jbi-20221001

Segment

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

________________________

FORM 10-Q

________________________

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended October 1, 2022


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________ to _________

Commission file number 001-40456

________________________

JANUS INTERNATIONAL GROUP, INC.

(Exact name of registrant as specified in its charter)

________________________


Delaware			86-1476200
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification Number)
135 Janus International Blvd. Temple, GA			30179
(Address of Principal Executive Offices)			(Zip Code)

(866) 562-2580

(Registrant's telephone number, including area code)

________________________

Securities registered pursuant to Section 12(b) of the Act:


Title of Each Class:	Trading Symbol(s)	Name of Each Exchange on Which Registered:
Common Stock, par value $0.0001 per share	JBI	New York Stock Exchange

Securities registered pursuant to section 12(g) of the Act: None

________________________

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☐
		Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of November 8, 2022, 146,647,275 shares of Class A Common Stock, par value $0.0001, were issued and outstanding.

JANUS INTERNATIONAL GROUP, INC.

Quarterly Report on Form 10-Q

Table of Contents


SAFE HARBOR, FORWARD-LOOKING STATEMENTS
			Page
PART I--FINANCIAL INFORMATION			4
Item 1. Financial Statements			4
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations			28
Item 3. Quantitative and Qualitative Disclosures About Market Risk			49
Item 4. Controls and Procedures			49
PART II--OTHER INFORMATION			51
Item 1. Legal Proceedings			51
Item 1A. Risk Factors			51
Item 2. Unregistered Sales of Equity and Use of Proceeds			51
Item 3. Defaults upon Senior Securities			51
Item 4. Mine Safety Disclosures			51
Item 5. Other Information			51
Item 6. Exhibits			52
SIGNATURES			53

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Statements contained in this Quarterly Report on Form 10-Q (this “Form 10-Q”) that reflect our current views with respect to future events and financial performance, business strategies, expectations for our business and any other statements of a future or forward-looking nature, constitute “forward-looking statements” for the purposes of federal securities laws.

These forward-looking statements include, but are not limited to, statements about our financial condition, results of operations, earnings outlook and prospects or regarding management’s expectations, hopes, beliefs, intentions or strategies regarding the future. These forward-looking statements involve risks and uncertainties that could cause our actual results to differ materially from those contemplated in the forward-looking statements, including, without limitation, the risks set forth in Part II, Item 1A, “Risk Factors” in this Form 10-Q and in our other filings with the Securities and Exchange Commission (the “SEC”). We do not assume any obligation to update any forward-looking statements after the date of this Report, except as required by law.

In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. Forward-looking statements are typically identified by words such as “plan,” “believe,” “expect,” “anticipate,” “intend,” “outlook,” “estimate,” “forecast,” “project,” “continue,” “could,” “may,” “might,” “possible,” “potential,” “predict,” “should,” “will”, “likely”, and other similar words and expressions, but the absence of these words does not mean that a statement is not forward-looking.

The forward-looking statements contained in this Form 10-Q are based on our current expectations and beliefs concerning future developments and their potential effects on us. We cannot assure you that future developments affecting us will be those that we have anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. Some factors that could cause actual results to differ include, but are not limited to:

•changes adversely affecting the business in which we are engaged;

•geopolitical risk and changes in applicable laws or regulations;

•the possibility that Janus may be adversely affected by other economic, business, and/or competitive factors;

•operational risk;

•the possibility that the COVID-19 pandemic, or another major disease, disrupts Janus’ business;

•our ability to maintain the listing of our securities on a national securities exchange;

•litigation and regulatory enforcement risks, including the diversion of management time and attention and the additional costs and demands on Janus’ resources; and

•other risks detailed from time to time in our filings with the SEC, press releases, and other communications, including those set forth under “Risk Factors” included in our 2021 Annual Report on Form 10-K for the year ended January 1, 2022, and in the documents incorporated by reference herein and therein.

All subsequent written and oral forward-looking statements concerning the matters addressed in this Form 10-Q and attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this Form 10-Q. We undertake no obligation to update any forward-looking statement, whether written or oral, to reflect events or circumstances after the date of this Form 10-Q or to reflect the occurrence of unanticipated events.

PART I--FINANCIAL INFORMATION

Item 1. Financial Statements.


Janus International Group, Inc.

