results may differ from those anticipated by such forward-looking statements for a variety of reasons, including, but not limited to, tariffs, interest rates and other macroeconomic factors, many of which are beyond our control.

Please see our recent filings with the Securities and Exchange Commission, which identify the principal risks and uncertainties that could affect our business, prospects and future results. We assume no obligation to update publicly any forward-looking statements and any forward-looking statement made by us during this call is based only on information currently available to us and speaks only as of the date when it is made.

In addition, we will be discussing or providing certain non-GAAP financial measures today, including adjusted EBITDA, adjusted EBITDA margin, adjusted net income, adjusted EPS and net leverage. Please see our release and filings for a reconciliation of these non-GAAP measures to their most directly comparable GAAP measure. On today's call, Ramey will provide an overview of our business. Anselm will continue with a discussion of our financial results and 2025 guidance before Ramey share some closing thoughts, and we open up the call for your questions.

At this point, I will turn the call over to Ramey.

Thank you, Sara, and good morning, everyone. We appreciate you all joining our call today.

I'd like to highlight a few key themes as I begin my prepared remarks. First, our team continues to execute in an operating environment that remains challenging. Second, we have confidence in the long-term fundamentals of our end markets we serve, reinforced by the stability of our backlog and pipeline. And finally, we believe our flexible financial profile and solid cash generation underpin the resiliency of our business model and allow us to adapt to changing market conditions.

For the third quarter of 2025, Janus delivered total revenue of $219.3 million down 4.7% from the third quarter of 2024. Adjusted EBITDA was $43.6 million, up 1.2% compared to the prior year. Anselm will expand further upon drivers of these results shortly. Moving along to a discussion of our sales channels. Total self-storage saw a revenue increase of 3.7% and on the New Construction side. This was driven by strength in our International segment, which more than offset continued softness in the North American market.

The R3 sales channel benefited from strength in the door replacement and renovation activity. Our Commercial and Other sales channel decreased 20.1% primarily driven by declines in our TMC business due to project timing as well as weakness in the LTL trucking industry stemming from broader economic impacts.

TMC accounted for approximately 70% of the decline in revenue in the quarter. As we have noted before, the TMC business can be somewhat lumpy and will ebb and flow throughout the year. Additionally, we continue to experience overall market softness for commercial sheet doors.

Despite the revenue decline, we are still seeing growth in other areas of our commercial business including rolling steel and our multiyear effort to get specified for certain architectural requirements. We believe the more comprehensive suite of offerings we have worked to develop is helping to build upon our position in the commercial market.

Adoption of our Noke Smart Entry system continues to progress with 439,000 installed units at quarter end, representing an increase of 35.9% year-over-year. The latest addition in our line of Noke Smart Entry products, Noke Ion has been well received by the industry. The smart locking solution is low voltage powered can be customized and enhanced features like LED lights and motion sensors and is designed and optimized for all Janus self-storage and commercial door products for both New Construction and retrofits.

We're pleased with the performance of this business and in particular, the acceleration of interest from the large institutional customers. We continue to see opportunities for further expansion as operators explore avenues to effectively manage their costs, prevent theft and enhance tenant satisfaction.

In the third quarter, Janus continued to invest in innovation and expand our offerings to drive long-term growth across our portfolio. Through our BETCO brand, we announced a comprehensive expansion of our metal decking product line. This new range of custom metal decking system provides design flexibility to meet the unique structural and architectural demands of self-storage development and redevelopment.

We also launched a redesigned web portal for our Noke Smart Entry platform, marking another milestone in our ongoing commitment to delivering seamless enterprise-level experiences for self-storage owner operators to run their facilities in a more effective and efficient manner.

From a financial standpoint, our strong business model and cash flow generation should allow us to be opportunistic with regard to our capital allocation priorities. During the quarter, we continued our share repurchase program and are consistently evaluating M&A opportunities, which remain our top capital allocation priority.

