jbi-20230701

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 July 1, 2023


☐			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 August 4, 2023, 146,827,066 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



			Page
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS			3
PART I--FINANCIAL INFORMATION			4
Item 1. Financial Statements			4
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations			25
Item 3. Quantitative and Qualitative Disclosures About Market Risk			43
Item 4. Controls and Procedures			43
PART II--OTHER INFORMATION			44
Item 1. Legal Proceedings			44
Item 1A. Risk Factors			44
Item 2. Unregistered Sales of Equity and Use of Proceeds			44
Item 3. Defaults upon Senior Securities			44
Item 4. Mine Safety Disclosures			44
Item 5. Other Information			44
Item 6. Exhibits			45
SIGNATURES			46

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 our or our 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,” “would”, 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;

•any failure to effectively manage, and receive anticipated returns from, acquisitions, divestitures, investments, joint ventures and other portfolio actions;

•fluctuations in the demand for our products and services;

•the impact of supply chain disruptions and inflation and our ability to recoup rising costs in the rates we charge to our customers;

•the possibility that we may impair our long-lived assets and other assets, including inventory, property and equipment and investments in unconsolidated affiliates;

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

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

•the possibility of significant changes in foreign exchange rates and controls;

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

•general economic conditions, including the capital and credit markets;

•the possibility of political instability, war or acts of terrorism in any of the countries where we operate; 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 2022 Annual Report on Form 10-K for the year ended December 31, 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. Except to the extent required by applicable law or regulation we undertake no obligation to update these forward-looking statements 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 - Unaudited)


	July 1,		December 31,
	2023		2022
ASSETS
Current Assets
Cash	$	110,707	$	78,373
Accounts receivable, less allowance for credit losses; $5,389 and $4,549, at July 1, 2023 and December 31, 2022, respectively	156,018		155,397
Contract assets	50,171		39,251
Inventory, net	59,573		67,677
Prepaid expenses	10,125		9,098
Other current assets	3,912		13,381
Total current assets	$	390,506	$	363,177
Right-of-use assets, net	43,428		44,305
Property and equipment, net	47,183		42,083
Intangible assets, net	390,186		404,385
Goodwill	368,523		368,204
Deferred tax asset, net	46,601		46,601
Other assets	1,702		1,863
Total assets	$	1,288,129	$	1,270,618
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
Accounts payable	$	55,666	$	52,268
Billing in excess of costs	18,840		21,445
Current maturities of long-term debt	8,854		8,347
Accrued expenses and other current liabilities	72,248		70,551
Total current liabilities	$	155,608	$	152,611
Long-term debt, net	649,220		699,850
Deferred tax liability, net	1,751		1,927
Other long-term liabilities	38,576		40,944
Total liabilities	$	845,155	$	895,332
STOCKHOLDERS’ EQUITY
Common Stock, 825,000,000 shares authorized, $0.0001 par value, 146,825,494 and 146,703,894 shares issued and outstanding at July 1, 2023 and December 31, 2022, respectively	15		15
Treasury stock, at cost, 18,638 and zero shares as of July 1, 2023 and December 31, 2022, respectively	(184)		—
Additional paid-in capital	285,495		281,914
Accumulated other comprehensive loss	(3,474)		(4,796)
Retained earnings	161,122		98,153
Total stockholders’ equity	$	442,974	$	375,286
Total liabilities and stockholders’ equity	$	1,288,129	$	1,270,618

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 - Unaudited)


	Three Months Ended				Six months ended
	July 1, 2023		July 2, 2022		July 1, 2023		July 2, 2022

REVENUES
Product revenues	$	232,831	$	219,022	$	448,239	$	420,849
Service revenues	37,780		28,692		74,277		56,385
Total Revenues	270,611		247,714		522,516		477,234
Product cost of revenues	126,342		142,391		250,701		274,165
Service cost of revenues	27,949		21,342		55,561		42,519
Cost of Revenues	154,291		163,733		306,262		316,684
GROSS PROFIT	116,320		83,981		216,254		160,550
OPERATING EXPENSE
Selling and marketing	16,721		14,389		31,542		27,739
General and administrative	35,316		29,743		69,416		57,849
Operating Expenses	52,037		44,132		100,958		85,588
INCOME FROM OPERATIONS	64,283		39,849		115,296		74,962
Interest expense	(14,797)		(8,868)		(30,796)		(17,643)
Other expense	(145)		(342)		(161)		(369)
INCOME BEFORE TAXES	49,341		30,639		84,339		56,950
Provision for Income Taxes	12,354		7,802		21,370		14,409
NET INCOME	$	36,987	$	22,837	$	62,969	$	42,541
Other Comprehensive Income (Loss)	631		(3,387)		1,322		(3,901)
COMPREHENSIVE INCOME	37,618		19,450		64,291		38,640
Net income attributable to common stockholders	$	36,987	$	22,837	$	62,969	$	42,541
Weighted-average shares outstanding, basic and diluted (Note 12)
Basic	146,765,631		146,575,720		146,734,762		146,568,719
Diluted	146,772,157		146,717,937		146,762,029		146,648,306
Net income per share, basic and diluted (Note 12)
Basic	$	0.25	$	0.16	$	0.43	$	0.29
Diluted	$	0.25	$	0.16	$	0.43	$	0.29

See accompanying Notes to the Unaudited Condensed Consolidated Financial Statements


Janus International Group, Inc.

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


	Class A Preferred Units (1,000,000 shares authorized par value of .0001)			Common Stock			Additional paid-in capital		Accumulated Other Comprehensive Loss		Retained Earnings (Accumulated Deficit)		Total
	Shares	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
Share-based compensation	—	—		77,660	—		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

(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 in the Annual Report on Form 10-K, for the year ended December 31, 2022, for further details of the impact of each standard.