Condensed Consolidated Balance Sheets
(dollar amounts in thousands, except share and per share data)


	October 1,		January 1,
	2022		2022
	(Unaudited)

ASSETS
Current Assets
Cash	$	55,335	$	13,192
Accounts receivable, less allowance for credit losses; $4,553 and $5,449, at October 1, 2022 and January 1, 2022, respectively	151,694		107,372
Costs and estimated earnings in excess of billing on uncompleted contracts	30,831		23,121
Inventory, net	69,050		56,596
Prepaid expenses	12,282		9,843
Other current assets	2,227		4,057
Total current assets	$	321,419	$	214,181
Right-of-use assets, net	45,529		—
Property and equipment, net	42,855		41,607
Customer relationships, net	288,770		312,199
Tradename and trademarks	106,971		107,980
Other intangibles, net	14,743		15,861
Goodwill	367,262		369,286
Deferred tax asset, net	59,979		58,915
Other assets	1,874		1,973
Total assets	$	1,249,402	$	1,122,002
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
Accounts payable	$	55,728	$	54,961
Billing in excess of costs and estimated earnings on uncompleted contracts	27,235		23,207
Current maturities of long-term debt	8,379		8,067
Other accrued expenses	75,919		54,111
Total current liabilities	$	167,261	$	140,346
Line of credit	—		6,369
Long-term debt, net	701,189		703,718
Deferred tax liability, net	1,678		749
Other long-term liabilities	41,764		2,533
Total liabilities	$	911,892	$	853,715
STOCKHOLDERS’ EQUITY
Common Stock, 825,000,000 shares authorized, $0.0001 par value, 146,647,275 and 146,561,717 shares issued and outstanding at October 1, 2022 and January 1, 2022, respectively	15		15
Additional paid-in capital	279,944		277,799
Accumulated other comprehensive loss	(7,887)		(949)
Retained earnings (accumulated deficit)	65,438		(8,578)
Total stockholders’ equity	$	337,510	$	268,287
Total liabilities and stockholders’ equity	$	1,249,402	$	1,122,002

See accompanying Notes to the Unaudited Condensed Consolidated Financial Statements


Janus International Group, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Income
(dollar amounts in thousands, except share and per share data)


	Three Months Ended				Nine Months Ended
	October 1, 2022		September 25, 2021		October 1, 2022		September 25, 2021
	(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)
REVENUE
Sales of product	$	230,847	$	155,670	$	642,122	$	417,922
Sales of services	31,700		32,120		97,659		96,874
Total revenue	262,547		187,790		739,781		514,796
Cost of Sales	165,755		125,551		482,439		340,070
GROSS PROFIT	96,792		62,239		257,342		174,726
OPERATING EXPENSE
Selling and marketing	14,477		12,066		42,216		31,906
General and administrative	28,418		24,947		86,267		81,469
Contingent consideration and earnout fair value adjustments	—		—		—		687
Operating Expenses	42,895		37,013		128,483		114,062
INCOME FROM OPERATIONS	53,897		25,226		128,859		60,664
Interest expense	(10,979)		(7,664)		(28,622)		(23,265)
Other expense	56		91		(313)		(2,388)
Change in fair value of derivative warrant liabilities	—		1,271		—		(658)
INCOME BEFORE TAXES	42,974		18,924		99,924		34,353
Provision for Income Taxes	10,575		3,382		24,984		5,787
NET INCOME	$	32,399	$	15,542	$	74,940	$	28,566
Other Comprehensive Income (Loss)	(3,037)		(1,170)		(6,938)		(896)
COMPREHENSIVE INCOME	29,362		14,372		68,002		27,670
Net income attributable to common stockholders	$	32,399	$	15,542	$	74,940	$	28,566
Weighted-average shares outstanding, basic and diluted (Note 16)
Basic	146,639,452		138,384,284		146,592,296		95,179,726
Diluted	146,717,917		142,840,792		146,671,509		97,828,380
Net income per share, basic and diluted (Note 16)
Basic	$	0.22	$	0.11	$	0.51	$	0.30
Diluted	$	0.22	$	0.10	$	0.51	$	0.30

See accompanying Notes to the Unaudited Condensed Consolidated Financial Statements


Janus International Group, Inc.

Condensed Consolidated Statement of Changes in Stockholders’ Equity (Unaudited)
(dollar amounts in thousands, except share data)