Despite sustained high interest rates, we are encouraged by the fundamentals of our business and their capacity to drive long-term growth. The self-storage industry remains resilient and continued consolidation presents growth opportunities for our R3 business. With an aging installed base and in the face of liquidity constraints, we believe facility owners will be encouraged to focus their capital allocation on existing properties. With positive industry tailwinds, coupled with our significant scale and financial discipline, we believe we are well positioned to deliver long-term shareholder value.

With that, I'll turn the call over to Anselm for a further review of our financial results and updates to our 2025 guidance. Anselm?

Thank you, Ramey, and good morning, everyone. As Ramey shared, our team has continued to focus on execution in a tempered operating environment. For the third quarter, consolidated revenue of $219.3 million declined 4.7% as compared to the prior year quarter. In total, our self-storage business was up 3.7%. New Construction increased 5.5% and R3 was up 0.7% for the quarter.

The growth in revenues for New Construction was driven by strength in our International segment which more than offset continued weakness in North America. The increase in R3 revenue was driven by increases in door replacement and renovation activity.

In the third quarter, our International segment saw total revenues increased to $28.3 million, up $7 million or 32.9% compared to the prior year, driven primarily by growth in New Construction. For the quarter, revenue in our Commercial and Other segment declined by 20.1%. Approximately 70% of the decline in revenue was attributable to our TMC business due to project timing as well as overall weakness in the LTL trucking industry resulting from tariff and economic impact.

As Ramey noted, the TMC business can fluctuate throughout the year depending on the timing of jobs that are completed. While we continue to see softness in the commercial sheet door market, we are encouraged by the strength we are seeing in both rolling steel and the carport and sheds business.

On a consolidated basis, the impact of revenues for the quarter was roughly 60% price and 40% volume. Third quarter adjusted EBITDA of $43.6 million was up 1.2% compared to the third quarter of 2024. This resulted in an adjusted EBITDA margin of 19.9%, an increase of approximately 120 basis points from the prior year period. The increase in margins year-over-year is primarily attributable to the prior year being negatively impacted by adjustments to our provision for credit losses, which was partially offset by volume declines and the impact of geographic segment and sales channel mix.

We continue to see the benefits from our previously announced cost reduction program. As a reminder, we expect to realize approximately $10 million to $12 million in annual pretax cost savings by the end of 2025. For the third quarter, we produced adjusted net income of $22.6 million, up 1.3% compared to the prior year period and adjusted EPS of $0.16. We generated cash from operating activities of $15 million and free cash flow of $8.3 million in the quarter.

On a trailing 12-month basis, this represents a free cash flow conversion of adjusted net income of 171% and Capital expenditures in the quarter were $6.7 million. We ended the quarter with $256.2 million in total liquidity, including $178.9 million of cash and equivalents on the balance sheet. Our total outstanding long-term debt at quarter end was $554 million, and net leverage was 2.3x, within our target range of 2 to 3x. These liquidity levels provide us ample financial flexibility and allow us to execute on our capital allocation priority.

During the quarter, we repurchased approximately 82,000 shares for $800,000 as part of our share repurchase program. With the additional $75 million share repurchase authorization approved by our Board of Directors earlier this year, the company had $80.5 million remaining on our share repurchase authorization at the end of the third quarter.

Subsequent to quarter end, we are also pleased that S&P upgraded our credit rating from B+ to BB- with a stable outlook. This recognition reflects our resilient business model, balanced approach to capital allocation and consistent cash flow generation and profitability.

Now going to our 2025 guidance. Based on our year-to-date results, current visibility into our backlog and end markets and business trends and conditions as of today, we are updating our full year 2025 guidance for revenues and adjusted EBITDA. We expect revenues to be in the range of $870 million to $880 million and adjusted EBITDA to be in the range of $164 million to $170 million, reflecting an adjusted EBITDA margin of 19.1% at the midpoint.

While we anticipate revenues in the fourth quarter to be largely in line with the third quarter and the midpoint of the guide remains intact, we now anticipate EBITDA margins to come down from our original guidance, primarily driven by geographic and product mix. We continue to anticipate the free cash flow conversion of adjusted net income will be above the target range of 75% to 100% for 2025. Please refer to the presentation we have posted for additional details on our key planning assumptions for 2025.

