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Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis provides information which Janus’s management believes is relevant to an assessment and understanding of the consolidated results of operations and financial condition. You should read the following discussion and analysis of Janus’s financial condition and results of operations in conjunction with the consolidated financial statements and notes thereto contained in this Annual Report on Form 10-K (this “Annual Report”).

See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K filed on March 29, 2023 for discussion and analysis of results of operations for the year ended December 31, 2022.

Certain information contained in this discussion and analysis or set forth elsewhere in this Annual Report, including information with respect to plans and strategy for Janus’s business, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the section entitled “Risk Factors,” Janus’s actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. Factors that could cause or contribute to such differences include, but are not limited to, capital expenditures, economic and competitive conditions, regulatory changes and other uncertainties, as well as those factors discussed below and elsewhere in this Annual Report. We assume no obligation to update any of these forward-looking statements.

Unless otherwise indicated or the context otherwise requires, references in this Management’s Discussion and Analysis of Financial Condition and Results of Operations section to “Midco” “Janus,” “we,” “us,” “our,” and other similar terms refer to Midco and its subsidiaries prior to the Business Combination and to Janus International Group Inc. (Parent) and its consolidated subsidiaries after giving effect to the Business Combination.

Percentage amounts included in this Annual Report have not in all cases been calculated on the basis of such rounded figures, but on the basis of such amounts prior to rounding. For this reason, percentage amounts in this Annual Report may vary from those obtained by performing the same calculations using the figures in our consolidated financial statements included elsewhere in this Annual Report. Certain other amounts that appear in this Annual Report may not sum due to rounding.

Dollar amounts are shown in millions of dollars, unless otherwise noted, and rounded to the nearest million except for share

and per share amounts.

Introduction

This Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is a supplement to the accompanying consolidated financial statements and provides additional information on our business, recent developments, financial condition, liquidity and capital resources, cash flows and results of operations. MD&A is organized as follows:

•Business Overview: This section provides a general description of our business, and a discussion of management’s general outlook regarding market demand, our competitive position and product innovation, as well as recent developments that are important to understanding our results of operations and financial condition or in understanding anticipated future trends.

•Basis of Presentation: This section provides a discussion of the basis on which our consolidated financial statements were prepared.

•Results of Operations: This section provides an analysis of our results of operations for the years ended December 30, 2023 and December 31, 2022.

•Liquidity and Capital Resources: This section provides a discussion of our financial condition and an analysis of our cash flows for the years ended December 30, 2023 and December 31, 2022. This section also provides a discussion of our contractual obligations, other purchase commitments and customer credit risk that existed at December 30, 2023, as well as a discussion of our ability to fund our future commitments and ongoing operating activities through internal and external sources of capital.

•Critical Accounting Estimates: This section identifies and summarizes those accounting estimates that significantly impact our reported results of operations and financial condition and require significant judgment or estimates on the part of management in their application.

Business Overview

Janus is a leading 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, United Kingdom, Australia, and Poland. The Company focuses on providing building solutions to two primary markets, providing building solutions to the self-storage industry and the broader commercial industrial market. The self-storage industry is comprised of institutional and non-institutional facilities. Institutional facilities typically include multi-story, climate-controlled facilities located in prime locations owned and/or managed by large REITs or returns-driven operators of scale and are primarily

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located in the top 50 MSAs, whereas the vast majority of non-institutional facilities are single-story, non-climate controlled facilities located outside of city centers owned and/or managed by smaller private operators that are mostly located outside of the top 50 U.S. MSAs. Janus is highly integrated with customers at every phase of a project, including facility planning/design, construction, access control and restore, rebuild, replace of damaged or end-of-life products.

Our 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 Holdings Ltd. (UK), whose production and sales are largely in Europe and Australia. The Janus North America segment is comprised of all the other entities including Janus International Group, LLC (“Janus Core”), Betco, Inc. (“BETCO”), Nokē, Inc. (“NOKE”), Asta Industries, Inc. (“ASTA”), DBCI, LLC (“DBCI”), Access Control Technologies, LLC (“ACT”), Janus Door, LLC (“Janus Door”), and Steel Door Depot.com, LLC (“Steel Door Depot”).

Furthermore, our business is comprised of three primary sales channels: New Construction-Self-storage, R3-Self-storage (R3), and Commercial and Other. The Commercial and Other category is primarily comprised of roll-up sheet and rolling steel door sales into the commercial marketplace.

New construction consists of engineering and project management work pertaining to the design, building, and logistics of a greenfield new self-storage facility tailored to customer specifications while being compliant with ADA regulations. Any Nokē Smart Entry System revenue associated with a new construction project also rolls up into this sales channel.

The concept of Janus R3 is to remodel self-storage facilities including storage unit doors, hallways, ceilings, offices, optimizing unit mix, utilizing vacant land for movable storage units (JBI MASS relocatable storage units), and adding a more robust security solutions to enable customers to (1) charge higher rental rates and (2) compete with modern self-storage facilities and large operators. In addition, the R3 sales channel also includes new self-storage capacity being brought online through conversions and expansions. R3 transforms facilities through door replacement, facility upgrades, Nokē Smart Entry Systems, and relocatable storage MASS.

Commercial light duty steel roll-up doors are designed for applications that require less frequent and less demanding operations. Janus offers heavy duty commercial grade steel doors (minimized dead-load, or constant weight of the curtain itself) perfect for warehouses, commercial buildings, and terminals, designed with a higher gauge and deeper guides, which combat the heavy scale of use with superior strength and durability. Janus also offers rolling steel doors known for minimal maintenance and easy installation with, but not limited to, the following options for; commercial slat doors, heavy duty service doors, fire doors, fire rated counter shutters, insulated service doors, counter shutters and grilles.

Executive Overview

Janus’s financials reflect the result of the execution of our operational and corporate strategy to penetrate the growth within the commercial storage market, expanding its self-storage market share, as well as capitalizing on the aging self-storage facilities, while continuing to diversify our products and solutions. Janus is a bespoke provider of not only products, but solutions that generate a favorable financial outcome for our clients.

Total revenues was $1,066.4 for the year ended December 30, 2023, representing an increase of 4.6% from $1,019.5 for the year ended December 31, 2022.

Net income was $135.7 for the year ended December 30, 2023, representing an increase of $28.0 from $107.7 for the year ended December 31, 2022. Adjusted EBITDA was $285.6 for the year ended December 30, 2023, representing a 25.9% increase from $226.9 for the year ended December 31, 2022. Adjusted EBITDA as a percentage of revenue was 26.8% for the year ended December 30, 2023, representing an increase of 4.5% from 22.3% for the year ended December 31, 2022. The increase in Adjusted EBITDA margins is a direct result of increased revenue primarily due to commercial actions taking full effect in third quarter of 2022 which was partially offset by the investments we made in our software center and inflationary costs.

Cash flows from operations was $215.0 for the year ended December 30, 2023, representing an increase of $126.5 from $88.5 for the year ended December 31, 2022. During the year ended December 30, 2023, Free Cash Flow to Non-GAAP Adjusted Net Income was 142%, compared to 73% during the year ended December 31, 2022. Free Cash Flow conversion is higher in 2023 due to higher net income adjusted for non cash items of $29.0 and changes in net working capital of $97.5.

During fiscal 2023, we did a voluntary paydown of our debt of $85.3 and refinanced our Term loan to a new $625.0 First Lien Note payable. In addition, we opened a new manufacturing facility in Poland as well as opened our new software center in Atlanta.

Information regarding use of Adjusted EBITDA and Free Cash Flow non-GAAP measures, and a reconciliation to the most comparable GAAP measure, is included in “Non-GAAP Financial Measures.”

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Business Segment Information

Our business is operated through two geographic regions that comprise our two reportable segments: Janus North America and Janus International.

Janus North America is comprised of eight entities including Janus Core, Janus Door, Steel Door Depot, ASTA, NOKE, BETCO, DBCI, and ACT. Janus North America produces and provides various fabricated components such as commercial and self-storage doors, walls, hallway systems and building components used primarily by owners or builders of self-storage facilities and also offers installation services along with the products. Janus North America represented 92.3% and 92.6% of Janus’s revenue for the years ended December 30, 2023 and December 31, 2022, respectively.

Janus International is comprised solely of one entity, Janus International Europe Holdings Ltd (UK). The Janus International segment produces and provides similar products and services as Janus North America but largely in Europe and Australia. Janus International represented 7.7% and 7.4% of Janus’s revenue for the years ended December 30, 2023 and December 31, 2022, respectively.

Key Performance Measures

Management evaluates the performance of its reportable segments based on the revenue of services and products, gross profit, operating margins, and cash from business operations. We use Adjusted EBITDA, which is a non-GAAP financial metric, as a supplemental measure of our performance in order to provide investors with an improved understanding of underlying performance trends. Please see the section “Non-GAAP Financial Measure” below for further discussion of this financial measure, including the reasons why we use such financial measures and reconciliations of such financial measures to the nearest GAAP financial measures.

Human capital is also one of the main cost drivers of the manufacturing, selling, and administrative processes of Janus. As a result, headcount reflect Janus’s operational status, indicating whether the business is expanding or contracting. We expect a continued rise in our workforce as we expand our operations. Additionally, we foresee the need to hire additional software personnel as we continue to expand the software accessibility component of our business. As of December 30, 2023, and December 31, 2022, the headcount was 2,305 (including 441 temporary employees) and 2,247 (including 551 temporary employees), respectively.

The following table sets forth key performance measures for the years ended December 30, 2023 and December 31, 2022

(dollar amounts in millions)

Year Ended Variance

Adjusted EBITDA (% of revenue) 26.8 % 22.3 % 4.5 %

Total revenues increased by $46.9 or 4.6% for the year ended December 30, 2023 compared to the year ended December 31, 2022, primarily due to commercial actions.

Adjusted EBITDA increased by $58.7 or 25.9% from the year ended December 30, 2023 compared to the year ended December 31, 2022, and Adjusted EBITDA as a percentage of revenue increased 4.5% for the year ended December 30, 2023 primarily due to increased revenue due to commercial actions taking full effect in third quarter 2022 which was partially offset by inflationary increases in labor and logistics costs. (See “Non-GAAP Financial Measures” section).