	Class B Common Units			Class A Preferred Units			Common Stock			Additional paid-in capital		Accumulated Other Comprehensive Income (Loss)		Retained Earnings (AccumulatedDeficit)		Total
	Unit	Amount		Unit	Amount		Shares	Amount
Balance as of December 26, 2020	4,478	$	261	189,044	$	189,044	—	$	—	$	—	$	(227)	$	(48,205)	$	140,874
Retroactive application of the recapitalization	(4,478)	(261)		(189,044)	(189,044)		66,145,633	7		189,299		—		—		—
Balance as of December 26, 2020, as adjusted	—	$	—	—	$	—	66,145,633	$	7	$	189,299	$	(227)	$	(48,205)	$	140,874
Vesting of Midco LLC class B units	—	—		—	—		111,895	—		52		—		—		52
Distributions to Janus Midco LLC Class A unitholders	—	—		—	—		—	—		—		—		(96)		(96)
Cumulative translation adjustment	—	—		—	—		—	—		—		311		—		311
Net income	—	—		—	—		—	—		—		—		14,719		14,719
Balance as of March 27, 2021	—	$	—	—	$	—	66,257,528	$	7	$	189,351	$	84	$	(33,582)	$	155,860
Vesting of Midco LLC class B units	—	—		—	—		4,012,872	—		5,210		—		—		5,210
Issuance of PIPE Shares	—	—		—	—		25,000,000	3		249,997		—		—		250,000
Issuance of common stock upon merger, net of transaction costs, earn out, and merger warrant liability	—	—		—	—		41,113,850	4		226,940		—		—		226,944
Issuance of earn out shares to common stockholders	—	—		—	—		2,000,000	—		26,480		—		—		26,480
Distributions to Janus Midco, LLC unitholders	—	—		—	—		—	—		(541,710)		—		—		(541,710)
Distributions to Class A preferred units	—	—		—	—		—	—		—		—		(4,078)		(4,078)
Deferred Tax Asset	—	—		—	—		—	—		78,291		—		—		78,291
Cumulative translation adjustment	—	—		—	—		—	—		—		(37)		—		(37)
Net income	—	—		—	—		—	—		—		—		(1,694)		(1,694)
Balance as of June 27, 2021	—	$	—	—	$	—	138,384,250	$	14	$	234,559	$	47	$	(39,354)	$	195,266
Warrant redemption	—	—		—	—		110	—		1		—		—		1
Cumulative translation adjustment	—	—		—	—		—	—		—		(1,170)		—		(1,170)
Warrant movements from private to public							—	—		10,111						10,111
Net Income	—	—		—	—		—	—		—		—		15,542		15,542
Balance as of September 25, 2021	—	$	—	—	$	—	138,384,360	$	14	$	244,671	$	(1,123)	$	(23,812)	$	219,750


Janus International Group, Inc.

Condensed Consolidated Statement of Changes in Stockholders’ Equity (Unaudited)
(dollar amounts in thousands, except share data)


	Class B Common Units			Class A Preferred Units			Common Stock			Additional paid-in capital		Accumulated Other Comprehensive Loss		Retained Earnings (AccumulatedDeficit)		Total
	Unit	Amount		Unit	Amount		Shares	Amount
Balance as of January 1, 2022	—	$	—	—	$	—	146,561,717	$	15	$	277,799	$	(949)	$	(8,578)	$	268,287
Share based compensation	—	—		—	—		—	—		600		—		—		600
Cumulative effect of change in accounting principle(a)	—	—		—	—		—	—		—		—		(924)		(924)
Cumulative translation adjustment	—	—		—	—		—	—		—		(514)		—		(514)
Net income	—	—		—	—		—	—		—		—		19,704		19,704
Balance as of April 2, 2022	—	$	—	—	$	—	146,561,717	$	15	$	278,399	$	(1,463)	$	10,202	$	287,153
Issuance of restricted units	—	—		—	—		77,660	—		—		—		—		—
Share based compensation	—	—		—	—		—	—		910		—		—		910
Cumulative translation adjustment	—	—		—	—		—	—		—		(3,387)		—		(3,387)
Net income	—	—		—	—		—	—		—		—		22,837		22,837
Balance as of July 2, 2022	—	$	—	—	$	—	146,639,377	$	15	$	279,309	$	(4,850)	$	33,039	$	307,513
Issuance of restricted units	—	—		—	—		7,898	—		—		—		—		—
Share based compensation	—	—		—	—		—	—		635		—		—		635
Cumulative translation adjustment	—	—		—	—		—	—		—		(3,037)		—		(3,037)
Net income	—	—		—	—		—	—		—		—		32,399		32,399
Balance as of October 1, 2022	—	$	—	—	$	—	146,647,275	$	15	$	279,944	$	(7,887)	$	65,438	$	337,510

(a) Effective January 2, 2022, the Company adopted the provisions of Accounting Standards Update (“ASU”) 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments (Topic 326) and ASU 2016-02, Leases (Topic 842). We have elected to adopt each of the two standards using the modified retrospective approach through a cumulative-effect adjustment to the opening balance of accumulated deficit for both. See Note 2 for further details of the impact of each standard.