	Class A Preferred Units (1,000,000 shares authorized par value of .0001)			Common Stock			Treasury Stock			Additional paid-in capital		Accumulated Other Comprehensive Loss		Retained Earnings		Total
	Shares	Amount		Shares	Amount		Shares	Amount
Balance as of December 31, 2022	—	$	—	146,703,894	$	15	—	$	—	$	281,914	$	(4,796)	$	98,153	$	375,286
Issuance of restricted units	—	—		58,790	—		—	—		—		—		—		—
Shares withheld for taxes upon vesting of restricted units	—	—		(18,520)	—		18,520	(183)		—		—		—		(183)
Share-based compensation	—	—		—	—		—	—		1,830		—		—		1,830
Cumulative translation adjustment	—	—		—	—		—	—		—		691		—		691
Net income	—	—		—	—		—	—		—		—		25,982		25,982
Balance as of April 1, 2023	—	$	—	146,744,164	$	15	18,520	$	(183)	$	283,744	$	(4,105)	$	124,135	$	403,606
Issuance of restricted units	—	—		81,448	—		—	—		—		—		—		—
Shares withheld for taxes upon vesting of restricted units	—	—		(118)	—		118	(1)		—		—		—		(1)
Share-based compensation	—	—		—	—		—	—		1,751		—		—		1,751
Cumulative translation adjustment	—	—		—	—		—	—		—		631		—		631
Net income	—	—		—	—		—	—		—		—		36,987		36,987
Balance as of July 1, 2023	—	$	—	146,825,494	$	15	18,638	$	(184)	$	285,495	$	(3,474)	$	161,122	$	442,974

See accompanying Notes to the Unaudited Condensed Consolidated Financial Statements


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


	Six Months Ended
	July 1, 2023		July 2, 2022

Cash Flows Provided By Operating Activities
Net income	$	62,969	$	42,541
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation of property and equipment	4,369		3,835
Reduction in carrying amount of right-of-use assets	3,048		2,615
Change in inventory obsolescence reserve	(829)		(253)
Amortization of intangibles	14,837		14,871
Deferred finance fee amortization	2,196		1,832
Provision for losses on accounts receivable	844		1,158
Share-based compensation	3,581		1,510
Loss (gain) on sale of equipment	54		(28)
Loss on abandonment of lease	—		571
Loss (gain) on equity investment	53		(60)
Changes in operating assets and liabilities
Accounts receivable	(973)		(26,682)
Contract assets	(10,776)		1,406
Prepaid expenses and other current assets	8,410		2,481
Inventory	9,125		(9,920)
Other assets	2,002		39
Accounts payable	3,188		1,464
Billings in excess of costs	(2,866)		2,877
Accrued expenses and other current liabilities	2,006		4,094
Long-term liabilities	(4,639)		(1,199)
Net Cash Provided By Operating Activities	$	96,599	$	43,152
Cash Flows Used In Investing Activities
Proceeds from sale of equipment	$	17	$	45
Purchases of property and equipment	(9,602)		(5,268)
Cash paid for acquisitions, net of cash acquired	(1,002)		—
Net Cash Used In Investing Activities	$	(10,587)	$	(5,223)
Cash Flows Used In Financing Activities
Payments on line of credit	$	—	$	(6,369)
Principal payments on long-term debt	(54,034)		(4,034)
Principal payments under finance lease obligations	(268)		(66)
Cash Used In Financing Activities	$	(54,302)	$	(10,469)
Effect of exchange rate changes on cash	$	624	$	66
Net Increase in Cash	$	32,334	$	27,526
Cash, Beginning of Period	$	78,373	$	13,192
Cash, End of Period	$	110,707	$	40,718
Supplemental Cash Flows Information
Interest paid	$	28,448	$	18,296
Income taxes paid	$	11,226	$	11,889
Cash paid for operating leases included in operating activities	$	4,101	$	3,832
Non-cash investing and financing activities:
Right-of-use assets obtained in exchange for operating lease obligations	$	39	$	42,380
Right-of-use assets obtained in exchange for finance lease obligations	$	2,102	$	706
RSU Shares withheld related to employee taxes	$	184	$	—

See accompanying Notes to the Unaudited Condensed Consolidated Financial Statements


Janus International Group, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

1.Nature of Operations

Janus International Group, Inc. is a holding company incorporated in Delaware. References to “Janus,” “Group,” “Company,” “we,” “our” or “us” refer to Janus International Group, Inc. and its consolidated subsidiaries. The Company is a global manufacturer, supplier, and provider of turn-key self-storage, commercial, and industrial building solutions. The Company provides facility and door automation and access control technologies, roll up and swing doors, hallway systems, and relocatable storage “MASS” (Moveable Additional Storage Structures) units, among other solutions, and works with its customers throughout every phase of a project by providing solutions spanning from facility planning and design, construction, technology, and the restoration, rebuilding, and replacement (“R3”) of damaged or end-of-life products.

The Company is headquartered in Temple, Georgia, and has domestic operations in Georgia, Texas, Arizona, Indiana, North Carolina, with international operations in United Kingdom, Australia, and Singapore. The Company provides products and services through its two operating and reportable segments which are based on the geographic region of its operations: (i) Janus North America and (ii) Janus International. The Janus International segment is comprised of Janus International Europe Holdings Ltd. (UK) (“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 together with each of its operating subsidiaries, Betco, Inc. (“BETCO”), Nokē, Inc. (“NOKE”), Asta Industries, Inc. (“ASTA”), Access Control Technologies, LLC (“ACT”), Janus Door, LLC and Steel Door Depot.com, LLC. The Company’s common stock is currently traded on the New York Stock Exchange under the symbol “JBI”.

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.

Assets held at foreign locations were approximately $65,393 and $61,144 as of July 1, 2023 and December 31, 2022, respectively. Revenues earned at foreign locations totaled approximately $21,209 and $20,324 for the three months ended July 1, 2023 and July 2, 2022, respectively, and $42,782 and $38,238 for the six months ended July 1, 2023 and July 2, 2022, respectively.