Basis of Presentation

The consolidated financial statements have been derived from the accounts of Janus and its wholly owned subsidiaries. Janus’s fiscal year follows a 4-4-5 calendar which divides a year into four quarters of 13 weeks, grouped into two 4-week “months” and one 5-week “month.” As a result, some monthly comparisons are not comparable as one month is longer than the other two. The major advantage of a 4-4-5 calendar is that the end date of the period is always the same day of the week, making manufacturing planning easier as every period is the same length. Every fifth or sixth year will require a 53rd week and the year ended January 1, 2022 was a year in which we added a 53rd week.

We have presented results of operations, including the related discussion and analysis for the year ended December 30, 2023 compared to the year ended December 31, 2022.

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Components of Results of Operations

Product revenues. Product revenues represent the sale of products, including steel roll-up and swing doors, rolling steel doors, steel structures, as well as hallway systems and facility and door automation technologies for commercial and self-storage customers. Product revenues are recognized upon transfer of control to the customer, which generally takes place at the point of destination. In certain instances, product revenues include all revenues affiliated with erecting an entire structure for our customers, which is recognized over-time. We expect our product revenue may vary from period to period on, among other things, the timing and size of orders and delivery of products and the impact of significant transactions. Revenues are monitored and analyzed as a function of sales reporting within the following sales channels, Self-Storage New Construction, Self-Storage R3, and Commercial and Other.

Service revenues. Service revenue reflects installation services to customers for steel structures, steel roll-up and swing doors, hallway systems, and relocatable storage units which is recognized over time based on the satisfaction of our performance obligation. Janus is highly integrated with customers at every phase of a project, including facility planning/design, construction, access control and R3 of damaged, or end-of-life products or rebranding of facilities due to market consolidation. Service obligations are primarily short term and completed within a one-year time period. We expect our service revenue to increase as we add new customers and our existing customers continue to add more and more content per square foot.

Product cost of revenues Product costs of revenues includes the manufacturing cost of our steel roll-up and swing doors, rolling steel doors, steel structures, and hallway systems which primarily consists of amounts paid to our third-party contract suppliers and personnel-related costs directly associated with manufacturing operations as well as overhead and indirect costs. Product costs of revenues also include all costs affiliated with erecting a self storage facility for our customers. We expect cost of revenues to increase in absolute dollars in future periods as we expect our revenues to continue to grow.

Service cost of revenues Cost of services includes third-party installation subcontractor costs directly associated with the installation of our products. Our cost of revenues include purchase price variance, cost of spare or replacement parts, warranty costs, excess and obsolete inventory charges, shipping costs, and an allocated portion of overhead costs, including depreciation. We expect cost of revenues to increase in absolute dollars in future periods as we expect our revenues to continue to grow.

Selling and marketing expense. Selling expenses consist primarily of compensation and benefits of employees engaged in selling activities as well as related travel, advertising, trade shows/conventions, meals and entertainment expenses. We expect selling expenses to increase in absolute dollars in future periods as we expect our revenues to continue to grow.

General and administrative expense. General and administrative (“G&A”) expenses are comprised primarily of expenses relating to employee compensation and benefits, travel, meals and entertainment expenses as well as depreciation, amortization, and public company costs. We expect general and administrative expenses to increase in absolute dollars in future periods as we expect our revenues to continue to grow. We also expect G&A expenses to increase in the near term as a result of operating as a public company, including expenses associated with compliance with the rules and regulations of the Commission, and an increase in legal, audit, insurance, investor relations, professional services and other administrative expenses.

Interest expense. Consists of interest expense on short-term and long-term debt and amortization of deferred financing fees (see “Long Term Debt” section).

Factors Affecting the Results of Operations

Key Factors Affecting the Business and Financial Statements

Management understands Janus’s performance and future growth depends on a number of factors that present significant opportunities but also pose risks and challenges.

Factors Affecting Revenues

Janus’s revenues from products sold are driven by economic conditions, which impacts new construction of self-storage facilities, R3 of self-storage facilities, and commercial revenue.

Janus periodically modifies sales prices of their products due to changes in costs for raw materials and energy, market conditions, labor and logistics costs and the competitive environment. In certain cases, realized price increases are less than the announced price increases because of project pricing, competitive reactions and changing market conditions. Janus also offers a wide assortment of products that are differentiated by style, design and performance attributes. Pricing and margins for products within the assortment vary. In addition, changes in the relative quantity of products purchased at different price points can impact year-to-year comparisons of net sales and operating income.

Service revenue is driven by the product revenue and the increase in value-added services, such as pre-work planning, site drawings, installation and general contracting, project management, and third-party security. Janus differentiates itself through on-time delivery, efficient installation, best in-class service, and a reputation for high quality products.

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Factors Affecting Growth Through Acquisitions

Janus’s business strategy involves growth through, among other things, the acquisition of other companies. Janus evaluates companies that it believes will strategically fit into its business and growth objectives, including those that will support its overall strategy of portfolio diversification, geographic expansion, and technological innovation, among other areas of focus. While Janus seeks acquisition opportunities that it believes will augment its business and growth objectives, certain factors could prevent acquisition opportunities from materializing, including target-company availability, relative valuation expectations, and certain due diligence considerations, among other factors.

Seasonality

Generally, Janus’s sales tend to be the slowest in the first and fourth quarters due to more unfavorable weather conditions, customer business cycles and the timing of renovation and new construction project launches.

Factors Affecting Operating Costs

Janus’s operating expenses are comprised of direct production costs (principally raw materials, labor and energy), manufacturing overhead costs, freight, costs to purchase sourced products and selling and marketing, and general and administrative expenses.

Janus’s largest individual raw material expenditure is steel coils. Fluctuations in the prices of steel coil are generally beyond Janus’s control and have a direct impact on the financial results. From time to time, Janus enters into agreements with large suppliers in order to lock in steel coil prices for part of Janus’s production needs and partially mitigate the potential impacts of short-term steel coil price fluctuations. This arrangement allows Janus to purchase quantities of product within specified ranges as outlined in the contracts. Outbound freight costs are driven by Janus’s volume of product revenues and are subject to the freight market pricing environment.

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Results of Operations - Consolidated

The period to period comparisons of our results of operations have been prepared using the historical periods included in our consolidated financial statements. The following discussion should be read in conjunction with the consolidated financial statements and related notes included elsewhere in this document. We have derived this data from our consolidated financial statements included elsewhere in this Annual Report. The following tables set forth our results of operations for the periods presented are in dollars.

A detailed discussion of the prior year 2022 to 2021 year-over-year changes is not included herein and can be found in the Management's Discussion and Analysis of Financial Condition and Results of Operations section in the 2022 Annual Report on Form 10-K filed March 29, 2023.

Results of Operations

(dollar amounts in millions)

Unaudited Quarterly Consolidated Results for the quarter ended December 30, 2023 compared to the quarter ended December 31, 2022

Three Months Ended Variance

REVENUE

OPERATING EXPENSE

Other income (expense) — 0.1 (0.1) (100.0) %

(1) These numbers have been revised for the year ended December 31, 2022. See Note 2 to our consolidated financial statements for additional information.

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For the year ended December 30, 2023 compared to the year ended December 31, 2022

Year Ended Variance

REVENUE

OPERATING EXPENSE

Loss on extinguishment and modification of debt (3.9) — (3.9) 100.0 %

(1) These numbers have been revised for the period ended December 31, 2022. See Note 2 to our consolidated financial statements for additional information.

Revenue

(dollar amounts in millions) Year Ended Variance

(1) Product revenues include product revenues transferred at a point in time and product revenues transferred over time.

The $46.9 revenue increase for the year ended December 30, 2023 compared to the year ended December 31, 2022 was due to growth in the New Construction and R3 self storage segments, and is 80% attributable to commercial actions. The 21.8% increase in service revenues is primarily attributable to an 11.1% increase in the New Construction and R3 self storage product revenues for the year ended December 30, 2023.

The following table and discussion compares Janus’s revenues by sales channel (dollar amounts in millions).

Year Ended Year Ended Variance

December 30, 2023 % of revenues December 31, 2022 % of revenues $ %

New construction revenues increased by $71.5 or 22.1% for the year ended December 30, 2023 compared to the year ended December 31, 2022. The increase in the year ended December 30, 2023 is primarily due to commercial actions and increased demand for capacity additions through greenfield sites.

R3 revenues increased by $13.8 or 4.3% for the year ended December 30, 2023 compared to the year ended December 31, 2022. The growth was primarily driven by the expansion of storage facilities and strategic adjustments in unit configurations, alongside favorable outcomes from commercial actions.

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Commercial and other revenues decreased by $38.4 or 10.2% for the year ended December 30, 2023 compared to the year ended December 31, 2022 due to shifts in demand for certain product lines, affecting both the commercial steel roll up door market and the rolling steel product line.

Cost of Revenues and Gross Margin

(dollar amounts in millions)

Gross margin increased by 6.4% to 42.2% for the year ended December 30, 2023 from 35.8% for the year ended December 31, 2022 primarily due to the commercial actions and cost containment initiatives taking effect in the second half of 2022, offset by increased labor and logistics costs.

Year Ended Variance

The $37.9 or 5.8% decrease in cost of revenues for the year ended December 30, 2023 compared to the year ended December 31, 2022, is attributable to a $73.4 decrease in material, due to cost containment initiatives, as well as the decrease in the demand for certain products within the commercial sales channel, partially offset by an increase of $17.1 in labor, freight and other costs of revenues. The $18.4 increase in installation cost of revenue supports the service revenue growth of $28.0 for the year ended December 30, 2023 compared to the year ended December 31, 2022.

Operating Expenses - Selling and marketing

Selling and marketing expense increased $7.2 or 12.3% for the year ended December 31, 2022 compared to the year ended December 30, 2023. The increase is primarily the result of a $4.1 rise in payroll related expenditures attributable to additional headcount in sales, along with a $1.2 increase in marketing and advertising expenses, and a $0.5 increase in travel-related costs.

Operating Expenses - General and administrative

General and administrative expenses rose by $19.4 or 16.3% for the year ended December 31, 2022 compared to the year ended December 30, 2023. This upward trend was primarily driven by a $13.2 increase in employee wages and benefits for additional headcount to support the continued top line revenue growth and additional expenses associated with the opening of the Atlanta software center. Additionally, there was a $2.9 uptick in stock-based compensation, and a $1.4 increase in sales and use taxes.