See accompanying Notes to the Unaudited Condensed Consolidated Financial Statements


Janus International Group, Inc.
Condensed Consolidated Statements of Cash Flows
(dollar amounts in thousands)


	Nine Months Ended
	October 1, 2022		September 25, 2021
	(Unaudited)		(Unaudited)
Cash Flows Provided By Operating Activities
Net income	$	74,940	$	28,566
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation of property and equipment	5,817		4,678
Reduction in carrying amount of right-of-use assets	3,997		—
Amortization of intangibles	22,278		21,852
Deferred finance fee amortization	2,758		2,286
Provision (reversal) for losses on accounts receivable	1,206		(59)
Share based compensation	2,145		5,262
Loss on extinguishment of debt	—		2,415
Change in fair value of contingent consideration	—		687
(Gain) loss on sale of assets	(45)		43
Loss on abandonment of lease	571		—
Change in fair value of derivative warrant liabilities	—		658
Undistributed (earnings) losses of affiliate	(102)		76
Deferred income taxes, net	—		(768)
Changes in operating assets and liabilities
Accounts receivable	(45,893)		(16,884)
Costs and estimated earnings in excess of billings and billings in excess of costs and estimated earnings on uncompleted contracts	(7,710)		(12,101)
Prepaid expenses and other current assets	(531)		(4,488)
Inventory, net	(12,454)		(18,474)
Accounts payable	766		18,409
Other accrued expenses	17,658		28,649
Other assets and long-term liabilities	(2,810)		(1,124)
Net Cash Provided By Operating Activities	$	62,591	$	59,683
Cash Flows Used In Investing Activities
Proceeds from sale of equipment	$	67	$	79
Purchases of property and equipment	(7,856)		(15,930)
Cash paid for acquisition, net of cash acquired	—		(179,714)
Net Cash Used In Investing Activities	$	(7,789)	$	(195,565)
Cash Flows Used In Financing Activities
(Repayments) proceeds from line of credit	$	(6,369)	$	19,351
Distributions to Janus Midco LLC unitholders	—		(4,174)
Principal payments on long-term debt	(6,051)		(64,825)
Proceeds from long-term debt	—		155,000
Proceeds from merger	—		334,874
Proceeds from PIPE	—		250,000
Payments for transaction costs, net	—		(44,489)
Payments to Janus Midco, LLC unitholders at the Business Combination	—		(541,710)
Proceeds from warrant exercise	—		1
Principal payments under finance lease obligations	(137)		—
Payments for deferred financing fees	—		(4,321)
Cash (Used In) Provided by Financing Activities	$	(12,557)	$	99,707
Effect of exchange rate changes on cash and cash equivalents	$	(102)	$	142
Net Increase (Decrease) in Cash and Cash Equivalents	$	42,143	$	(36,033)
Cash and Cash Equivalents, Beginning of Period	$	13,192	$	45,255
Cash and Cash Equivalents, End of Period	$	55,335	$	9,222
Supplemental Cash Flows Information
Interest paid	$	28,351	$	19,227
Income taxes paid	$	21,655	$	1,510
Cash paid for operating leases	$	5,763	$	—
Non-cash investing and financing activities:
Right-of-use assets obtained in exchange for operating lease obligations	$	47,999	$	—
Right-of-use assets obtained in exchange for finance lease obligations	$	1,373	$	—

See accompanying Notes to the Unaudited Condensed Consolidated Financial Statements


Janus International Group, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

1.Basis of Presentation

Janus International Group, Inc. is a holding company. References to “Janus,” “Group,” “Company,” “we,” “our” or “us” refer to Janus International Group, Inc., and its consolidated subsidiaries. Janus International Group, LLC (“Janus Core”) is a wholly-owned subsidiary of Janus Intermediate, LLC (“Intermediate”). Intermediate is a wholly-owned subsidiary of Janus Midco, LLC (“Midco”). Midco is a wholly-owned subsidiary of Janus Intermediate Holdco, Inc. (“Intermediate Holdco”). Intermediate Holdco is a wholly-owned subsidiary of Juniper Industrial Holdings, Inc. (“Juniper” or “JIH”), and Juniper is a wholly-owned subsidiary of Group.

The dollar amounts in the notes are shown in thousands of dollars, unless otherwise noted, and rounded to the nearest thousand except for share and per share amounts.

The accompanying Unaudited Condensed Consolidated Financial Statements are presented in U.S. dollars and have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) and pursuant to the accounting and disclosure rules and regulations of the SEC for interim financial information. However, they do not include all of the financial information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of the Company’s management, the Unaudited Condensed Consolidated Financial Statements include all adjustments necessary for the fair presentation of the Company’s balance sheet as of October 1, 2022, and its results of operations, including its comprehensive income and stockholders’ equity for the three and nine months ended October 1, 2022 and September 25, 2021.

This Quarterly Report on Form 10-Q should be read in conjunction with the Audited Consolidated Financial Statements and notes that are included in the Annual Report on Form 10-K, for the year ended January 1, 2022.