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying consolidated financial statements are presented in U.S. dollars and have been prepared in accordance with U.S. GAAP and pursuant to the applicable rules and regulations of the SEC. 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 July 1, 2023, and its results of operations, including its comprehensive income and stockholders’ equity for the six months ended July 1, 2023 and July 2, 2022. The year-end condensed consolidated balance sheet data was derived from audited financial statement, but does not include all disclosures required by accounting principles generally accepted in the United States of America. 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 December 31, 2022.

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.

Reclassification

Certain items have been reclassified in the prior year financial statements to conform to the presentation and classifications used in the current year. These reclassifications had no effect on our previously reported results of operations or retained earnings.

Prior Period Financial Statement Correction of Immaterial Error

Subsequent to the issuance of the fiscal year 2022 Form 10-K consolidated financial statements, an immaterial error was identified relating to certain contracts that were recognized as revenue based on two performance obligations, but it was subsequently determined that the performance obligations were not distinct within the context of the contract with the customer. The correction of this immaterial error led to a presentation change on the condensed consolidated statement of operations and comprehensive income and in Footnote 13 to the condensed consolidated financial statements for the three and six-month periods ended July 2, 2022, as illustrated in the table below. These presentation changes had no effect on our previously reported results of operations or retained earnings.


Janus International Group, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

The effect of correcting the immaterial error in the condensed consolidated financial statements for the three and six month periods ended July 1, 2023 is shown in the following table:


	As previously reported		Correction		As adjusted
Condensed Consolidated Statements of Operations and Comprehensive Income
Three Months Ended July 2, 2022
Product Revenues	$	213,969	$	5,053	$	219,022
Service Revenues	33,745		(5,053)		28,692
	$	247,714	$	—	$	247,714
Six Months Ended July 2, 2022
Product Revenues	411,274		9,575		420,849
Service Revenues	65,960		(9,575)		56,385
	$	477,234	$	—	$	477,234
Footnote 13. Revenue Recognition
Reportable Segments by Timing of Revenue Recognition
Three Months Ended July 2, 2022
Janus North America
Product revenues transferred at a point in time	$	215,865	$	(19,922)	$	195,943
Product revenues transferred over time	—		24,975		24,975
Services revenues transferred over time	25,597		(5,053)		20,544
	$	241,462	$	—	$	241,462
Six Months Ended July 2, 2022
Janus North America
Product revenues transferred at a point in time	$	416,023	$	(43,180)	$	372,843
Product revenues transferred over time	—		52,754		52,754
Services revenues transferred over time	50,696		(9,574)		41,122
	$	466,719	$	—	$	466,719

Use of Estimates

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.

Significant items subject to such estimates and assumptions include, but are not limited to, income taxes and the effective tax rates, reserves

for inventory obsolescence, the recognition and valuation of unit-based compensation arrangements, the useful lives of property and equipment, estimated progress toward completion for certain revenue contracts, 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


Janus International Group, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

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 credit losses, and accounts 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 July 1, 2023 and December 31, 2022 due to its variable interest rate that is tied to the current SOFR 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.

Significant Accounting Policies

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 December 31, 2022.

Accounts Receivable and Allowance for Credit Losses

Accounts receivable are recorded at the invoiced amount and do not bear interest. Accounts receivable are stated at estimated net realizable value from the sale of products and services to established customers. All trade receivables are due in one year or less. The Company pools accounts receivable by customer type, commercial and self-storage, and by business units due to the similarity of risk characteristics within each group.

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.

At origination, we evaluate credit risk based on a variety of credit quality factors including prior payment experience, customer financial information, credit ratings, probabilities of default, industry trends, macroeconomic factors and other internal metrics. On an ongoing basis, we monitor credit quality based on past-due status as there is a meaningful correlation between the past-due status of customers and the risk of loss. In determining past-due status, we consider the receivable past due when any installment is over 30 days past due. Receivable balances are written off to the allowance for credit losses when, in the judgment of management, they are considered uncollectible. Revolving charge accounts are generally deemed to be uncollectible and written off to the allowance for credit losses when delinquency reaches 120 days, taking into consideration the financial condition of the customer.

The Company uses the loss-rate method in the CECL analysis for trade receivables and contract assets. The allowance for credit losses reflects the estimate of the amount of receivables that the Company will be unable to collect based on historical collection experience and, as applicable, current conditions and reasonable and supportable forecasts that affect collectability. The Company's estimate reflects changing circumstances, including changes in the economy or in the particular circumstances of individual customers. Accordingly, the Company may be required to increase or decrease its allowance.

The activity for the allowance for credit losses during the six months ended July 1, 2023 and the fiscal year ended December 31, 2022, is as follows:


	July 1, 2023		December 31, 2022
Balance at beginning of period	$	4,549	$	5,449
CECL Adoption (1)	—		366
Write-offs	(4)		(2,949)
Provision (reversal), net	844		1,683
Balance at end of period	$	5,389	$	4,549

(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.


Janus International Group, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

Product Warranties

The Company records a liability for product warranties at the time of the related sale of goods. The liability is estimated using historical warranty experience, projected claim rates and expected costs per claim. The Company adjusts its liability for specific warranty matters when they become known and the exposure can be estimated. Product failure rates as well as material usage and labor costs incurred in correcting a product failure affect the Company's warranty liabilities. If actual costs differ from estimated costs, the Company must make a revision to the warranty liability. Generally, the Company offers warranties ranging between 1-3 years for our products with the exception of roofing at one of our business units which is up to 10 years.