Interest Expense

Interest expense increased $18.0 or 42.9% for the year ended December 30, 2023 compared to the year ended December 31, 2022 due to an increase in the LIBOR / SOFR rate in 2023 and the term loan refinancing in August. (See “Liquidity and Capital Resources” section).

Income Taxes

Income tax expense increased by $9.5 or 25.3% to $47.1 for the year ended December 30, 2023 from $37.6 for the year ended December 31, 2022, due to the year over year increase of income before taxes.

Net Income

The $28.0 or 26.0% increase in net income for the year ended December 31, 2022 compared to the year ended December 30, 2023 is largely due to an increase in revenues and decrease in cost of revenues, offset by the increase in selling and general and administrative expenses, interest expense and income taxes.

Segment Results of Operations

We operate in and report financial results for two segments: North America and International with the following sales channels, Self-Storage New Construction, Self-Storage R3, and Commercial and Other.

Segment operating income is the measure of profit and loss that our chief operating decision maker uses to evaluate the financial performance of the business and as the basis for resource allocation, performance reviews and compensation. For these reasons segment operating income represents the most relevant measure of segment profit and loss. Our chief operating decision maker may exclude certain charges or gains, such as corporate charges and other special charges, to arrive at a segment operating income that is a more meaningful measure of profit and loss upon which to base our operating decisions. We define segment operating margin as segment operating income as a percentage of the segment’s Net revenues.

The segment discussion that follows describes the significant factors contributing to the changes in results for each segment included in net earnings.

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Results of Operations - Janus North America

(dollar amounts in millions)

For the year ended December 30, 2023 compared to the year ended December 31, 2022

Year Ended Variance

$ %

REVENUE

OPERATING EXPENSE

(1) These numbers have been revised for the year ended December 31, 2022. See Note 2 to our consolidated financial statements for additional information.

Revenue

(dollar amounts in millions) Year Ended Variance

(1) Product revenues include product revenues transferred at a point in time and product revenues transferred over time.

The $34.1 or 3.4% revenue increase was due to growth in the New Construction and R3 self storage segments and is 86% attributable to impact from our commercial actions for the year ended December 30, 2023. The service revenues increased by $25.5 or 26.4% due to the increase in the self storage product revenues, as illustrated in the below table, which have a larger service component to those contracts.

The following table and discussion compares Janus North America revenues by sales channel.

(in millions) Year Ended Variance

December 30, 2023 % of total revenues December 31, 2022 % of total revenues

$ %

New Construction revenues increased by $47.1 or 16.3% for the year ended December 30, 2023 compared to the year ended December 31, 2022 primarily due to commercial actions and increased demand for capacity additions through greenfield sites.

R3 revenues increased by $22.8 or 7.5% for the year ended December 30, 2023 compared to the year ended December 31, 2022. The growth was primarily driven by the expansion of storage facilities and strategic adjustments in unit configurations, alongside favorable outcomes from commercial actions.

Commercial and Other revenues decreased by $35.8 or 8.9% for the year ended December 30, 2023 compared to the year ended December 31, 2022 due to shifts in demand for certain product lines, affecting both the commercial steel roll up door market and the rolling steel product line.

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Cost of Revenues and Gross Margin

(dollar amounts in millions)

Gross Margin increased by 6.7% to 41.4% for the year ended December 30, 2023 from 34.7% for the year ended December 31, 2022 primarily due to the commercial actions and material cost containment initiatives taking effect in the second half of 2022, offset by the continued increased labor and logistics costs.

Year Ended Variance

The $46.4 or 7.1% decrease in cost of revenues for the year ended December 30, 2023 compared to the year ended December 31, 2022 is primarily due to a decrease in material due to cost containment initiatives, as well as the decrease in the demand for certain products within the commercial sales channel, partially offset by an increase in labor, and logistics costs.

Operating Expenses - Selling and marketing

Selling and marketing expenses increased $7.1 or 12.9% from $55.1 for the year ended December 31, 2022 to $62.2 for the year ended December 30, 2023 primarily due to increased marketing and trade show and payroll related costs for additional headcount to support revenue growth.

Operating Expenses - General and administrative

General and administrative expenses increased $18.3 or 17.1% from $107.1 for the year ended December 31, 2022 to $125.4 for the year ended December 30, 2023 primarily due to an increase in employee wages and benefits for additional headcount to support the continued top line revenue growth and additional expenses associated with the opening of the Atlanta software center.

Income from Operations

Income from operations increased by $55.1 or 30.1% from $183.1 for the year ended December 31, 2022 to $238.2 for the year ended December 30, 2023 due to an increase in gross margins offset by an increase in selling and marketing and general and administrative expenses.

Results of Operations - Janus International

(dollar amounts in millions)

For the year ended December 30, 2023 compared to the year ended December 31, 2022

Year Ended Variance

$ %

REVENUE

OPERATING EXPENSE

INCOME FROM OPERATIONS $ 7.8 $ 4.4 $ 3.4 77.3 %

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Revenue

(dollar amounts in millions)

Year Ended Variance

The $6.8 or 9.0% increase in revenues is 48% due to commercial actions instituted.

The following table illustrates the revenues by sales channel for the years ended December 30, 2023 and December 31, 2022 (dollar amounts in millions).

Year Ended Variance

December 30, 2023 % of totalrevenues December 31, 2022 % of totalrevenues $ %

New Construction revenues increased by $16.0 or 28.0% to $73.2 for the year ended December 30, 2023 from $57.2 for the year ended December 31, 2022. The increase was due to increased volumes, commercial actions, and higher occupancy rates at existing facilities, leading to a necessity for an expansion in capacity by operators.

R3 revenues decreased by $9.2 or 50.3% to $9.1 for the year ended December 30, 2023 from $18.3 for the year ended December 31, 2022 primarily due to customers focusing more on New Construction versus expanding their portfolio through expansions and retrofits or utilizing our portable MASS units.

Cost of revenues and Gross Margin

(dollar amounts in millions)

Gross Margin increased by 3.4% to 29.4% for the year ended December 30, 2023 from 26.0% for the year ended December 31, 2022.

The increase is primarily due to increased revenue resulting in improved absorption.

Year Ended Variance

Cost of revenues increased by $2.2 or 3.9% to $58.1 for the year ended December 30, 2023 from $55.9 for the year ended December 31, 2022.

Operating Expenses - General and administrative

General and administrative expenses increased $1.1 or 9.2% to 13.1 for the year ended December 30, 2023 from $12.0 for the year ended December 31, 2022. The increase for the year ended December 30, 2023 is primarily due to the setup costs associated with the Poland plant opening in the fourth quarter of 2023.

Income from Operations

Income from operations increased by $3.4 to $7.8 for the year ended December 30, 2023 from $4.4 for the year ended December 31, 2022. The increase was primarily due to an increase in revenues offset by the increase in general and administrative expenses.

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Results of Operations - Eliminations

(dollar amounts in millions)

Eliminations include transactions to account for intercompany activity. The eliminations necessary to arrive at consolidated financial information activity for the years December 30, 2023 and December 31, 2022 are as follows:

Revenues Year Ended

North America Segment revenues before eliminations $ 1,028.4 $ 994.3

International Segment revenues before eliminations 82.3 75.5

Cost of Revenues Year Ended

North America Segment cost of revenues before eliminations $ 602.6 $ 649.0

International Segment cost of revenues before eliminations 58.1 55.9

Consolidated total cost of revenues $ 616.7 $ 654.6

1) Cost of revenues eliminations for the year ended December 30, 2023 includes intercompany profit in inventory eliminations.

Revenues by Sales Channel

North America Revenues International Revenues Eliminations Consolidated Revenues

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Non-GAAP Financial Measures

(dollar amounts in millions)

Janus uses measures of performance that are not required by or presented in accordance with GAAP in the United States. Non-GAAP financial performance measures are used to supplement the financial information presented on a GAAP basis. These non-GAAP financial measures should not be considered in isolation or as a substitute for the relevant GAAP measures and should be read in conjunction with information presented on a GAAP basis.

Adjusted EBITDA

Janus presents Adjusted EBITDA which is a non-GAAP financial performance measure, which excludes from reported GAAP results, the impact of certain items consisting of acquisition events and other non-recurring charges. Such expenses, charges, and gains are not indicative of Janus’s normal, ongoing operations, and their inclusion in results makes for more difficult comparisons between years and with peer group companies.

Adjusted EBITDA is used by Janus to evaluate its operating performance, generate future operating plans, and make strategic decisions, including those relating to operating expenses and the allocation of internal resources. Accordingly, these measures provide useful information to investors and others in understanding and evaluating Janus’s operating results in the same manner as its management and board of directors. In addition, they provide useful measures for period-to-period comparisons of Janus’s business, as they remove the effect of certain non-cash items and certain variable charges. Adjusted EBITDA is defined as net income excluding interest expense, income taxes, depreciation expense, amortization, and other non-operational, non-recurring items.

Adjusted EBITDA should not be considered in isolation of, or as an alternative to, measures prepared in accordance with GAAP. There are a number of limitations related to the use of Adjusted EBITDA rather than net income, which is the nearest GAAP equivalent of Adjusted EBITDA. These limitations include that the non-GAAP financial measures:

•exclude depreciation and amortization, and although these are non-cash expenses, the assets being depreciated may be replaced in the future;

•do not reflect interest expense, or the cash requirements necessary to service interest on debt, which reduces cash available;

•do not reflect the provision for or benefit from income tax that may result in payments that reduce cash available;

•exclude non-recurring items which are unlikely to occur again and have not occurred before (e.g., corporate restructuring); and

•may not be comparable to similar non-GAAP financial measures used by other companies, because the expenses and other items that Janus excludes in the calculation of these non-GAAP financial measures may differ from the expenses and other items, if any, that other companies may exclude from these non-GAAP financial measures when they report their operating results.

Because of these limitations, these non-GAAP financial measures should be considered along with other operating and financial performance measures presented in accordance with GAAP.