Nature of Operations

The Group is a global manufacturer and supplier of turn-key self-storage, commercial and industrial building solutions including: roll up and swing doors, hallway systems, relocatable storage units, and facility and door automation technologies with manufacturing operations in Georgia, Texas, Arizona, Indiana, North Carolina, the United Kingdom, Australia, and Singapore.

The Group’s business is operated through two geographic regions that comprise our two reportable segments: Janus North America and Janus International. The Janus International segment is comprised of Janus International Europe Ltd., a company incorporated in England and Wales (“JIE”), whose production and sales are largely in Europe and Australia. The Janus North America segment is comprised of all the other entities including Janus Core, Betco, Inc. (“BETCO”), Noke, Inc. (“NOKE”), Asta Industries, Inc. (“ASTA”), Janus Door, LLC (“Janus Door”), Access Control Technologies, LLC (“ACT”), U.S Door & Building Components, LLC (“U.S. Door”), and Steel Door Depot.com, LLC (“Steel Door Depot”).

Assets held at foreign locations were approximately $55,749 and $58,439 as of October 1, 2022 and January 1, 2022, respectively. Revenues earned at foreign locations totaled approximately $16,959 and $17,824 for the three months ended October 1, 2022 and September 25, 2021, respectively, and $55,197 and $48,729 for the nine months ended October 1, 2022 and September 25, 2021, respectively.

Principles of Consolidation

The Unaudited Condensed Consolidated Financial Statements include the accounts of the Company and its wholly owned subsidiaries. The Company’s joint venture is accounted for under the equity method of accounting. All significant intercompany accounts and transactions have been eliminated in consolidation.

Reorganization

On June 7, 2021, Midco transferred Janus Core, its wholly owned direct subsidiary, to the Group, thereby transferring the business for which historical financial information is included in these results of operations, to be indirectly held by Midco.

The Business Combination (defined and discussed below) was accounted for as a reverse recapitalization in accordance with U.S. GAAP. Under this method of accounting, Juniper is treated as the acquired company and Midco is treated as the acquirer for financial statement reporting purposes (the “Combined Company”). Accordingly, for accounting purposes, the financial statements of the Combined Company represent a continuation of the financial statements of Midco with the acquisition being treated as the equivalent of Midco issuing stock for the net assets of JIH, accompanied by a recapitalization. The net assets of JIH will be stated at historical cost, with no goodwill or other intangible assets recorded.

Use of Estimates in the Unaudited Condensed Consolidated Financial Statements

The preparation of Unaudited Condensed Consolidated Financial Statements in conformity with U.S GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.


Janus International Group, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

Significant items subject to such estimates and assumptions include, but are not limited to, the derivative warrant liability, the recognition of the valuations of share-based compensation arrangements, the useful lives of property and equipment, revenue recognition, allowances for uncollectible receivable balances, fair values and impairment of intangible assets and goodwill and assumptions used in the recognition of contract assets.

Emerging Growth Company

Section 102(b)(1) of the Jumpstart Our Business Startups Act, or JOBS Act, exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies are required to comply with the new or revised financial accounting standards. The Company qualifies as an “Emerging Growth Company” and has elected to use the extended transition period for complying with new or revised accounting standards under Section 102(b)(1) of the JOBS Act. This election allows the Company to adopt the new or revised standard at the same time periods as private companies.

Fair Value Measurement

The Company uses valuation approaches that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. A three-tiered hierarchy is established as a basis for considering such assumptions and for inputs used in the valuation methodologies in measuring fair value. This hierarchy requires that the Company use observable market data, when available, and minimize the use of unobservable inputs when determining fair value:

•Level 1, observable inputs such as quoted prices in active markets;

•Level 2, inputs other than the quoted prices in active markets that are observable either directly or indirectly;

•Level 3, unobservable inputs in which there is little or no market data, which requires that the Company develop its own assumptions.

The fair value of cash, accounts receivable, less allowance for doubtful accounts and account payable approximate the carrying amounts due to the short-term maturities of these instruments. The fair value of the Company’s debt approximates its carrying amount as of October 1, 2022 and January 1, 2022 due to its variable interest rate that is tied to the current London Interbank Offered Rate (“LIBOR”) rate plus an applicable margin and consistency in our credit rating. To estimate the fair value of the Company’s debt, the Company utilized fair value based risk measurements that are indirectly observable, such as credit risk that fall within Level 2 of the Fair Value hierarchy. The fair value of the warrants contains significant unobservable inputs including the expected term and the share exchange ratio in evaluating the fair value of underlying common stock, and exercise price, therefore, the warrant liabilities were evaluated to be a Level 3 fair value measurement.

Significant Accounting Policies

Other than the following, the Company’s significant accounting policies have not changed materially from those described in its Annual Report on Form 10-K for the fiscal year ended January 1, 2022.