The activity related to product warranty liabilities recorded in Accrued expenses and other current liabilities, during the six months ended July 1, 2023 and the fiscal year ended December 31, 2022, is as follows:


	July 1, 2023		December 31, 2022
Balance at beginning of period	$	876	$	736
Aggregate changes in the product warranty liability	608		140
Balance at end of period	$	1,484	$	876

Concentrations of Risk

Financial instruments that are potentially subject to concentration of credit risk consist primarily of cash and accounts receivable. The Company maintains cash in bank deposit accounts that, at times, may exceed the insured limits of the local country. The Company has not experienced any losses in such accounts. The Company sells its products and services mainly in the United States and European regions. The Company performs ongoing evaluations of its customers’ financial condition and limits the amount of credit extended when deemed necessary. The Company generally does not require its customers to provide collateral or other security to support accounts receivable. As of July 1, 2023 and December 31, 2022, no customer accounted for more than 10% of the accounts receivable balance.

Segments

The Company manages its operations through two operating and reportable segments: Janus North America and Janus International. These segments align the Company’s products and service offerings based on the geographic location between North America and International locations which is consistent with how the Company’s Chief Executive Officer, its Chief Operating Decision Maker (“CODM”), reviews and evaluates the Company’s operations. The CODM allocates resources and evaluates the financial performance of each operating segment. The Company’s segments are strategic businesses that are managed separately because each one develops, manufactures and markets distinct products and services. Refer to Note 14, Segments, for further detail.

Recently Adopted Accounting Pronouncements

On January 1, 2023, the Company adopted ASU 2021-08, Business Combinations (Topic 805) Accounting for Contract Assets and Contract Liabilities from Contracts with Customers ("ASU 2021-08"), which amends ASC 805, Business Combinations (Topic 805), to add contract assets and contract liabilities to the list of exceptions to the recognition and measurement principles that apply to business combinations and to require that an acquiring entity recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with ASC 606, Revenue from Contracts with Customers (Topic 606) ("ASC 606"). Janus will be applying the pronouncement prospectively to business combinations occurring on or after the adoption date.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting and subsequent amendment to the initial guidance: ASU 2021-01, Reference Rate Reform (Topic 848): Scope (collectively, “Topic 848”). Topic 848 provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. In December 2022, the FASB issued ASU 2022-06, Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848. ASU 2022-06 defers the sunset date of Topic 848 from December 31, 2022, to December 31, 2024. Effective April 2, 2023, the Company transitioned its credit agreements from LIBOR to the Secured Overnight Financing Rate ("SOFR"). The Company adopted this guidance prospectively on April 2, 2023, and the adoption did not have a material impact on the Consolidated Condensed Financial Statements.

Recently Issued Accounting Pronouncements

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


Janus International Group, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

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 July 1, 2023 and December 31, 2022 are as follows:


	July 1,		December 31,
	2023		2022
Raw materials	$	41,954	$	49,788
Work-in-process	581		1,566
Finished goods	17,038		16,323
Inventory, net	$	59,573	$	67,677

The Company has recorded a reserve for inventory obsolescence as of July 1, 2023 and December 31, 2022, of approximately $2,872 and $2,034, respectively.

4. Property and Equipment

Property, equipment, and other fixed assets as of July 1, 2023 and December 31, 2022 are as follows:


		July 1,		December 31,
	Useful Life	2023		2022
Land	Indefinite	$	4,501	$	4,501
Building	39 years	2,459		2,459
Manufacturing machinery and equipment	3-7 years	40,689		38,814
Leasehold improvements	Over the shorter of the lease term or respective useful life	9,731		8,327
Computer and software	3 years	3,877		9,580
Furniture and fixtures, and vehicles	3-7 years	8,457		3,623
Construction in progress	—	8,095		1,852
		$	77,809	$	69,156
Less: accumulated depreciation		(30,626)		(27,073)
		$	47,183	$	42,083

Depreciation expense was approximately $2,189 and $1,978 for the three month periods ended July 1, 2023 and July 2, 2022, respectively, and $4,369 and $3,835 for the six months ended July 1, 2023 and July 2, 2022, respectively.

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 July 1, 2023 and December 31, 2022, are as follows:


		July 1,						December 31,
		2023						2022
		Gross Carrying Amount		Accumulated Amortization		Net Amount		Gross Carrying Amount		Accumulated Amortization		Net Amount
Intangible Assets	Useful Life
Customer relationships	10-15 years	$	408,853	$	139,910	$	268,943	$	408,246	$	125,613	$	282,633
Tradenames and trademarks	Indefinite	107,613		—		107,613		107,378		—		107,378
Software development	10-15 years	20,320		6,808		13,512		20,320		6,085		14,235
Noncompete agreements	3-8 years	396		278		118		394		255		139
Backlog	< 1 year	—		—		—		41,390		41,390		—
		$	537,182	$	146,996	$	390,186	$	577,728	$	173,343	$	404,385

Changes to gross carrying amount of recognized intangible assets due to translation adjustments include an approximate $638 gain and $1,972 gain for the periods ended July 1, 2023 and December 31, 2022, respectively. The amortization of intangible assets is included in the general and administrative expense on the Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income.


Janus International Group, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

Amortization expense was approximately $7,421 and $7,646 for the three month periods ended July 1, 2023 and July 2, 2022, respectively, and $14,837 and $14,871 for the six months ended July 1, 2023 and July 2, 2022, respectively.

The changes in the carrying amounts of goodwill for the period ended July 1, 2023 were as follows:


Balance as of December 31, 2022	$	368,204
Foreign Currency Translation Adjustment	319
Balance as of July 1, 2023	$	368,523

6. Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities are summarized as follows:


	July 1,		December 31,
	2023		2022
Customer deposits	$	34,089	$	29,581
Employee compensation	13,474		16,520
Current operating lease liabilities	5,248		5,310
Sales tax payable	5,800		5,144
Income taxes	1,026		773
Accrued professional fees	2,652		3,594
Product warranties	1,256		876
Accrued freight	951		1,177
Interest payable	386		235
Indemnity holdback liability	—		1,002
Other liabilities	7,366		6,339
Total	$	72,248	$	70,551

Other liabilities as of July 1, 2023 and December 31, 2022 consists of property tax, credit card and various other accruals.