The following table present a reconciliation of net income to Adjusted EBITDA for the periods indicated:

Three Months Ended Variance

(dollar amounts in millions) $ %

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Year Ended Variance

(dollar amounts in millions) $ %

Loss on extinguishment and modification of debt(1) 3.9 — 3.9 100.0 %

(1)Adjustment for loss on extinguishment and modification of debt regarding the write off of unamortized fees and third-party fees as a result of the debt modification completed in August 2023.

(2)Adjustment consists of signage, cleaning and supplies to maintain work environments necessary to adhere to CDC guidelines during the COVID-19 pandemic.

(3)Adjustments consist of the following: 1) facility relocations, and 2) severance and hiring costs associated with our strategic transformation, including executive leadership team changes, strategic business assessment and transformation projects.

(4)Income or expenses related to the transition services agreement and legal settlement for an acquisition.

Adjusted Net Income

Adjusted Net Income is defined as net income attributable to shareholders, which excludes from reported GAAP results, the impact of certain items consisting of acquisition events and other non-recurring charges. Similar to Adjusted EBITDA, such expenses, charges, and gains are excluded since they are not indicative of Janus’s normal, ongoing operations, and their inclusion in results makes for more difficult comparisons between years and with peer group companies.

We use Adjusted Net Income to facilitate a comparison of our operating performance on a consistent basis from period to period that, when viewed in combination with our results prepared in accordance with U.S. GAAP, provides a more complete understanding of factors and trends affecting our business than does U.S. GAAP measures alone. Adjusted net income should not be considered in isolation of, or as an alternative to, measures prepared in accordance with GAAP.

The following table present a reconciliation of net income to adjusted net income for the periods indicated:

Three Months Ended

Net Income Adjustments(1) 0.2 —

Tax Effect Non-GAAP on Net Income Adjustments(2) (0.1) —

Non-GAAP Adjusted Net Income $ 35.9 $ 32.7

Year Ended

Net Income Adjustments(1) 3.7 2.0

Tax Effect Non-GAAP on Net Income Adjustments(2) (1.0) (0.5)

Non-GAAP Adjusted Net Income $ 138.4 $ 109.2

(1)Refer to the Adjusted EBITDA table above for detailed breakout of adjustment items.

(2)Tax effected for the net income adjustments. Used effective tax rates 27.2% and 27.8% for the three months ended December 30, 2023 and December 31, 2022, respectively, and 25.8% and 25.9% for the years ended December 30, 2023 and December 31, 2022, respectively.

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Free Cash Flow

The Company uses a measure of free cash flow to facilitate an understanding of its ability to generate cash for reinvestment into its businesses. We define "Free Cash Flow" as cash flow from operating of continuing operations, less cash used in purchases of property and equipment. Free Cash Flow is not intended as an alternative measure of cash flow from operations, as determined in accordance with GAAP in the United States. We use this financial measure both in presenting results to shareholders and the investment community and in our internal evaluation and management of our businesses. We believe that this financial measure and the information it provides are useful to investors because it permits investors to view our performance using the same tool that we use to gauge progress in achieving our goals. We believe that the non-GAAP financial measure "Free cash flow" is also useful to investors because it is an indication of cash flow that may be available to fund investments in future growth initiatives. Free cash flow should not be considered in isolation of, or as an alternative to, measures prepared in accordance with GAAP.

The following table present a reconciliation of cash flows provided by operating activities to free cash flow for the periods indicated:

Three Months Ended

Cash flow from operating activities $ 68.5 $ 25.9

Less: capital expenditure (5.5) (1.0)

Non-GAAP Adjusted Net Income $ 35.9 $ 32.7

Operating Cash Flow to GAAP Net Income 191 % 79 %

Free Cash Flow to Non-GAAP Adjusted Net Income (“conversion”) 175 % 76 %

Year Ended

Cash flow from operating activities $ 215.0 $ 88.5

Less: capital expenditure (19.0) (8.8)

Non-GAAP Adjusted Net Income $ 138.4 $ 109.2

Operating Cash Flow to GAAP Net Income 158 % 82 %

Free Cash Flow to Non-GAAP Adjusted Net Income (“conversion”) 142 % 73 %

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Liquidity and Capital Resources

We assess our liquidity in terms of our ability to generate cash to fund our operating, investing and financing activities. In doing so, we review and analyze our current cash on hand, days sales outstanding, inventory turns, days payable outstanding, capital expenditure forecasts, interest and principal payments on debt and income tax payments.

Our primary sources of liquidity include cash balances on hand, cash flows from operations, proceeds from equity, debt offerings and borrowing availability under our existing credit facility. Based on the information available as of the date of this Annual Report on Form 10-K, our operating cash flow, along with funds available under the line of credit, adequately support Janus’s liquidity and financing needs, including working capital requirements, capital expenditures, debt servicing, and potential acquisitions. The Company believes it will have sufficient working capital to fund operations for at least the next twelve months from the date of issuance of these financial statements.

Financial Policy

Our financial policy seeks to: (i) selectively invest in organic and inorganic growth to enhance our portfolio, including certain strategic capital investments and (ii) maintain appropriate leverage by using free cash flows to repay outstanding borrowings.

Liquidity Policy

We maintain a strong focus on liquidity and define our liquidity risk tolerance based on sources and uses to maintain a sufficient liquidity position to meet our obligations under both normal and stressed conditions. At Janus, we manage our liquidity to provide access to sufficient funding to meet our business needs and financial obligations, as well as capital allocation and growth objectives, throughout business cycles.

Cash Management

Janus manages its operating cash management activities through banking relationships for the domestic entities and international entities. Domestic subsidiaries monitor cash balances on a monthly basis and excess cash is transferred to Janus to pay down intercompany debt, interest on the intercompany debt, and intercompany sales of products and materials and other services. International subsidiaries monitor excess cash balances on a periodic basis and transfer excess cash flow to Janus in the form of a dividend. Janus compiles a monthly standalone business unit and consolidated 13-week cash flow forecast to monitor various cash activities and forecast cash balances to fund operational activities.

Holding Company Status

Janus International Group, Inc. owns no material assets, other than its ownership of Janus Core, and does not conduct any business operations of its own. As a result, Janus International Group, Inc. is largely dependent upon cash dividends and distributions and other transfers from its subsidiaries, such as Janus Core, to meet obligations. The agreements governing the indebtedness of our subsidiaries impose restrictions on our subsidiaries’ ability to pay dividends or make other distributions to us.

Foreign Exchange

We have operations in various foreign countries, principally the United Kingdom, France, Australia, Poland, and Singapore. Therefore, changes in the value of the related currencies affect our financial statements when translated into U.S. dollars.

Debt Profile

(dollar amounts in millions)

Principal Amount Issuance Date Maturity Date Interest Rate Net Carrying Value

Financing leases 3.4 1.1

Less: unamortized deferred finance fees 11.8 7.2

Less: current portion of long-term debt 7.3 8.3

Long-term debt, net of current portion $ 607.7 $ 699.9

(1)The interest rate on the Amendment No. 6 First Lien term loan as of December 30, 2023, was 8.76%, which is a variable rate based on Adjusted Term SOFR, subject to a 1.00% floor, plus .10% credit spread adjustment (“CSA”) and an applicable margin percent of 3.25%

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First Lien Term Loan - 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 Adjusted Term SOFR, plus .10% CSA and an applicable margin percent. The debt is secured by substantially all business assets. For the year ended December 30, 2023, the Company made voluntary payments of $85.3 toward the First Lien Term Loan using cash on hand.

On August 3, 2023, the Company refinanced its existing First Lien Term Loan pursuant to the Amendment No. 6 First Lien. The loan was made by a syndicate of lenders, with the aggregate amount of $625.0. The outstanding loan balance is to be repaid on a quarterly basis of 0.25% of the original balance of the amended loan beginning the last business day of December 2023 with the remaining principal due on the maturity date of August 3, 2030. As chosen by the Company, the amended loan bears interest at a floating rate per annum consisting of Adjusted Term SOFR plus .10% CSA and an applicable margin percent (effective rate of 8.76% as of December 30, 2023). (see Note 9, Long-Term Debt, to our consolidated financial statements in this Form 10-K for a further discussion).

Revolving Credit Facility - On August 18, 2021, the Company increased the existing available LOC Agreement with a domestic bank, from $50.0 to $80.0, incurred additional fees for this amendment of $0.4 and extended the maturity date from February 12, 2023 to August 12, 2024. On August 3, 2023, the Company refinanced the revolving credit facility, pursuant to a new ABL Credit and Guarantee Agreement (the “2023 LOC Agreement”). The 2023 LOC Agreement, among other things, (i) increased the previous aggregate commitments from $80.0 to $125.0, (ii) updated the manner in which the previous borrowing base under the 2023 LOC Agreement was determined, and (iii) replaced the administrative agent with a new administrative agent. Interest payments with respect to the 2023 LOC Agreement are due in arrears. The maturity date is August 3, 2028.

As chosen by the Company, the amended revolving credit facility bears interest at a floating rate per annum consisting of SOFR plus .10% CSA and an applicable margin percent that is based on excess availability. There was no outstanding balance on the line of credit as of December 30, 2023, and December 31, 2022. As of December 30, 2023, the Adjusted Term SOFR interest rate for the facility was 6.8%. The line of credit is secured by accounts receivable and inventories. (see Note 8, Line of Credit, to our consolidated financial statements in this Form 10-K for a further discussion)

The 2023 LOC Agreement and Amendment No. 6 First Lien contain affirmative and negative covenants, including limitations on, subject to certain exceptions, the incurrence of indebtedness, the incurrence of liens, fundamental changes, dispositions, restricted payments, investments, transactions with affiliates as well as other covenants customary for financings of these types. The 2023 LOC Agreement also includes a financial covenant, applicable only when the excess availability is less than the greater of (i) 10% of the lesser of the aggregate commitments under the line of credit facility and the borrowing base, and (ii) $10.0. In such circumstances, we would be required to maintain a minimum fixed charge coverage ratio for the trailing four quarters equal to at least 1.00 to 1.00; subject to our ability to make an equity cure (no more than twice in any four quarter period and up to five times over the life of the facility). As of December 30, 2023, we were compliant with our covenants under the agreements governing our outstanding indebtedness.