Thank you all for your time. I will now turn the call over to Ramey for his closing remarks. Ramey?

Thank you, Anselm. Our team has continued to focus on factors we can control in a dynamic environment. Supported by our balance sheet and cash flow foundation, we will continue to develop our innovative suite of solutions to further build upon our industry leadership position and invest for future growth.

We believe we will be well positioned in our industry when an inflection point in the operating environment does occur. Looking ahead, we will continue to execute on our strategic plan as we look to drive long-term value creation for all of our stakeholders.

In closing, I'd like to express my appreciation to our team, customers and our shareholders for your support. Thank you again for participating on today's call. Operator, we would now like to open up the lines for Q&A, please.

[Operator Instructions] We'll take our first question today from Dan Moore with CJS Securities.

This is Will on for Dan. Just looking at the guidance -- looking at the guidance, revenue is unchanged, but EBIT is lower by 10% at the midpoint. So we're looking for something in the 19% margin range versus 21%. Can you add some more color and help us rank order or bucket the delta between mix, higher input costs, including tariffs and other factors?

Sure. Biggest thing was really product mix and in the kind of segment mix, where the sales came from. If you actually noticed when we print the Q, you'll see that international sales were up meaningfully. So there's a lower margin versus kind of in our North America business. So the majority is there, tariffs is really not material and neither was input costs.

Very helpful. And then looking at your backlogs and quoting activity, particularly from your core REIT customers. What does it tell you regarding their plans and budgets for growth for both New Construction and R3 related spend as we look into 2026?

At least what we are seeing right now, at least for the current time, the backlog in the pipeline looked pretty stable. I wouldn't say there's anything that's changed from last quarter where we saw was fairly stable.

We'll take our next question from Jeff Hammond with KeyBanc.

This is David Tarantino on for Jeff. Starting with commercial, could you give us some more color on the weakness in TMC, how much is timing versus the softness in the end markets? And then maybe around the unchanged midpoint in the overall sales guide, how should we think about the assumptions between the end markets and what gives you the confidence that this is more down to timing and should improve moving forward?

Yes. As we said about TMC, it's really -- there's 2 things there is that a lot of their projects are pretty large projects that get impacted by weather, get impact the decision by the customer. So it's really hard to predict kind of what quarters certain projects lean in because of those decision points. So a lot of it I would say was a push out of at least from a visibility point of a project that we're aware of.

Second, I think if you know that the LTL market and the customer is there, it has been softer due to the reduced volume of transactions due to the tariffs. So we are seeing a little of that pushback in terms of opportunities there because of that. But in general, most of our TMC business is R&R. So at some point, you're going to have to do some of the repairs. So I think there's just some timing that we expect for some of the projects that are being pushed out.

Yes. Just to close, I mean it's -- we remain excited about the TMC business. It's a really good business and a good industry. So we're very optimistic about the growth profile of that business.

And is it fair to think within the change midpoint of the sales guide, maybe commercial is a little bit lower in self-storage higher? Is that -- am I thinking about that correctly?

If you look -- if you do the implied you'll see it's a little lower for both of them just to get to the implied Q4. But I don't think commercial will be as bad as Q3 in terms of decline.

Okay. Great. And then maybe in self-storage, can you dig into what's driving the strength in international and maybe how we should expect that moving forward? And then maybe can you just give us some color on what you're seeing on the ground and North America and how that's played out relative to your guys' expectations?

Yes, I can start. Look, I mean, there are certain pockets internationally that are undergoing extreme growth mode. We kind of revised our go-to-market strategy moving forward, and it matters in terms of being in the countries that you serve. And so that's playing out, and we're excited about that. And in addition to that, around the international business, our Noke adoption is becoming more standard. So we're seeing a lot of acceleration as with door and hallway sales being standard with our Noke offering.

And then on the self-storage piece of it in North America, no change from the past few quarters. The institutional operators are accelerating development. They're using this opportunity to gain market share. And then the noninstitutional are pretty much on the sidelines. But one positive thing that we are seeing with noninstitutional is they have a lot of construction ready sites. So they're at a good point to when the macro turns, they'll be able to accelerate development as well.