Janus International Group, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

7. Line of Credit

On April 10, 2023, the Company entered into Amendment Number Three to the ABL Credit and Guarantee Agreement (the “LOC Amendment”) to that certain ABL Credit and Guarantee Agreement, dated as of February 12, 2018 (the “LOC Agreement”). The Amendment, among other things, (i) replaced the interest rate based on the LIBOR and related LIBOR-based mechanics applicable to borrowings under the ABL Credit and Guarantee Agreement with an interest rate based on the Secured Overnight Financing Rate (“SOFR”) and related SOFR-based mechanics and (ii) updates certain other provisions of the ABL Credit and Guarantee Agreement to reflect the transition from LIBOR to SOFR.

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 SOFR Rate (as defined in the LOC Agreement) option is chosen by the Company. If the SOFR Rate is elected, the interest computation is equal to the SOFR Rate plus the SOFR Rate Margin of 1.25%, as of July 1, 2023. 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 SOFR 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 July 1, 2023. 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 July 1, 2023 and December 31, 2022, the interest rate in effect for the facility was 8.5% and 7.8%, 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 straight-line 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. Amortization of approximately $62 was recognized for both the three month periods ended July 1, 2023 and July 2, 2022, and $123 was recognized for both the six month periods ended July 1, 2023 and July 2, 2022. The unamortized portion of the fees as of July 1, 2023 and December 31, 2022 was approximately $279 and $402, respectively. There were no borrowings outstanding on the line of credit as of July 1, 2023 and December 31, 2022.

8. Long-Term Debt

Long-term debt consists of the following:


	July 1,		December 31,
	2023		2022
Note payable - Amendment No.5 First Lien	$	660,279	$	714,312
Financing leases	2,880		1,043
	$	663,159	$	715,355
Less: unamortized deferred finance fees	5,085		7,158
Less: current maturities	8,854		8,347
Total long-term debt	$	649,220	$	699,850

Notes Payable - Amendment No.4 First Lien - On August 18, 2021, the Company completed an incremental raise in the form of that certain Incremental Amendment No. 4 (the “Amendment No. 4 First Lien”) to the First Lien Term Loan. The Amendment No. 4 First Lien is comprised of a syndicate of lenders modified on August 18, 2021 for an aggregate principal balance of $726,413 with interest payable in arrears. The outstanding loan balance is to be repaid on a quarterly basis of 0.28% of the original balance beginning the last day of September 2021 with the remaining principal due on the maturity date of February 12, 2025. During the six months ended July 1, 2023, the Company made a voluntary prepayment of $50,000 on the Amendment No. 4 First Lien.

Notes Payable - Amendment No.5 First Lien - On June 20, 2023, the Company entered into Amendment No. 5 (the “Amendment No. 5 First Lien”) to the First Lien Term Loan. The Amendment No. 5 First Lien, among other things, (i) replaces the interest rate based on the London Interbank Offered Rate (“LIBOR”) and related LIBOR-based mechanics applicable to borrowings under the Agreement with an interest rate based on the Secured Overnight Financing Rate (“SOFR”) and related SOFR-based mechanics and (ii) updates certain other provisions of the Agreement to reflect the transition from LIBOR to SOFR. As chosen by the Company, the amended loan bears interest at a floating rate per annum consisting of SOFR, plus an applicable margin percent (effective rate of 8.5% as of July 1, 2023). The debt is secured by substantially all business assets.

In connection with the Company entering into the First Lien debt agreement discussed above, deferred finance fees were capitalized and are being amortized using the effective interest method. Amortization of approximately $789 and $858 was recognized for the three months ended July 1, 2023 and July 2, 2022, respectively. $2,073 and $1,709 was recognized for the six months ended July 1, 2023 and July 2, 2022, respectively, as a component of interest expense. The increase during the six months ended July 1, 2023, was primarily a result of the voluntary prepayment as noted above.

As of July 1, 2023 and December 31, 2022, the Company maintained one letter of credit totaling approximately $400 on which there were no balances due.


Janus International Group, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

9. Leases

At lease commencement, a right-of-use (“ROU”) asset and lease liability is recorded based on the present value of the future lease payments over the lease term. The Company has elected not to recognize a ROU asset and lease liability for leases with terms of 12 months or less. The Company leases facilities, vehicles, and other equipment under long-term operating and financing leases with varying terms.

In addition to the base rent, real estate leases typically contain provisions for common-area maintenance and other similar service, which are considered non-lease components for accounting purposes. For our real estate leases, we apply a practical expedient to include these non-lease components in calculating the ROU asset and lease liability. Furthermore, for all other types of leases, the practical expedient was also elected whereby lease and non-lease components have been combined.

The Company uses the non-cancellable lease term unless it is reasonably certain that a renewal or termination option will be exercised. When available, the Company will use the rate implicit in the lease to discount lease payments to present value, however as most leases do not provide an implicit rate, the Company will estimate the incremental borrowing rate to discount the lease payments. The Company estimates the incremental borrowing rate based on the rates of interest that the Company would have to pay to borrow an amount equal to the lease payments on a collateralized basis, over a similar term, and in a similar economic environment. The ROU asset also includes any lease prepayments and initial direct costs, offset by lease incentives. The Company does not consider renewal periods or early terminations to be reasonably certain and are thus not included in the lease term for real estate or equipment assets.