As of December 30, 2023, and December 31, 2022, the Company maintained one letter of credit totaling approximately $0.4 on which there were no balances due.

Statement of cash flows

(dollar amounts in millions)

The following table presents a summary of cash flows from operating, investing and financing activities for the following comparative periods. For additional detail, please see the Consolidated Statements of Cash Flows in the consolidated financial statements.

Year ended December 30, 2023 compared to the year ended December 31, 2022:

$ %

Net cash used in investing activities (19.9) (8.7) (11.2) 128.7 %

Effect of foreign currency rate changes on cash 0.6 0.1 0.5 500.0 %

Net cash provided by operating activities

Net cash provided by operating activities increased by $126.5 to $215.0, or 142.9%, for the year ended December 30, 2023, compared to $88.5 for the year ended December 31, 2022. This was primarily due to a favorable change in the net working capital, resulting in a $97.5 increase in net cash flows from operating activities, as in the year ended December 31, 2022, changes in net working capital resulted in a cash usage of $84.8, while there was a $12.7 cash inflow due to changes in net working capital for the year ended December 30, 2023. Additionally, the increase in net cash provided by operating activities for the year ended December 30, 2023, was attributable to a $29.0 increase in net income, adjusted for non-cash items.

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Net cash used in investing activities

Net cash used in investing activities increased by $11.2 for the year ended December 30, 2023 as compared to the year ended December 31, 2022. This increase was driven primarily by a $10.2 increase in capital expenditures to continue to support our strategic growth initiatives.

Net cash used in financing activities

Net cash used in financing activities increased by $87.7 for the year ended December 30, 2023 as compared to the year ended December 31, 2022. This decrease was primarily due to principal repayments of $428.5 and a payment of deferred financing costs of $10.8, partially offset by proceeds from borrowings of $337.6 during the year ended December 30, 2023 in connection with the 2023 debt refinancing. See Note 9, Long-term Debt, to our consolidated financial statements for additional discussion of the transaction.

Capital allocation strategy

We continually assess our capital allocation strategy, including decisions relating to mergers and acquisitions, share repurchases, capital expenditures, debt pay-downs, etc.

Contractual Obligations

(dollar amounts in millions)

Excluding debt obligations disclosed above, the table below summarizes our approximate contractual obligations as of December 30, 2023 and their expected impact on our liquidity and cash flows in future periods:

Total Less than 1 year 1-3 years 3-5 years Thereafter

Supply Contracts (1) $ 5.7 $ 5.7 $ — $ — $ —

(1)Supply Contracts relate to the multiple fixed price agreements.

Operating lease obligations consist of operating lease liabilities for real and personal property leases with various lease expiration dates. The amount listed in the thereafter category is primarily comprised of eleven real property leases with expiration dates ranging from 2029 – 2036. See Note 5, Leases, to our consolidated financial statements for a further discussion.

The table above does not include warranty liabilities because it is not certain when this liability will be funded and because this liability is considered immaterial.

Off-Balance Sheet Arrangements

As of December 30, 2023, we did not have any off-balance sheet arrangements that are material or reasonably likely to be material to our financial condition or results of operations.

Related Party Transactions

See Note 14, Related Party Transactions, to our consolidated financial statements for a discussion of related party transactions.

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Critical Accounting Estimates

For the critical Accounting Estimates used in preparing Janus’s consolidated financial statements, Janus makes assumptions, judgments and estimates that can have a significant impact on its revenue, results from operations and net income, as well as on the value of certain assets and liabilities on its consolidated balance sheets. Janus bases its assumptions, judgments and estimates on historical experience and various other factors that are reasonable under the circumstances. Actual results could differ materially from these estimates under different assumptions or conditions.

The consolidated financial statements have been prepared in accordance with GAAP. To prepare these financial statements, Janus makes estimates, assumptions, and judgments that affect what Janus reports as its assets and liabilities, what Janus discloses as contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the periods presented.

In accordance with Janus’s policies, Janus regularly evaluates its estimates, assumptions, and judgments, including, but not limited to, those concerning revenue recognition, lease accounting, income taxes and acquisitions of businesses. The Company bases its estimates, assumptions, and judgments on its historical experience and on factors that are reasonable under the circumstances. The results involve judgments about the carrying values of assets and liabilities not readily apparent from other sources. If Janus’s assumptions or conditions change, the actual results Janus reports may differ from these estimates. The following critical accounting estimates affect the more significant estimates, assumptions, and judgments Janus uses to prepare these consolidated financial statements.

Revenue Recognition

The Company enters into certain contracts with customers that may include multiple performance obligations. Determining whether the performance obligations in these contracts are considered to be distinct within the context of the contract with the customer may require significant judgment. Additionally, it is determined whether the performance obligation(s) will be recognized point in time or over time.

For performance obligations recognized over time, we employ the cost-to-cost input method as we consider it the most accurate measure of when goods and services are transferred to the customer. Under this method, we estimate the costs to complete individual contracts and recognize as revenue the portion of the total contract price deemed complete, based on the relationship of costs incurred to date to total anticipated costs.

It is important to note that, under the cost-to-cost method, the use of estimated costs to complete each contract is a crucial variable in determining recognized revenue. This estimate can change over the course of a contract's duration due to factors such as contract modifications and other elements affecting job completion. Our cost estimation process relies on the expertise, significant experience, and judgment of project management, finance professionals, and operational management. These teams assess various factors, including historical performance, costs of materials and labor, change orders, and the nature of the work to be performed.

To ensure accuracy, we regularly review and reassess our estimates for each uncompleted contract at least quarterly, incorporating the latest reliable information available. It's important to recognize that changes in these estimates could have both favorable and unfavorable impacts on revenues and their related profits.

Lease Accounting

Judgments made by management for our lease obligations include the determination of our incremental borrowing rate, and the length of the lease term, which includes the determination of renewal options that are reasonably assured. The lease term can affect the classification of a lease as finance or operating for accounting purposes, the amount of the lease liability and corresponding right-of-use lease asset recognized, the term over which related leasehold improvements for each restaurant are amortized and any rent holidays and/or changes in rental amounts for recognizing rent expense over the term of the lease. These judgments may produce materially different amounts of depreciation, amortization and rent expense than would be reported if different assumed lease terms were used.

We use our estimated incremental borrowing rate in determining the present value of lease payments for purposes of determining lease classification and recording lease liabilities and lease assets on our consolidated balance sheet. Our incremental borrowing rate is determined based on a synthetic credit rating, determined using a valuation model, adjusted to reflect a secured credit rating and a developed spread curve, if applicable, applied to a risk-free rate yield curve. If the estimate of our incremental borrowing rate was changed, our operating lease assets and liabilities could differ materially. Changes in the determination of our incremental borrowing rate could also have an impact on the depreciation and interest expense recognized for finance leases. See Note 5, Leases, to our consolidated financial statements.

Business Combinations

Under the acquisition method of accounting, Janus recognizes tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values. Janus records the excess of the fair value of the consideration transferred, plus fair value of noncontrolling interest, plus fair value of preexisting interest in the acquiree over the value of the net assets acquired as goodwill. The accounting for business combinations requires us to make significant estimates and assumptions, especially with respect to intangible assets and the fair value of contingent payment obligations. Janus uses a variety of information sources to determine the value of acquired assets and liabilities including: third-party appraisers for the values and lives of property, identifiable intangibles and inventories; and legal counsel or other advisors to assess the obligations associated with legal, environmental or other claims. Critical estimates in valuing customer relationships, noncompete agreements, trademarks and tradenames, and other intangible assets (e.g., backlog, software, and technology) acquired, include future cash flows that we expect to generate from the acquired assets. If the subsequent actual results and updated

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projections of the underlying business activity change compared with the assumptions and projections used to develop these values, we could experience impairment charges which could be material.

We record contingent consideration resulting from a business combination at its fair value on the acquisition date. We generally determine the fair value of the contingent consideration using the Monte Carlo simulation, and Probability-Weighted Payment method. Each reporting period thereafter, we revalue these obligations and record increases or decreases in their fair value as an adjustment to operating expenses within the Consolidated Statements of Operations and Comprehensive Income. Changes in the fair value of the contingent consideration can result from changes in assumed discount periods and rates, and from changes pertaining to the achievement of the defined milestones. Significant judgment is employed in determining the appropriateness of these assumptions as of the acquisition date and for each subsequent period. Accordingly, future business and economic conditions, as well as changes in any of the assumptions described above, can materially impact the amount of contingent consideration expense we record in any given period.

Recently Issued Accounting Standards

See Note 2, Summary of Significant Accounting Policies, to our consolidated financial statements for a discussion of recently issued and adopted accounting pronouncements.

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Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

Foreign Currency Exposures

Janus is exposed to foreign currency exchange risk related to currency translation exposure because the operations of its subsidiaries are measured in their functional currency which is the currency of the primary economic environment in which the subsidiary operates; particularly, the United Kingdom and Australia. Any currency balances that are denominated in currencies other than the functional currency of the subsidiary are re-measured into the functional currency, with the resulting gain or loss recorded in the other income (expense) in Janus’ income statement. In turn, subsidiary income statement balances that are denominated in currencies other than the U.S. dollar are translated into U.S. dollars, Janus’ functional currency, in consolidation using the average exchange rate in effect during each fiscal month during the period, with any related gain or loss recorded as foreign currency translation adjustments in other comprehensive income (loss). The assets and liabilities of subsidiaries that use functional currencies other than the U.S. dollar are translated into U.S. dollars in consolidation using period end exchange rates, with the effects of foreign currency translation adjustments included in accumulated other comprehensive income (loss).

Janus seeks to naturally hedge its foreign exchange transaction exposure by matching the transaction currencies for its cash inflows and outflows and maintaining access to credit in the principal currencies in which it conducts business. Janus does not currently hedge our foreign exchange transaction or translation exposure but may consider doing so in the future. Other comprehensive income (loss) includes foreign currency translation adjustments.