And then on the R3 side, same thing. Consolidation matters, M&A matters to us in terms of R3 revenue from a rebranding perspective and then unit mix optimization, being able to rightsize the sites continue to drive R3.

We'll take our next question from John Lovallo with UBS.

This is Spencer Kaufman on for John. The first one, I think if we were kind of back out or back into the impact from TMC, I think it would be like an $11 million impact in the quarter. I guess, one, is that roughly what it was? And then two, are you expecting to sort of recover that in the fourth quarter? Or does this kind of get pushed into 2026?

Yes, that's about the approximate value if you imply it. And it's going to be a push, as you expect because there's certain jobs we can only do in certain amounts in the quarter. So there's definitely a push into Q4 and then subsequently into 2026.

Okay. Got it. And I think typically, sales in the first quarter are a little bit softer than the rest of the quarters, which usually leads to lower EBITDA margin sequentially. Is that how you guys are sort of thinking about 1Q at this point? Or are there any unusual items kind of similar to what happened in 4Q '24 to 1Q '25?

Yes. We haven't disclosed anything yet, obviously, on 2026. So I think I'd say at this point, it's just we'll probably refer to our next quarter earnings call to really discuss that.

Okay. Fair enough. If I could just squeeze 1 more in. Just on the tariff side, recognizing it's pretty small for you guys. I think that you haven't really changed the outlook for sort of the annualized impact of $6 million to $8 million on an unmitigated basis. But if I look in the slide deck, I think you guys may have admitted in the footnote this part about securing the alternative sourcing for components and that you anticipate the productivity and commercial actions will offset a lot of that exposure. I guess is there anything to read into it to why that's not in the slide deck anymore?

No. We're still doing the same thing like we said. We're mitigating and looking at alternative sources. We've already done some of the actions to that. So I don't think it's implying anything. We're still on track for that.

We'll take our next question from Phil Ng with Jefferies.

I appreciate all the color. I guess, first on your self-storage business in the U.S., appreciating TMCs lumpy in nature, but it sounds like a lot of the growth is coming from the international business.

So when you guys had to unpack the North American self-storage business, is it kind of unfolding like what you expected, particularly in the back half of this year?

Yes. It's probably -- the only thing I would say is that the R3, as we talked about, acceleration is not happening as fast as we would have liked. Obviously, we don't predict that timing. It was our best guess in terms of that piece. But I think the balance of it is kind of coming what we expect in New Construction, but it's just the R3 piece is a bit slower in terms of growing where we would have thought it would be.

And that's mostly in the institutional side of things or noninstitutional side? Where it's been a little more...

Yes, institutional in large REITs.

Okay. All right. That's helpful. And in terms of the color that you shared earlier about how -- Ramey, you shared about how a lot of your noninstitutional customers have construction-ready sites. How quickly can they react? I mean I guess, what should we be monitoring that from the outside looking that would be indicative of perhaps things picking up? Is it rates coming down, liquidity and improving consumer confidence? Just kind of help us think through what are the nuggets that we should be looking from the outside? And if those things unfold, how quickly could that translate to your volumes?

Yes, that's hard to predict. Great question, by the way. But all of the above, I mean in terms of the macro, liquidity matters, interest rates, I mean, the 10-year treasury keeps bouncing around. But I think more than anything is the confidence is what we're hearing for a stronger tomorrow in the macro. But what we've seen, we've mentioned several times on these calls that activity in the pipeline remains very strong.

And so that gives us optimism that our customers will be ready to dive in as quickly as possible. That's something that hasn't happened in previous downturns. Usually when things slow down, everything slows down. But that has not been the case in terms of the amount of work that we're doing on the design side of it and the quoting in the pipeline. So we're really optimistic that once things do turn that it will accelerate. And on the timing, it's hard to tell. What I do know is I would classify a lot of these sites are shovel-ready, so they have the property. It's just a matter of getting construction started.