The components of ROU assets and lease liabilities were as follows:


(in thousands)	Balance Sheet Classification	July 1, 2023		December 31, 2022
Assets:
Operating lease assets	Right-of-use assets, net	$	40,607	$	43,282
Finance lease assets	Right-of-use assets, net	2,821		1,023
Total leased assets		$	43,428	$	44,305
Liabilities:
Current:
Operating	Other accrued expenses	$	5,248	$	5,310
Financing	Current maturities of long-term debt	787		280
Noncurrent:
Operating	Other long-term liabilities	$	38,486	$	40,907
Financing	Long-term debt	2,093		763
Total lease liabilities		$	46,614	$	47,260

The components of lease expense were as follows:


	Three Months Ended		Three Months Ended		Six Months Ended		Six Months Ended
(in thousands)	July 1, 2023		July 2, 2022		July 1, 2023		July 2, 2022
Operating lease cost	$	2,145	$	2,018	$	4,289	$	4,005
Variable lease cost	159		80		321		165
Short-term lease cost	—		—		—		60
Finance lease cost:
Amortization of right-of-use assets	$	182	$	45	$	306	$	62
Interest on lease liabilities	49		9		79		12
Total lease cost	$	2,535	$	2,152	$	4,995	$	4,304

Other information related to leases was as follows:


	July 1, 2023	December 31, 2022
Weighted Average Remaining Lease Term (in years)
Operating Leases	9.44	9.66
Finance Leases	3.49	3.37
Weighted Average Discount Rate
Operating Leases	7.1%	7.1%
Finance Leases	8.3%	6.6%


Janus International Group, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

As of July 1, 2023, future minimum lease payments under noncancellable operating leases with initial or remaining lease terms in excess of one year were as follows:


(in thousands)
2023	$	4,153
2024	7,531
2025	6,668
2026	6,084
2027	5,309
Thereafter	31,864
Total future lease payments	$	61,609
Less: imputed interest	$	(17,875)
Present value of future lease payments	$	43,734

As of July 1, 2023, future minimum repayments of finance leases were as follows:


(in thousands)
2023	$	495
2024	990
2025	990
2026	480
2027	288
Thereafter	86
Total future lease payments	$	3,329
Less: imputed interest	$	(449)
Present value of future lease payments	$	2,880

10. Income Taxes

The Company is taxed as a Corporation for U.S. income tax purposes and similar sections of the state income tax laws. The Company’s effective tax rate is based on pre-tax earnings, enacted U.S. statutory tax rates, non-deductible expenses, and certain tax rate differences between U.S. and foreign jurisdictions. The foreign subsidiaries file income tax returns in the United Kingdom, France, Australia, and Singapore as necessary. For tax reporting purposes, the Company includes the taxable income or loss with respect to the 45% ownership in the joint venture operating in Mexico. The Company’s provision for income taxes consists of provisions for federal, state, and foreign income taxes. Deferred tax liabilities and assets attributable to different tax jurisdictions are not offset.

The provision for income taxes for the three and six months ended July 1, 2023 and July 2, 2022 includes amounts related to entities within the Company taxed as corporations in the United States, United Kingdom, France, Australia, and Singapore. The Company determines its provision for income taxes for interim periods using an estimate of its annual effective tax rate on year to date ordinary income and records any changes affecting the estimated annual effective tax rate in the interim period in which the change occurs. Additionally, the income tax effects of significant unusual or infrequently occurring items are recognized entirely within the interim period in which the event occurs.

During the three months ended July 1, 2023 and July 2, 2022, the Company recorded a total income tax provision of approximately $12,354 and $7,802 on pre-tax income of $49,341 and $30,639 resulting in an effective tax rate of 25.0% and 25.5%, respectively. During the six months ended July 1, 2023 and July 2, 2022, the Company recorded a total income tax provision of approximately $21,370 and $14,409 on pre-tax income of $84,339 and $56,950 resulting in an effective tax rate of 25.3% and 25.3%, respectively.

For the three and six months ended July 1, 2023, effective tax rates were primarily impacted by the change in statutory rate differentials, changes in estimated state income tax and apportionment rates, and permanent differences. For, the three and six months ended July 2, 2022, effective rates were primarily impacted by statutory rate differentials, changes in estimated tax rates, and permanent differences.


Janus International Group, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

11. Equity Compensation

2021 Omnibus Incentive Plan

The Company maintains its 2021 Omnibus Incentive Plan (the “Plan”) under which it grants stock-based awards to eligible directors, officers and employees in order to attract, retain and reward such individuals and strengthen the mutuality of interest between such individuals and the Company’s stockholders. The Plan allows the Company to issue and grant 15,125,000 shares.

The Company measures compensation expense for stock-based awards in accordance with ASC Topic 718, Compensation – Stock Compensation (“ASC 718”). During the six months ended July 1, 2023, the Company granted stock-based awards including restricted stock units (“RSUs”), performance-based restricted stock units (“PSUs”), and stock options under the Plan. The grant date fair value of RSUs are equal to the closing price of the Company’s common stock on either: (i) the date of grant; or (ii) the previous trading day, depending on the level of administration required. Forfeitures are recognized as they occur, any unvested RSUs or stock options are forfeited upon a “Termination of Service”, as defined in the Plan, or as otherwise provided in the applicable award agreement or determined by the Company’s Compensation Committee of the Board of Directors.

Restricted Stock Unit Grants

RSUs are subject to a vesting period between one and four years. RSU activity for the six months ended July 1, 2023 is as follows:

(dollar amounts in thousands, except share and per share data)


	Six Months Ended July 1, 2023
	RSUs	Weighted-Average Grant Date Fair Value
Unvested, outstanding at December 31, 2022	465,064	$	10.5
Granted	593,587	10.4
Vested	(140,238)	10.5
Forfeited	(14,659)	10.2
Unvested, outstanding at July 1, 2023	903,754	$	10.5

Stock-based compensation expense for RSUs is recognized straight line over the respective vesting period, reduced for actual forfeitures, and included in general and administrative expense in the accompanying Unaudited Condensed Consolidated Statement of Operations and Comprehensive Income. Total compensation expense related to the above awards was approximately $947 and $679 for the three months ended July 1, 2023 and July 2, 2022, respectively. Total compensation expense related to the above awards was approximately $1,584 and $1,278 for the six months ended July 1, 2023 and July 2, 2022, respectively. As of July 1, 2023, there was an aggregate of $8,494 of unrecognized expense related to the RSUs granted, which the Company expects to amortize over a weighted-average period of 2.62 years.