Commodity/Raw Material Price Exposures and Concentration of Supplier Risk

Janus’s biggest commodity Company spend is steel coils, which is subject to price volatility due to external factors, and comprises approximately, 58.3% and 62.2% of commodity spend on a consolidated level for the fiscal year ended December 30, 2023 and December 31, 2022, respectively. Historically, exposures associated with these costs were primarily managed through terms of the sales and by maintaining relationships with multiple vendors. Prices for spot market purchases were negotiated on a continuous basis in line with the market at the time. Other than short term supply contracts and occasional strategic purchases of larger quantities of certain raw materials, we generally buy materials on an as-needed basis. Periodically, we enter into fixed price and fixed supply agreements to combat fluctuations in the price of steel locking in prices and will continue to do so in the future. We have not entered into hedges with respect to our raw material costs at this time, but we may choose to enter into such hedges in the future.

Interest Rate Exposure

As indicated in Note 9, Long-term Debt, of Janus’ consolidated financial statements, for the year ended December 30, 2023, outstanding borrowings under its credit facilities include a First Lien term loan. On August 3, 2023, the Company refinanced its existing First Lien Term Loan pursuant to Amendment No. 6 (the “Amendment No. 6 First Lien”) to the First Lien Agreement. The loan was made by a syndicate of lenders, with the aggregate amount of $625.0. As chosen by the Company, the amended loan bears interest at a floating rate per annum consisting of Adjusted Term SOFR plus an applicable margin percent. The interest rate on the Amendment No. 6 First Lien term loan as of December 30, 2023, was 8.76%, which is a variable rate based on Adjusted Term SOFR, subject to a 1.00% floor, and includes a 0.10% CSA and an applicable margin percentage of 3.25%.

As indicated in Note 8, Line of Credit, of Janus’s consolidated financial statement, Janus also has a $125.0 credit facility with a financial institution. On August 3, 2023, the Company refinanced the revolving credit facility, pursuant to a new ABL Credit and Guarantee Agreement (the “2023 LOC Agreement”). Interest payments with respect to the 2023 LOC Agreement are due in arrears. The maturity date is August 3, 2028. As of December 30, 2023, the Adjusted Term SOFR interest rate for the facility was 6.8%.

Janus experiences risk related to fluctuations in the SOFR rate and base rate at any given time. Taking into account the SOFR floor of 1.0%, a hypothetical increase or decrease in 100 basis points of the SOFR rate on the amounts outstanding under the Amendment No. 6 to First Lien term loan as of December 30, 2023, would have led to an approximate $6.2 increase or $6.2 decrease in the interest expense of the Amendment No. 6 to First Lien term loan on an annual basis. Management may consider using interest rate hedges in the future to combat potential interest rate exposure. Refer to Item 1A. Risk Factors for further information on the risks associated with our interest rate exposure.

Credit Risk

As of December 31, 2022 and January 1, 2022, our cash was maintained at major financial institutions in the United States, Europe, Singapore, and Australia, and our current deposits are likely in excess of insured limits. Based on the information available as of the date of this Annual Report on Form 10-K, these institutions have sufficient assets and liquidity to conduct their operations in the ordinary course of business with little or no credit risk to us.

Our accounts receivable primarily relate to revenue from the sale of products and services to established customers. To mitigate credit risk, ongoing credit evaluations of customers’ financial condition are performed, deposits are required for select customers, and lien rights on any jobs in which Janus provides subcontracted installation services are available. As of December 30, 2023, one customer accounted for 11% of the account receivable balance. There were no other customers that represented more than 10% of accounts receivable as of December 31, 2022 and January 1, 2022.

Impact of Inflation

Inflationary factors such as increases in the cost of our product and overhead costs may adversely affect our operating results if we are unsuccessful in passing such inflationary increases on to our customers in the form of higher prices.

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Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Page

Consolidated Balance Sheets as of December 30, 2023 and December 31, 2022 48

Notes to the Consolidated Financial Statements 53

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Shareholders and Board of Directors

Janus International Group, Inc.

Temple, GA

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Janus International Group, Inc. (the “Company”) as of December 30, 2023 and December 31, 2022, the related consolidated statements of operations and comprehensive income, changes in stockholders’ equity, and cash flows for each of the three years in the period ended December 30, 2023, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 30, 2023 and December 31, 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 30, 2023, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company's internal control over financial reporting as of December 30, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and our report dated February 28, 2024, expressed an unqualified opinion thereon.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.

Revenue Recognition – Identification of Performance Obligations

As described in Notes 2 and 15 to the consolidated financial statements, the Company recognized product revenues transferred over time of $122.4 million for the year ended December 30, 2023. The Company enters into certain of these contracts with customers that may include multiple performance obligations. Determining whether the performance obligations in these contracts are considered to be distinct within the context of the contract with the customer requires significant judgment.

We identified revenue recognition, specifically related to management’s identification of the performance obligations within certain of its contracts with customers, as a critical audit matter. The principal consideration for our determination included the significant judgement involved in management’s determination of whether the contracts contain (1) multiple performance obligations that are distinct within the context of the contract and require recognition as separate units of account or (2) a single performance obligation that requires recognition as a single unit of account. Auditing these elements was especially challenging due to the degree of auditor judgment required to address these matters.

The primary procedures we performed to address this critical audit matter included:

•Evaluating management’s revenue recognition policy, including the judgments and assumptions used by management related to the identification of performance obligations.

•Testing a sample of certain revenue contracts by obtaining and evaluating underlying source documents relevant to revenue recognition. For those selected contracts, we considered whether the contract contained (1) multiple performance obligations that are distinct within the context of the contract and require recognition as separate units of account or (2) a single performance obligation that requires recognition as a single unit of account.

/s/ BDO USA, P.C.

We have served as the Company’s auditor since 2018

Atlanta, GA

February 28, 2024

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Janus International Group, Inc.

Consolidated Balance Sheets

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

ASSETS

Current Assets

Prepaid expenses 8.4 9.1

Right of-use assets, net 50.9 44.3

Property, plant and equipment, net 52.4 42.1

Deferred tax asset, net 36.8 46.6

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current Liabilities

Billings in excess of costs 26.7 21.4

Current maturities of long-term debt 7.3 8.3

Accrued expenses and other current liabilities 80.3 70.6

Total current liabilities $ 174.1 $ 152.6

Deferred tax liability, net 1.7 1.9

Other long-term liabilities 46.9 40.9

Commitments and Contingencies (Note 20)

STOCKHOLDERS’ EQUITY

Accumulated other comprehensive loss (2.9) (4.8)

Total stockholders’ equity $ 519.6 $ 375.3

Total liabilities and stockholders’ equity $ 1,350.0 $ 1,270.6

See accompanying Notes to Consolidated Financial Statements

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Janus International Group, Inc.

Consolidated Statements of Operations and Comprehensive Income

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

Year Ended

REVENUES

OPERATING EXPENSE

Contingent consideration and earnout fair value adjustments — — 0.7

Loss on extinguishment and modification of debt (3.9) — (2.4)

Other income (expense) 1.0 (0.2) (0.8)

Change in fair value of derivative warrant liabilities — — (5.9)

Other Comprehensive Income (Loss), net of tax $ 1.9 $ (3.9) $ (0.7)

Net income attributable to common stockholders $ 135.7 $ 107.7 $ 43.8

Weighted-average shares outstanding, basic and diluted

Net income per share, basic and diluted

See accompanying Notes to Consolidated Financial Statements.

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Janus International Group, Inc.

Consolidated Statements of Changes in Stockholders’ Equity

(dollar amounts in millions, except share data)

Shares Amount Shares Amount Shares Amount

Vesting of Midco LLC class B units — — 4,124,767 — — 5.3 — — 5.3

Distributions to Janus Midco, LLC unitholders — — — — — — (541.7) — — (541.7)

Distributions to Class A preferred units — — — — — — — — (4.2) (4.2)

Deferred tax asset — — — — — — 78.2 — — 78.2

Share-based compensation — — — — — — 0.1 — — 0.1

Foreign currency translation adjustment — — — — — — — (0.7) — (0.7)

Net income — — — — — — — — 43.8 43.8

Issuance of restricted units — — 142,177 — — — — — — —

Share-based compensation — — — — — — 4.1 — — 4.1

Foreign currency translation adjustment — — — — — — — (3.9) — (3.9)

Issuance of restricted units — — 191,892 — — — — — — —

Share-based compensation — — — — — — 7.1 — — 7.1

Foreign currency translation adjustment — — — — — — — 1.9 — 1.9

(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).

See accompanying Notes to Consolidated Financial Statements

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Janus International Group, Inc.

Consolidated Statements of Cash Flows

(dollar amounts in millions)

Year Ended

Cash Flows Provided by Operating Activities

Adjustments to reconcile net income to net cash provided by operating activities

Depreciation of property, plant and equipment 9.3 7.9 6.5

Noncash lease expense 6.3 5.4 —

(Reversal of) provision for inventory obsolescence — (0.7) 0.7

Deferred finance fee amortization 3.6 3.7 3.2

(Reversal of) provision for losses on accounts receivable (0.7) 1.7 1.3

Share-based compensation 7.1 4.1 5.3

Loss on extinguishment of debt 1.6 — 2.4

Change in fair value of contingent consideration and earnout — — 0.7

Loss (gain) on sale of assets 0.1 (0.1) —

Loss on abandonment of lease — 0.6 0.8

Change in fair value of derivative warrant liabilities — — 5.9

(Gain) loss on equity method investment — (0.2) 0.2

Deferred income taxes, net 9.5 13.5 4.8

Changes in operating assets and liabilities

Prepaid expenses and other current assets 4.1 (8.5) (6.0)

Billings in excess of costs 5.0 (1.8) 1.7

Accrued expenses and other current liabilities 10.0 7.7 16.6

Other long-term liabilities (3.5) 9.3 (16.3)

Net Cash Provided by Operating Activities $ 215.0 $ 88.5 $ 74.8

Cash Flows Used in Investing Activities

Proceeds from sale of equipment $ 0.1 $ 0.1 $ 0.1

Purchases of property and equipment (19.0) (8.8) (19.9)

Proceeds from sale leaseback transaction — — 9.6

Cash paid for acquisitions, net of cash acquired (1.0) — (179.7)

Net Cash Used in Investing Activities $ (19.9) $ (8.7) $ (189.9)

Cash Flows (Used in) Provided by Financing Activities

(Payments on) proceeds from line of credit $ — $ (6.4) $ 6.4

Distributions to Janus Midco LLC unitholders — — (4.2)

Principal payments on long-term debt (428.5) (8.1) (68.9)

Principal payments on finance lease obligations (0.7) (0.2) —

Proceeds from issuance of long-term debt 337.6 — 155.0

Payments for deferred financing fees (10.8) — (4.3)

Proceeds from merger — — 334.9

Proceeds from PIPE — — 250.0

Payments for transaction costs, net — — (44.5)

Payments to Janus Midco, LLC unitholders at the Business Combination — — (541.7)

Proceeds from warrant exercise — — 0.1

Cash (Used in) Provided by Financing Activities $ (102.4) $ (14.7) $ 82.8

Effect of exchange rate changes on cash $ 0.6 $ 0.1 $ 0.2

Net Increase (Decrease) in Cash $ 93.3 $ 65.2 $ (32.1)

Cash, Beginning of Fiscal Year $ 78.4 $ 13.2 $ 45.3

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Janus International Group, Inc.