Allowance for Credit Losses

On January 2, 2022, the Company adopted Accounting Standards Update (“ASU”) 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments (Topic 326) (“CECL”), which changes the impairment model for most financial assets. The new model uses a forward-looking expected loss method, which will generally result in earlier recognition of allowances for losses. Refer to Recently Adopted Accounting Pronouncements section of this note for more information on the impact to the Unaudited Condensed Consolidated Financial Statements.

The Company gathered information about its current bad debt reserve and write-off practices and loss methodology, in-scope assets, historical credit losses, proposed pooling approach and expected changes to business practices under CECL. Accounts receivables are stated at estimated net realizable value from the sale of products and services to established customers. The Company determined that pooling accounts receivable by business units was the most appropriate because of the similarity of risk characteristics within each line such as customers and services offered. Historical losses and customer-specific reserve information that are used to calculate the historical loss rates are available for each business unit.

During the pooling process, the Company identified two distinct customer types: commercial and self-storage. As these customer types have different risk characteristics, the Company concluded to pool the financial assets at this level within each business unit.

Commercial customers typically are customers contracting with the Company on short-term projects with smaller credit limits and overall, smaller project sizes. Due to the short-term nature and smaller scale of these types of projects, the Company expects minimal write-offs of its receivables at the commercial pool.

Self-storage projects typically involve general contractors and make up the largest portion of the Company’s accounts receivable balance. These projects are usually longer-term construction projects and billed over the course of construction. Credit limits are larger for these projects given the overall project size and duration. Due to the longer-term nature and larger scale of these types of projects, the Company expects a potential for more write-offs of its receivable balances within the self-storage pool.


Janus International Group, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

The Company reviewed methods provided by the guidance and determined to use the loss-rate method in the CECL analysis for trade receivables and contract assets. This loss-rate method was selected as there is reliable historical information available by business unit, and this historical information was determined to be representative of the Company’s current customers, products, services, and billing practices.

The summary of activity in the allowance for credit losses for the nine months ended October 1, 2022 and the allowance for doubtful accounts for the nine months ended September 25, 2021 are as follows:



	Beginning Balance		CECL Adoption1		Write-offs		Provision (Reversal), net		Ending Balance
2022	$	5,449	$	366	$	(2,468)	$	1,206	$	4,553
2021	4,485		—		(59)		(59)		4,367

(1) On January 2, 2022, the Company adopted the provisions of ASU 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments (Topic 326), which introduced a new model known as CECL.

2. Recently Issued Accounting Standards

In March 2020, the Financial Accounting Standards Board (“FASB”) issued ASU 2020-04, Reference Rate Reform (Topic 848), Facilitation of the Effects of Reference Rate Reform on Financial Reporting. This standard provides optional expedients and exceptions for applying generally accepted accounting principles to contract modifications and hedging relationships, subject to meeting certain criteria, that reference LIBOR or another reference rate expected to be discontinued. The ASU is effective and may be applied beginning March 12, 2020 and will apply through December 31, 2022. In January 2021, the FASB issued ASU No. 2021-01, Reference Rate Reform (Topic 848) (“ASU 2021-01”). The amendments in ASU 2021-01 provide optional expedients and exceptions for applying U.S. GAAP to contract modifications and hedging relationships, subject to meeting certain criteria, that reference the LIBOR or another reference rate expected to be discontinued because of the reference rate reform. The provisions must be applied at a Topic, Subtopic, or Industry Subtopic level for all transactions other than derivatives, which may be applied at a hedging relationship level. In April 2022, the FASB, proposed the deferral of the sunset date of this guidance to December 31, 2024. The Company is currently evaluating the impact this adoption will have on the Company’s consolidated financial statements.

Although there are several other new accounting pronouncements issued or proposed by the FASB, which have been adopted or will be adopted as applicable, management does not believe any of these accounting pronouncements has had or will have a material impact on the Group’s consolidated financial position or results of operations.

Recently Adopted Accounting Pronouncements

In June 2020, the FASB issued ASU 2020-05, Revenue from Contracts with Customers (Topic 606) and Leases (Topic 842) which deferred the effective date for ASC 842, Leases, for one year. The leasing standard will be effective for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. The Company adopted the leasing standard effective January 2, 2022 and has elected to adopt the new standard at the adoption date using the modified retrospective method and recognized a cumulative effect adjustment to accumulated deficit in the amount of $558. Under this approach, we will continue to report comparative period financial information under ASC 840. We have elected the package of practical expedients permitted under the transition guidance within the new standard, which among other things, allows us to carry forward the historical lease classification. We also made an accounting policy election to exclude leases with an initial term of 12 months or less from the consolidated balance sheet. We will recognize those lease payments in the consolidated statements of operations on a straight-line basis over the lease term. As part of this adoption, we have implemented internal controls and key system functionality to enable the preparation of financial information.