Performance-based Restricted Stock Unit Grants

PSU awards are based on the satisfaction of the Company’s performance metrics. The number of PSUs that become earned can range between 0% and 200% of the original target number of PSUs awarded for the 2022 and 2023 awards. PSUs are subject to a three-year performance cliff-vesting period.

PSUs activity for the six months ended July 1, 2023 is as follows:

(dollar amounts in thousands, except share and per share data)


	Six months ended July 1, 2023
	PSUs	Weighted-Average Grant Date Fair Value
Unvested, outstanding at December 31, 2022	252,923	$	9.5
Granted	229,091	10.6
Vested	—	—
Forfeited	—	—
Unvested, outstanding at July 1, 2023 (1)	482,014	$	10.0

1) This number excludes 252,923 performance stock units, which represents the incremental number of units that would be issued based on performance results from previously-granted PSU awards. The PSUs granted in 2022 are currently estimated at 200% of target.

Stock-based compensation expense for PSUs is recognized straight line over the requisite vesting period, reduced for actual forfeitures, and included in general and administrative expense in the accompanying Condensed Consolidated Statement of Operations and Comprehensive


Janus International Group, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

Income. Total compensation expense related to the PSUs was approximately $598 and $138 for the three months ended July 1, 2023 and July 2, 2022, respectively.

Total compensation expense related to the performance-based awards was approximately $1,591 and $138 for the six months ended July 1, 2023 and July 2, 2022, respectively. As of July 1, 2023, there was an aggregate of $4,391 of unrecognized expense related to the PSUs granted, which the Company expects to amortize over a weighted-average period of 1.96 years.

The above table represents PSUs assuming 100% of target payout at the time of the grant. Actual payouts can range between 0% and 200%, depending on performance results for the three-year performance period. As of July 1, 2023, the Company deemed the estimate of the PSUs granted in fiscal year ended December 31, 2022 to be issued at 200% of target, and have reflected such estimates within the share-based compensation expense. The Company estimates the PSU’s granted during the period ending July 1, 2023 to be issued at 100% of target.

The Actual payout of the 2022 grants will be in a range of 0% to 200%, depending on performance results for the three-year performance period from January 2, 2022, through December 28, 2024. The Actual payout of the 2023 grants will be in a range of 0% to 200%, depending on performance results for the three-year performance period from January 1, 2023, through December 27, 2025.

Stock Options

Stock options are granted by applying a Black-Scholes valuation model to determine the fair value on the grant date. Stock options are subject to a vesting period of either three or four years. Stock option awards typically vest in 33% or 25% annual installments on each annual anniversary of the vesting commencement date for the duration of the vesting period, and expire ten years from the grant date.

The principal assumptions utilized in valuing stock options include, the expected option life, the risk-free interest rate (an estimate based on the yield of United States Treasury zero coupon with a maturity equal to the expected life of the option), the expected stock price volatility using the historical and implied price volatility, and the expected dividend yield.

A summary of the assumptions used in determining the fair value of stock options is as follows:

(dollar amounts in thousands, except share and per share data)


	Six Months Ended July 1, 2023
Expected life of option (years)	6.00 - 6.25
Risk-free interest rate	2.9% - 3.7%
Expected volatility of the Company’s stock	45% - 48%
Expected dividend yield on the Company’s stock	—	%

Stock option activity for the six months ended July 1, 2023 is as follows:


	Six Months Ended July 1, 2023
	Stock Options	Weighted-Average Grant Date Fair Value		Weighted Average Remaining Contractual Life (in years)	Intrinsic value
Unvested, outstanding at December 31, 2022	700,729	$	4.5	9.8	$	0.2
Granted	18,796	5.3		9.7	0.1
Exercised	—	—		—	—
Vested	(175,175)	4.5		8.7	1.2
Forfeited	—	—		—	—
Unvested, outstanding at July 1, 2023	544,350	$	4.5	8.9	$	—
Vested not exercised at July 1, 2023	175,175	$	4.5	8.7	$	1.2

Stock-based compensation expense for stock options is recognized straight line over the respective vesting period, reduced for actual forfeitures, and included in general and administrative expense in the accompanying Unaudited Condensed Consolidated Statement of Operations and Comprehensive Income. Total compensation expense related to stock options was approximately $206 and $94 for the three months ended July 1, 2023 and July 2, 2022, respectively. Total compensation expense related to stock options was approximately $406 and $94 for the six months ended July 1, 2023 and July 2, 2022, respectively. Total unamortized stock-based compensation expense related to the unvested stock options was approximately $2,338, which the Company expects to amortize over a weighted-average period of 2.84 years.


Janus International Group, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

12. Net Income Per Share

Basic net income per share is computed based on the weighted average number of shares of common stock outstanding during the period. Diluted net income per share is computed based on the weighted average number of common shares outstanding plus the effect of dilutive potential common shares outstanding during the period using the treasury stock method. For the three and six months ended July 1, 2023 and July 2, 2022, dilutive potential common shares include stock options and unvested restricted stock units. Dilutive EPS excludes all common shares if their effect is anti-dilutive.