Consolidated Statements of Cash Flows

(dollar amounts in millions)

Year Ended

Supplemental Cash Flows Information

Cash paid for operating leases included in operating activities $ 8.4 $ 7.7 $ —

Non-cash investing and financing activities

RSU Shares withheld related to employee taxes $ 0.4 $ — $ —

See accompanying Notes to Consolidated Financial Statements

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Janus International Group, Inc.

Notes to Consolidated Financial Statements

(dollar amounts in millions, except per share data)

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, GA with operations in the United States of America (“United States”) (“U.S.”), United Kingdom (“U.K.”), Australia, France, and Poland. The Company provides products and services through its two 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. (U.K.) (“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”), DBCI, LLC f/k/a Dingo NewCo, LLC (“DBCI”), 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”.

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 accounting principles generally accepted in the United States of America (U.S. GAAP) and pursuant to the applicable rules and regulations of the U.S. Securities and Exchange Commission (“SEC”).

The Business Combination, completed on June 7, 2021, was accounted for as a reverse recapitalization in accordance with U.S. GAAP. Under this method of accounting, Juniper Industrial Holdings, Inc. (“JIH”) was treated as the acquired company and Janus Midco, LLC (“Midco”) was treated as the acquirer for financial statement reporting purposes (the “Combined Company”). Midco was determined to be the accounting acquirer. The Combined Company assumed the Janus name.

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 were stated at historical cost, with no goodwill or other intangible assets recorded. Midco is deemed to be the predecessor of the Company, and the consolidated assets and liabilities and results of operations prior to the Closing Date are those of Midco.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. 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 Consolidated Statement of Operations and Comprehensive Income and in Footnote 15 to the consolidated financial statements for the years ended December 31, 2022. These presentation changes had no effect on our previously reported results of operations or retained earnings.

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The effect of correcting the immaterial error in the fiscal years 2022 consolidated financial statements is shown in the following table:

(in millions) As previously reported Correction As adjusted

Consolidated Statements of Operations and Comprehensive Income

Year Ended January 1, 2022

Footnote 15. Revenue Recognition

Janus North America

Product revenues transferred at a point in time $ 880.0 $ (85.0) $ 795.0

Product revenues transferred over time — 102.8 102.8

Service revenues transferred over time 114.3 (17.8) 96.5

Reportable Segments by Timing of Revenue Recognition Year Ended January 1, 2022

Janus North America

Product revenues transferred at a point in time $ 614.8 $ (69.9) $ 544.9

Product revenues transferred over time — 86.8 86.8

Service revenues transferred over time 100.1 (16.9) 83.2

Use of Estimates in the Consolidated Financial Statements

The preparation of 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.

Items subject to such estimates and assumptions include, but are not limited to, income taxes and the effective tax rates, inventory basis adjustments, the fair value of assets and liabilities related to acquisitions, the derivative warrant liability, the recognition and valuation of unit-based compensation arrangements, the useful lives of property and equipment, the commencement date of leases, the incremental borrowing rate used to calculate lease liabilities, estimated progress toward completion for certain revenue contracts, allowance for credit losses, fair values and impairment of intangible assets and goodwill and assumptions used in the accounting for business combinations.

Cash and Cash Equivalents

The Company considers all liquid investments with original maturities of three months or less to be cash equivalents. At December 30, 2023 and December 31, 2022, the Company did not have any cash equivalents or restricted cash.

The Company maintains cash in bank deposit accounts that, at times, may exceed the insured limits of the local country, which may lead to a concentration of credit risk. Substantially all of the Company’s cash balances were deposited with financial institutions which management has determined to be high-credit quality institutions. The Company has not experienced any losses in such accounts.

Accounts Receivable and Allowance for Credit Losses

Accounts receivable primarily arise from the sale of products and services to established customers. Accounts receivable are recorded at the invoiced amount and do not bear interest. Additionally, accounts receivable are stated at estimated net realizable value, net of allowance for credit losses which is based on the Company’s assessment of the collectability of customer accounts.

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The Company estimates the allowance for credit losses using the loss-rate method. As the Company determined that its customers at various business units and sales channels share similar risk characteristics, the same loss rate is applied to all accounts receivable. The Company estimates the allowance for credit losses by considering various factors such as historical write-offs, changes in customers’ credit ratings, delinquency, payment history, the age of the accounts receivable balances, and current and expected economic conditions that may affect a customer’s ability to pay. Account balances are charged off against the allowance when it is determined that internal collection efforts should no longer be pursued.

The summary of activity in the allowance for credit losses for the years ended December 30, 2023, and December 31, 2022 are as follows:

(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 Current Expected Credit Losses (“CECL”).

Inventories

Inventories are stated at the lower of cost of net realizable value. Cost is determined using actual costs or standard costs (that approximate actual cost) determined on a first-in, first-out basis or average cost. Labor and overhead costs associated with inventory produced by the Company are capitalized into inventories.

Property and Equipment

Property and equipment are stated at cost less accumulated depreciation. Property and equipment acquired in business combinations are recorded at fair value as of the acquisition date and are subsequently stated less accumulated depreciation. Depreciation is charged to expense on the straight-line basis over the estimated useful life of each asset. Leasehold improvements are amortized over the shorter of the lease term or their respective useful lives. Maintenance and repairs are charged to expense as incurred.

Business Combinations

We account for business acquisitions in accordance with ASC 805, "Business Combinations". This standard requires the acquiring entity in a business combination to recognize all the assets acquired and liabilities assumed in the transaction and establishes the acquisition date fair value as the measurement objective for all assets acquired and liabilities assumed in a business combination. Certain provisions of this standard prescribe, among other things, the determination of acquisition date fair value of consideration paid in a business combination (including contingent consideration) and the exclusion of transaction costs from acquisition accounting. The determination of the fair value of assets acquired and liabilities assumed involves assessments of factors such as the expected future cash flows associated with individual assets and liabilities and appropriate discount rates at the acquisition date. For non-observable market values, the Company determines fair value using acceptable valuation principles (e.g., relief from royalty method). Results of operations for acquired companies are included in our consolidated results of operations from the date of acquisition.

Goodwill and Indefinite-Lived Intangible Assets

Goodwill represents the excess of the consideration transferred over the estimated fair value of the net assets acquired and liabilities assumed in business combination.

Goodwill is not amortized, but instead tested for impairment annually at the beginning of the fiscal year fourth quarter or more frequently if events or changes in circumstances indicate that it’s more likely than not that the fair value of the reporting unit is below its carrying amount, as set forth in ASC 350, “Intangibles — Goodwill and Other.” The Company tests for goodwill impairment at the reporting unit level, which is an operating segment or one level below an operating segment. The amount of goodwill acquired in a business combination that is assigned to one or more reporting units as of the acquisition date is the excess of the purchase price of the acquired businesses (or portion thereof) included in the reporting unit, over the fair value assigned to the individual assets acquired or liabilities assumed from a market participant perspective. Goodwill is assigned to the reporting unit(s) expected to benefit from the synergies of the combination even though other assets or liabilities of the acquired entity may not be assigned to that reporting unit.

ASC 350 allows an optional qualitative assessment as part of annual impairment testing, prior to a quantitative assessment test, to determine whether it is more likely than not that the fair value of a reporting unit exceeds its carrying amount. If a qualitative assessment determines an impairment is more likely than not, the Company is required to perform a quantitative impairment test. Otherwise, no further analysis is required. Alternatively, the Company may elect to proceed directly to the quantitative impairment test.

In conducting a qualitative assessment, the Company analyzes actual and projected growth trends for net sales and margin for each reporting unit, as well as historical performance versus plan and the results of prior quantitative tests performed. Additionally, the Company assesses factors that may impact its business, including macroeconomic conditions and the related impact, market-related exposures, plans to market for sale all or a portion of the business, competitive changes, new or discontinued product lines, changes in key personnel, and any potential risks to projected financial results.

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If performed, the quantitative test compares the fair value of a reporting unit with its carrying amount. If the carrying value of the reporting unit exceeds its fair value, the Company recognizes an impairment loss in the amount equal to the excess, not to exceed the total amount of goodwill allocated to that reporting unit. We determine the fair value of each reporting unit by weighting the results of the income approach and the market approach.

Indefinite-lived intangible assets are not amortized, but instead tested for impairment annually at the beginning of the fiscal year fourth quarter or more frequently if events or changes in circumstances indicate that it’s more likely than not that the fair value of the asset is below its carrying amount, as set forth in ASC 350, “Intangibles — Goodwill and Other.”

Based upon our review and analysis, no impairments were deemed to have occurred during any of the years presented. Refer to Note 5, Goodwill and Intangible Assets, for further detail.

Intangible Assets

Intangible assets relate to the value associated with our customer relationships, non-compete agreements, software development, and tradenames and trademarks at the time of acquisition through business combinations.

The Company determined the fair value of customer relationships and software development acquired using the excess earnings method under the income approach. Under the excess earnings method, an intangible asset’s fair value is equal to the present value of the incremental after-tax cash flows attributable solely to the intangible asset over its remaining economic life. The relief from royalty method was used to determine the fair value of tradenames and trademarks. The valuation models were based on estimates of future operating projections of the acquired business as well as judgments on the discount rates used and other variables. We determined the forecasts based on a number of factors, including our best estimate of near-term sales expectations and long-term projections, which include review of internal and independent market analyses. The discount rate used was representative of the weighted average cost of capital. The Company regularly evaluates the amortization period assigned to each intangible asset to ensure that there have not been any events or circumstances that warrant revised estimates of useful lives. Refer to Note 5, Goodwill and Intangible Assets, for further detail.