So let's say if they decided to move today, just in terms of construction cycle when your products come in, is that 6 months out? Or are you pretty early in that construction cycle in terms of the process?

Yes. It really depends on the mix. I mean, a large part of our go-to-market strategy has been end-to-end building solutions. So it's not only the door and hallways. And so with that being said, the projects that we're actually doing the buildings on will start a lot quicker. But 3 to 6 months is probably a good number for that.

Okay. And I'll sneak one more in Ramey. From a raw materials standpoint, how are you guys set up? Because I believe you purchased all of your steel domestic. So you don't really have that steel tariff peaks, but steel prices are certainly still higher. You had a lot of costs hedged out for good parts of this year. So when you look at the '26, I suspect your cost is going to go up. Have you started bidding work at these elevated prices? And are you able to pass it through?

Yes. It's actually the opposite. I'll let Anselm speak to the...

Yes. If you look at the -- if you look at the steel prices, I think there was that trend to go up. But then because there has not been the demand for it, it's actually held pretty low. So if you look at it right now, and obviously, you know how we buy steel is that we've already bought steel going into next year. It's been fairly stable, surprisingly in terms of where the steel price has been. So I wouldn't expect a large change at this point for the early parts of next year.

We'll take our next question from Reuben Garner with Benchmark.

So you've got the $10 million to $12 million in cost initiatives that you've had in place this year. How much of that has been realized so far? How much will carry into next year?

And I guess, if we don't start to see some significant changes in demand, are there more things that you can do to reduce the cost structure? Or is this the kind of situation where you'd likely ride it out? And because you're optimistic about the long-term dynamics in the industry?

No. I think if you look at the casting, we are on track already. You saw what we posted. We're about 70% of the savings already. So we should be in that range we talked about the 10% to 12% for the year. In terms of further costs, I think we're always looking. So Ramey and I are always pushing business to look at opportunities. So I would say there's definitely more opportunity there. We're already working on a few just in preparation if it does, the demand still stays low. So there's definitely more opportunity.

Okay. And then it looked like your inventory picked up as a percentage of revenue I don't know if it's just a one-off. Was there anything unique there? Would we expect that to kind of go back down in the fourth quarter and beyond?

Yes, definitely. If we buy the steel, our volume has been a bit lower than we would have expected. So you would expect the inventory to go up slightly due to compared to the original forecasted volume were there.

So I think it's just a slight blip there we had to have -- the inventory was not at the volume that we expected. But our expectation we'll burn it off as we go through the rest of the year.

Okay. And then last one for me. You mentioned Noke successes internationally. How do things stand domestically? I assume utilization rates have come in somewhat maybe a better time to make those kind of changes that would be necessary to move to the Noke system, at least now versus a couple of years ago?

Any signs that an acceleration around the way. I know you've been waiting or looking for a larger institutional player to kind of make the move on that? What are the chances that that's around the corner?

Yes, that's a good question. We mentioned in our comments that the institutional activity has certainly picked up and I think it's really a testament to Ion. It's really proven itself in terms of design, performance, stability and a price point that the market is looking for.

And then you've heard us talk about security. It's really a problem for the industry. And resolved a lot of the security issues. One of our larger clients has reported a 90% reduction in theft with that product line. So we continue to be optimistic and looking forward to driving additional use cases throughout the sector, but couldn't be happier.

So just a quick follow-up. I mean is it likely at some point that there's like a step function higher, like where there's a large adoption?

Yes.

Or do you think of more of -- okay, all right. So we're still -- so that's still in the cards.

And we'll take our next question as a follow-up from Jeff Hammond with KeyBanc.

This is David again. Just a quick follow-up on the pricing trends. It was largely stable sequentially. So could you just give us some more color on how we should expect this to evolve moving forward? And maybe into next year just based on the actions you've already implemented to date?

Yes. I think for related to this year, we expect something similar. But again, we haven't looked into make sure what the impact will be.

And there are no further questions on the line at this time. I'll turn the program back to Ramey Jackson for any additional or closing remarks.

All right. 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.

This does conclude today's program. Thank you all for your participation, and you may now disconnect.