The adoption of the standard resulted in recording right-of-use assets of $42,835 and lease liabilities of $44,776 as of January 2, 2022. The right-of-use assets are lower than the lease liabilities as existing deferred rent and lease incentive liabilities were recorded against the right-of-use assets at adoption in accordance with the standard. The standard had no impact on our debt-covenant compliance under our current agreements.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments (Topic 326), which changes the impairment model for most financial assets. The new model uses a forward-looking expected loss method, which will generally result in earlier recognition of allowances for losses. ASU 2016-13, as subsequently amended for various technical issues, is effective for emerging growth companies following private company adoption dates for fiscal years beginning after December 15, 2022 and for interim periods within those fiscal years. The Company adopted this standard effective January 2, 2022 using the modified retrospective method and recognized a cumulative-effect adjustment increasing accumulated deficit and increasing the allowance for credit losses by $366.


Janus International Group, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements


	January 2, 2022
	Pre-ASC 326 Adoption		Impact of ASC 326 Adoption		As Reported Under ASC 326
Accounts Receivable, net	$	107,372	$	(366)	$	107,006
Cost in Excess of Billings	23,121		—		23,121
Accumulated Deficit	(8,578)		(366)		(8,944)

3. Inventories

Inventories are stated at the lower of cost or net realizable value utilizing the first-in, first-out (FIFO) method. The major components of inventories as of October 1, 2022 and January 1, 2022 are as follows:


	October 1,		January 1,
	2022		2022
Raw materials	$	48,043	$	41,834
Work-in-process	650		671
Finished goods	20,357		14,091
	$	69,050	$	56,596

The Company has recorded a reserve for inventory obsolescence as of October 1, 2022 and January 1, 2022, of approximately $1,996 and $1,295, respectively.

4. Property and Equipment

Property, equipment, and other fixed assets as of October 1, 2022 and January 1, 2022 are as follows:


	October 1,		January 1,
	2022		2022
Land	$	4,501	$	4,501
Manufacturing machinery and equipment	37,286		35,688
Leasehold improvements	5,615		4,599
Construction in progress	6,063		3,571
Other	14,274		13,287
	$	67,739	$	61,646
Less accumulated depreciation	(24,884)		(20,039)
	$	42,855	$	41,607

5. Acquired Intangible Assets and Goodwill

Intangible assets acquired in a business combination are recognized at fair value and amortized over their estimated useful lives. The carrying basis and accumulated amortization of recognized intangible assets at October 1, 2022 and January 1, 2022, are as follows:


	October 1,					January 1,
	2022					2022
	Gross Carrying Amount		Accumulated Amortization		Average Remaining Life in Years	Gross Carrying Amount		Accumulated Amortization
Intangible Assets
Customer relationships	$	406,970	$	(118,200)	10	$	410,094	$	(97,895)
Noncompete agreements	380		(233)		5	412		(231)
Tradenames and trademarks	106,971		—		Indefinite	107,980		—
Other intangibles	61,626		(47,030)		10	61,836		(46,156)
	$	575,947	$	(165,463)		$	580,322	$	(144,282)

Changes to gross carrying amount of recognized intangible assets due to translation adjustments include an approximate $3,278 and $270 loss for the period ended October 1, 2022 and January 1, 2022, respectively. Amortization expense was approximately $7,408 and $8,229 for the


Janus International Group, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

three month periods ended October 1, 2022 and September 25, 2021, and $22,278 and $21,852 for the nine months periods ended October 1, 2022 and September 25, 2021, respectively.

The changes in the carrying amounts of goodwill for the period ended October 1, 2022 were as follows:


Balance as of January 1, 2022	$	369,286
Changes due to foreign currency fluctuations	(2,076)
Goodwill adjusted during the period	52
Balance as of October 1, 2022	$	367,262

6. Accrued Expenses

Accrued expenses are summarized as follows:


	October 1,		January 1,
	2022		2022
Sales tax payable	$	5,236	$	3,606
Interest payable	254		2,741
Indemnity Holdback Liability	1,002		—
Other accrued liabilities	6,222		1,766
Employee compensation	14,016		13,857
Customer deposits and allowances	36,297		24,555
Income taxes	2,121		810
Current operating lease liabilities	5,293		—
Other	5,478		6,776
Total	$	75,919	$	54,111

Other as of October 1, 2022 and January 1, 2022 consists of property tax, freight accrual, legal, accounting and other professional fee accruals.