Leases

The Company leases certain logistics, office, and manufacturing facilities, as well as vehicles, copiers and other equipment under long-term operating and financing leases with varying terms.

We adopted the provisions of the FASB Accounting Standards Codification ("ASC") 842 on January 2, 2022 using the modified retrospective approach and, as a result, did not restate prior periods. The Company has recognized the cumulative effect adjustment to the opening balance of retained earnings. The Company elected to adopt the package of practical expedients which apply to leases that commenced before the adoption date. By electing the package of practical expedients, the Company did not reassess whether any expired or existing contracts are or contain leases, the lease classification for any expired or existing leases, and the initial direct costs for any existing leases.

The Company determines whether an arrangement is a lease at inception of the agreement. Lease liabilities and right of use (“ROU”) assets are recognized at commencement date. ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Lease liabilities are measured based on the present value of the total lease payments not yet paid based on the Company’s incremental borrowing rate, as the rate implicit in the lease is generally not determinable. Lease payments include only payments that are fixed and determinable at the time of commencement. Rent expense commences when the lessor makes the underlying asset available to us. Lease expense for operating lease payments is recognized on a straight-line basis over the lease term. The Company does not assume renewals or early terminations unless it is reasonably certain to exercise these options at commencement. ROU assets are measured based on the corresponding lease liability adjusted for: (i) payments made to the lessor at or before the commencement date; (ii) initial direct costs; and (iii) tenant incentives under the lease. The variable portion of the lease payments is not included in the right-of-use assets or lease liabilities. Rather, variable payments, other than those dependent upon an index or rate, are expensed when the obligation for those payments is incurred. Leases with an initial term of 12 months or less are not recorded on the balance sheet in accordance with the short-term lease recognition exemption.

The Company has elected the practical expedient to not separate non-lease components from the lease components to which they relate, and instead account for each as a single lease component. Accordingly, all expenses associated with a lease contract are accounted for as lease expenses. Non-lease components for real estate leases primarily relate to common area maintenance, insurance, taxes, utilities and non-lease components for equipment, vehicles and leases within supply agreements primarily relate to usage, repairs, and maintenance.

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. We use the unsecured borrowing rate and risk-adjust that rate to approximate a collateralized rate, and apply the rate based on the currency of the lease, which is updated on a quarterly basis for measurement of new lease liabilities. See Note 16, Leases, for additional details.

Accounting for Income Taxes

The Company accounts for income taxes under the asset and liability method. Deferred tax assets and liabilities are recognized for the expected tax consequences of temporary differences between the tax bases of assets and liabilities and their reported amounts. Valuation allowances are recorded to reduce deferred tax assets to the amount that will more likely than not be realized.

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The Company accounts for uncertainty in income taxes using a two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon settlement. The Company recognizes accrued interest associated with unrecognized tax benefits as part of Interest expense, and penalties associated with unrecognized tax benefits as part of Other expenses on the Consolidated Statement of Operations and Comprehensive Income.

Deferred Income Tax Assets and Liabilities. The carrying values of deferred income tax assets and liabilities reflect the application of our income tax accounting policies in accordance with applicable accounting standards, and are based on management’s assumptions and estimates regarding future operating results and levels of taxable income, as well as management’s judgment regarding the interpretation of the provisions of applicable accounting standards. The carrying values of liabilities for income taxes currently payable are based on management’s interpretations of applicable tax laws, and incorporate management’s assumptions and judgments regarding the use of tax planning strategies in various taxing jurisdictions. The use of different estimates, assumptions and judgments in connection with accounting for income taxes may result in materially different carrying values of income tax assets and liabilities and results of operations.

We evaluate the recoverability of these deferred tax assets by assessing the adequacy of future expected taxable income from all sources, including reversal of taxable temporary differences, forecasted operating earnings and available tax planning strategies. These sources of income inherently rely heavily on estimates. We use our historical experience and our short-term and long-term business forecasts to provide insight. Further, our global business portfolio gives us the opportunity to employ various prudent and feasible tax planning strategies to facilitate the recoverability of future deductions. To the extent we do not consider it more likely than not that a deferred tax asset will be recovered, a valuation allowance is established.

Revenue Recognition

The Company accounts for revenue in accordance with ASC 606, “Revenue from Contracts with Customers” (“ASC 606”). 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.

The Company enters into certain contracts with customers that may include multiple performance obligations. The Company determines whether the performance obligations in these contracts are considered to be distinct within the context of the contract with the customer. Additionally, it is determined whether the performance obligation(s) will be recognized point in time or over time.

Revenue is recognized when, or as, performance obligations are satisfied by transferring control of a promised good or service to a customer. A performance obligation is a promise to transfer a distinct good or service to the customer and is the unit of account.

The Company’s performance obligations include delivery of products, construction of steel structures, installation services, and subscription services that provide access to the Nokē Smart Entry software and continuing technical support. The Nokē Smart Entry solution provides mobile access for tenants and remote monitoring and tracking for operators. Product revenues are recognized either at a point in time when delivery of the product to the customer takes place or over time as the steel structure is being constructed at the customer site. Installation services revenue and subscription revenue are recognized over time as the customer simultaneously receives and consumes the benefits provided by the company.

For contracts with multiple performance obligations, the transaction price is allocated to each performance obligation based on the standalone selling price. The standalone selling price for products is readily observable, and selling price for installation is estimated by maximizing observable inputs with consideration of market conditions, entity-specific factors, and information about the customer or class of customer. Standalone selling price for recurring software revenue is determined by using the adjusted market assessment approach.

The Company’s revenues are generated from contracts with customers and the nature, timing, and any uncertainty in the recognition of revenues is not affected by the type of good, service, customer or geographical region to which the performance obligation relates. The terms of sale are generally on an open account basis with standard commercial terms of net 30 days. Payment terms are short-term, are customary for our industry, and, in some cases, early payment incentives are offered. The Company’s contracts typically are less than one year in length and do not have significant financing components.

For performance obligations that are not complete at the reporting date, we recognize contract assets or contract liabilities. Contract assets are the rights to consideration in exchange for goods or 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.

The Company has elected to account for shipping and handling as activities to fulfill the promise to transfer the good rather than a promised service. As a result, shipping and handling costs are recorded as expenses in the same period the revenue is recognized.

Commissions to internal and external sales representatives are considered costs to obtain contracts. As these contracts are less than one year, these costs are expensed as incurred.

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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.

The following activity related to product warranty liabilities was recorded in Other accrued expenses during the years ended December 30, 2023 and December 31, 2022, respectively:

Balance at beginning of period $ 0.9 $ 0.7

Aggregate changes in the product warranty liability 1.4 0.2

Balance at end of period $ 2.3 $ 0.9

Shipping and Handling (Product Revenues & Product Cost of Revenues)

The Company records amounts billed to customers in product revenue transactions, related to shipping and handling, as revenue earned for the goods provided. Shipping and handling costs are included in product cost of revenues. Shipping and handling costs were approximately $38.1, $42.7 and $35.2 for the years ended December 30, 2023, December 31, 2022, and January 1, 2022 respectively.

Advertising Costs

The Company records all advertising and tradeshow related costs to the consolidated statements of operations and comprehensive income during the year they’re incurred and they are included in Selling and marketing operating expenses. During the years ended December 30, 2023, December 31, 2022, and January 1, 2022, the Company incurred and expensed advertising costs of $3.8, $2.6 and $2.0, respectively.

General and Administrative

The Company records corporate and business unit administrative personnel, facilities, professional services, amortization of intangible assets, share-based compensation, and other operating activities in general and administrative expenses on the Consolidated Statements of Operations and Comprehensive Income.

Selling and Marketing

The Company records compensation and benefits of employees engaged in selling activities as well as related travel, advertising, trade shows/conventions, meals and entertainment expenses to selling and marketing expense on the Consolidated Statements of Operations and Comprehensive Income.

StockCompensation

We recognize expense for share-based compensation plans based on the estimated fair value of the related awards in accordance with ASC 718, “Compensation – Stock Compensation”. Pursuant to our incentive stock plans, we can grant stock options, restricted stock units, performance-based restricted stock units (“PSUs”) to employees and our non-employee directors. The majority of our awards are restricted stock units granted to employees, with vesting period between one year and four years. We charge compensation expense under the plan to earnings over each award’s individual vesting period. Forfeitures are recorded as they occur. See Note 12, Equity Compensation, for additional information.

Treasury Stock

We account for treasury stock under the cost method pursuant to the provisions of ASC 505-30, Treasury Stock. Under the cost method, the gross cost of the shares reacquired is charged to a contra equity account, treasury stock. The equity accounts that were originally credited for the original share issuance, common stock and additional paid-in capital, remain intact.

If the treasury shares are ever reissued in the future at a price higher than its cost, the difference will be recorded as a component of additional paid-in-capital in our Consolidated Balance Sheets. When treasury stock is re-issued at a price lower than its cost, the difference will be recorded as a component of additional paid-in-capital to the extent that there are previously recorded gains to offset the losses. If there are no treasury stock gains in additional paid-in-capital, the losses upon re-issuance of treasury stock are recorded as a reduction of retained earnings in our Consolidated Balance Sheets. If treasury stock is reissued in the future, a cost flow assumption will be adopted to compute excesses and deficiencies upon subsequent share re-issuance.

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Earnings Per Share

Basic Earnings Per Share is computed by dividing net income by the weighted-average number of common shares outstanding during each period. Diluted Earnings Per Shares assumes the exercise of outstanding stock options and the vesting of performance share awards using the treasury stock method when the effects of such assumptions are dilutive.

Deferred Finance Fees

Deferred financing fees consist of First Lien Term Loan and the ABL Credit and Guarantee Agreement costs, which are being amortized on the effective interest and straight-line method, respectively, over the life of the related debt. During the year ended December 30, 2023, the Company incurred approximately $10.8 in deferred finance fees in connection with the 2023 debt refinancing transactions. Debt issuances are more fully described in Note 8, Line of Credit, and Note 9, Long-Term Debt.