The following table sets forth the computation of basic and diluted EPS attributable to common stockholders for the three and six months ended July 1, 2023 and July 2, 2022 (in thousands, except share and per share data):


	Three Months Ended				Six Months Ended
	July 1, 2023		July 2, 2022		July 1, 2023		July 2, 2022
Numerator:
Net income attributable to common stockholders	$	36,987	$	22,837	$	62,969	$	42,541
Denominator:
Weighted average number of shares:
Basic	146,765,631		146,575,720		146,734,762		146,568,719
Adjustment for dilutive securities	6,526		142,217		27,267		79,587
Diluted	146,772,157		146,717,937		146,762,029		146,648,306
Basic net income per share attributable to common stockholders	$	0.25	$	0.16	$	0.43	$	0.29
Diluted net income per share attributable to common stockholders	$	0.25	$	0.16	$	0.43	$	0.29

13. Revenue Recognition

The Company accounts for a contract with a customer when both parties have approved the contract and are committed to perform their respective obligations, each party’s rights and payment terms can be identified, the contract has commercial substance, and it is probable that the Company will collect substantially all of the consideration to which it is entitled. Revenue is recognized when, or as, performance obligations are satisfied by transferring control of a promised good or service to a customer.

Contract Balances

Contract assets are the rights to consideration in exchange for goods and services that the Company has transferred to a customer. Unbilled receivables result from revenues recognized at a point-in-time and represent an unconditional right to payment subject primarily to the passage of time. Unbilled receivables are recognized as accounts receivable when they are billed. Costs in excess of billings result from revenues recognized over time and represent the net balance of billings that already occurred. Contract liabilities (billings in excess of costs) represent billings to a customer in excess of revenue that has been recognized over time.

Contract balances as of July 1, 2023 were as follows:


Costs in excess of billings at December 31, 2022	$	17,008
Unbilled receivables at December 31, 2022	$	22,243
Contract assets at December 31, 2022	$	39,251

Costs in excess of billings at July 1, 2023	$	17,600
Unbilled receivables at July 1, 2023	$	32,571
Contract assets at July 1, 2023	$	50,171

Billings in excess of cost at December 31, 2022	$	21,445
Billings in excess of cost at July 1, 2023	$	18,840

During the three and six months ended July 1, 2023, the Company recognized revenue of approximately $6,642 and $18,590 related to contract liabilities at December 31, 2022. This reduction was offset by new billings of approximately $7,171 and $15,985 for product and services for which there were unsatisfied performance obligations to customers and revenue had not yet been recognized for the three and six month periods ended July 1, 2023.


Janus International Group, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

The Company derives subscription revenue from continued software support and through the Nokē Smart Entry System, a product which provides mobile access for tenants and remote monitoring and tracking for operators. We determine standalone selling price for recurring software revenue by using the adjusted market assessment approach. The recurring revenue recognized from the Nokē Smart Entry System for the three months ended July 1, 2023 and July 2, 2022 was $774 and $316, respectively. The recurring revenue recognized from the Nokē Smart Entry System for the six months ended July 1, 2023 and July 2, 2022 was $1,208 and $611, respectively.

Disaggregation of Revenue

The principal categories we use to disaggregate revenues are by timing and sales channel of revenue recognition. The following disaggregation of revenues depict the Company’s reportable segment revenues by timing and sales channel of revenue recognition for the three and six months ended July 1, 2023 and July 2, 2022:

Revenue by Timing of Revenue Recognition


	Three Months Ended				Six Months Ended
Reportable Segments by Timing of Revenue Recognition	July 1, 2023		July 2, 2022		July 1, 2023		July 2, 2022
Janus North America
Product revenues transferred at a point in time(1)	$	204,548	$	195,943	$	381,847	$	372,843
Product revenues transferred over time(1)	27,700		24,975		60,584		52,754
Service revenues transferred over time(1)	29,061		20,544		57,092		41,122
	$	261,309	$	241,462	$	499,523	$	466,719
Janus International
Product revenues transferred at a point in time	$	12,038	$	12,176	$	25,143	$	22,975
Service revenues transferred over time	9,171		8,148		17,638		15,263
	$	21,209	$	20,324	$	42,781	$	38,238
Eliminations	$	(11,907)	$	(14,072)	$	(19,788)	$	(27,723)
Total Revenue	$	270,611	$	247,714	$	522,516	$	477,234

(1) These numbers have been revised for the three and six month periods ended July 2, 2022. See Note 2 to our Unaudited Condensed Consolidated Financial Statements for additional information.

Revenue by Sales Channel


	Three Months Ended				Six Months Ended
Reportable Segments by Sales Channel Revenue Recognition	July 1, 2023		July 2, 2022		July 1, 2023		July 2, 2022
Janus North America
Self Storage-New Construction	$	88,599	$	70,650	$	156,842	$	146,359
Self Storage-R3	78,022		69,431		160,275		131,003
Commercial and Others	94,688		101,381		182,406		189,357
	$	261,309	$	241,462	$	499,523	$	466,719
Janus International
Self Storage-New Construction	$	18,529	$	14,884	$	37,067	$	26,782
Self Storage-R3	2,680		5,440		5,714		11,456
	$	21,209	$	20,324	$	42,781	$	38,238
Eliminations	$	(11,907)	$	(14,072)	$	(19,788)	$	(27,723)
Total Revenue	$	270,611	$	247,714	$	522,516	$	477,234


Janus International Group, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

14. Segments Information

The Company operates its business and reports its results through two reportable segments: Janus North America and Janus International, in accordance with ASC Topic 280, Segment Reporting. The Janus International segment is comprised of JIE with its production and sales located largely in Europe. The Janus North America segment is comprised of all the other entities including Janus Core, BETCO, NOKE, ASTA, DBCI, ACT, Janus Door, U.S. Door, and Steel Door Depot.

Summarized financial information for the Company’s segments is shown in the following tables:


	Three Months Ended				Six Months Ended
	July 1,		July 2,		July 1,		July 2,
	2023		2022		2023		2022
Revenue
Janus North America	$	261,309	$	241,462	$	499,523	$	466,719
Janus International	21,209		20,324		42,781		38,238
Eliminations	(11,907)		(14,072)		(19,788)		(27,723)
Consolidated Revenue	$	270,611	$	247,714	$	522,516	$	477,234
Income From Operations
Janus North America	$	61,541	$	38,173	$	110,419	$	73,028
Janus International