7. Line of Credit

On February 12, 2018, the Company, through Intermediate and Janus Core, entered into a revolving line of credit facility with a financial institution pursuant to ABL Credit And Guarantee Agreement (the “LOC Agreement”). In August 2021, the Company increased the available line of credit from $50,000 to $80,000, incurred additional fees for this amendment of $425 and extended the maturity date from February 18, 2023 to August 12, 2024. The current line of credit facility is for $80,000 with interest payments due in arrears. The interest rate on the facility is based on a base rate, unless a LIBOR Rate (as defined in the LOC Agreement) option is chosen by the Company. If the LIBOR Rate is elected, the interest computation is equal to the LIBOR Rate plus the LIBOR Rate Margin of 1.25%, as of October 1, 2022. If the Base Rate (as defined in the LOC Agreement) is elected, the interest computation is equal to the Base Rate of the greatest of (a) the federal funds rate plus .5%, (b) the LIBOR rate plus 1%, or (c) the financial institution’s Prime Rate (as defined in the LOC Agreement), plus the Base Rate Margin (as defined in the LOC Agreement) of .25% as of October 1, 2022. At the beginning of each quarter the applicable margin is set and determined by the administrative agent based on the average net availability on the line of credit for the previous quarter. As of October 1, 2022 and January 1, 2022, the interest rate in effect for the facility was 6.5% and 3.5%, respectively. The line of credit is collateralized by accounts receivable and inventories. The Company has incurred deferred loan costs in the amount of $1,483 which are being amortized over the term of the facility that expires on August 12, 2024, using the effective interest method, and are presented as part of other assets within our Unaudited Condensed Consolidated Balance Sheet. The amortization of the deferred loan costs is included in interest expense on the Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income. The unamortized portion of the fees as of October 1, 2022 and January 1, 2022 was approximately $463 and $648, respectively. There was $— and $6,369 outstanding on the line of credit as of October 1, 2022 and January 1, 2022, respectively.


Janus International Group, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

8. Long-Term Debt

Long-term debt consists of the following:


	October 1,		January 1,
	2022		2022
Note payable - Amendment No. 4 First Lien	$	716,329	$	722,379
Financing leases	1,260		—
	$	717,589	$	722,379
Less unamortized deferred finance fees	8,021		10,594
Less current maturities	8,379		8,067
Total long-term debt	$	701,189	$	703,718

Notes Payable - Amendment No.4 First Lien - On August 18, 2021, the Company completed a refinancing in the form of that certain First Lien Amendment No. 4, in which the principal terms of the amendment were new borrowings of $155,000 which was used to fund the DBCI (hereinafter defined) acquisition. The Amendment No. 4 First Lien is comprised of a syndicate of lenders originating on August 18, 2021 in the amount of $726,413 with interest payable in arrears. The outstanding loan balance is to be repaid on a quarterly basis of 0.25% of the original balance beginning the last day of September 2021 with the remaining principal due on the maturity date of February 12, 2025. As chosen by the Company, the amended loan bears interest at a floating rate per annum consisting of LIBOR, plus an applicable margin percent (effective rate of 6.4% as of October 1, 2022). The debt is secured by substantially all business assets. This refinancing amendment was accounted for as a modification and as such no gain or loss was recognized for this transaction and any bank fees, original issue discount and charges capitalized are being amortized as a component of interest expense over the remaining loan term. Third party fees paid in connection with this amendment were expensed.

As of October 1, 2022 and January 1, 2022, the Company maintained one letter of credit totaling approximately $400 on which there were no balances due.

In connection with the Company entering into the First Lien debt agreement discussed above, deferred finance fees were capitalized. Amortization of approximately $865 and $800 and $2,573 and $2,286 was recognized for the three and nine months ended October 1, 2022 and September 25, 2021, respectively, as a component of interest expense, including those amounts amortized in relation to the deferred finance fees associated with the outstanding line of credit.

9. Business Combinations

Access Control Technologies, LLC Acquisition

On August 31, 2021, Janus Core acquired 100% of the equity interests of ACT and all assets and certain liabilities of Phoenix Iron Worx, LLC for total consideration of approximately $10,385 which was comprised of approximately $9,383 of cash plus $1,002 of hold back

liability.

The assets and liabilities of the acquisitions have been recorded based upon management's estimates of their fair market values as of each

respective date of acquisition. The following tables summarize the fair values of consideration transferred and the fair values of identified

assets acquired, and liabilities assumed at the date of acquisition:


Janus International Group, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements


Fair Value of Consideration Transferred
Cash	$	9,383
Hold Back Liability	1,002
Total Fair Value of Consideration Transferred	$	10,385
Recognized Amounts of Identifiable Assets Acquired and Liabilities Assumed
Cash	169
Accounts receivable	1,101

Other current assets