- Helios team unites to overcome impacts of Hurricane Ian and
economic conditions in APAC and Europe to deliver top-tier
margins
- Remain on path to achieve strategic goal of at least $1
billion in revenue in 2023
- Executing to plan with manufacturing and operating strategy
driving productivity, margin enhancement and efficiencies,
leveraging “in the region, for the region” operations to protect
earnings and cash flow
- Year-to-date revenue up 6% on GAAP basis; Excluding impacts
from hurricane shut down, quarterly revenue relatively unchanged on
a constant currency basis over year-ago period
- Powerful financial flexibility with net debt to adjusted
EBITDA leverage ratio at 1.90x1
- Diluted EPS of $0.63 in the quarter; Diluted Non-GAAP Cash
EPS of $0.90 reflects an estimated $0.05 impact from Hurricane Ian
and $0.03 impact from FX compared with prior-year period
- 2022 outlook adjusted to reflect global macro-economic
conditions driving market demand timing, material and energy cost
increases, and foreign currency exchange rates
Helios Technologies, Inc. (NYSE: HLIO) (“Helios” or the
“Company”), a global leader in highly engineered motion control and
electronic controls technology for diverse end markets, today
reported financial results for the third quarter ended October 1,
2022.
Josef Matosevic, the Company’s President and Chief Executive
Officer, commented, “Our focus is on protecting our earnings power,
cash generation and financial strength while driving our strategy
to create scale and continue to deliver top-tier margins. Of note,
the agility of our Helios team helped mitigate the impact of
Hurricane Ian and the rapidly evolving headwinds from the
macro-economic environment with an all-hands on deck focus to meet
our customer’s needs and business goals. This quarter there was an
$8.2 million sales impact from the shift in currency exchange rates
compared with the same quarter last year. In addition, due to the
hurricane, Helios was unable to ship an estimated $5.3 million in
sales. Combined, these two items represent a 6.5% impact to the top
line. Without these impacts, sales would have been relatively
unchanged compared with last year. We also believe our market
diversification strategy is working and continues to help offset
the industry issues related to reduced consumer discretionary
spending globally which has impacted our health and wellness
business.”
He went on to say, “We remain confident we will outperform the
competition because of three very important factors. We are
committed to providing unwavering dedication to our customers, we
will remain an innovation leader, and we will continue to leverage
our unique position as a pure play in the hydraulics and
electronics industries. Despite increasing macro challenges, we
continue to have a line of sight to our 2023 goal of $1 billion in
revenue given the strength of our balance sheet, our flywheel
acquisition strategy, and pipeline of active opportunities.”
Third Quarter 2022 Consolidated Results
($ in millions, except per share data)
Q3 2022
Q3 2021
Change
% Change
Net sales
$
207.2
$
223.2
$
(16.0
)
(7
%)
Gross profit
$
69.3
$
80.9
$
(11.6
)
(14
%)
Gross margin
33.4
%
36.2
%
(280
)
bps Operating income
$
30.7
$
40.7
$
(10.0
)
(25
%)
Operating margin
14.8
%
18.2
%
(340
)
bps Non-GAAP adjusted operating margin
20.4
%
22.5
%
(210
)
bps Net income
$
20.4
$
27.8
$
(7.4
)
(27
%)
Diluted EPS
$
0.63
$
0.85
$
(0.22
)
(26
%)
Non-GAAP cash net income
$
29.2
$
34.8
$
(5.6
)
(16
%)
Diluted Non-GAAP cash EPS
$
0.90
$
1.07
$
(0.17
)
(16
%)
Adjusted EBITDA
$
48.0
$
55.9
$
(7.9
)
(14
%)
Adjusted EBITDA margin
23.2
%
25.1
%
(190
)
bps
See the attached tables for additional important disclosures
regarding Helios’ use of non-GAAP adjusted operating income,
non-GAAP adjusted operating margin, non-GAAP cash net income,
non-GAAP cash net income per share, adjusted EBITDA (earnings
before net interest expense, income taxes, depreciation,
amortization and certain other charges), adjusted EBITDA margin
(adjusted EBITDA as a percentage of sales), net debt-to-adjusted
EBITDA, and sales in constant currency, as well as reconciliations
of GAAP operating income to non-GAAP adjusted operating income and
non-GAAP adjusted operating margin, GAAP net income to non-GAAP
cash net income, non-GAAP cash earnings per share, adjusted EBITDA
and Adjusted EBITDA margin, net debt-to-adjusted EBITDA, and net
sales to sales in constant currency. Helios believes that, when
used in conjunction with measures prepared in accordance with GAAP,
the non-GAAP measures described above help improve the
understanding of its operating performance.
Sales
- Sales in several end markets improved over the third quarter of
2021, with the recreational, industrial machinery, and mobile
equipment end markets leading the growth, while the health and
wellness end market continued to contract. An estimated $5.3
million of product was not shipped in the quarter due to Hurricane
Ian. Sales included $2.9 million in revenue from acquisitions. (See
the table in this release that provides acquired revenue by segment
by quarter).
- Sales improved in the Americas and declined both in Europe and
the Middle East and Africa ("EMEA") and the Asia Pacific ("APAC")
regions compared with the third quarter of 2021. Sales for both the
EMEA and APAC regions, excluding foreign currency exchange rates
(FX), are being impacted by the softening demand for electronics
products in the health and wellness market.
- Foreign currency translation adjustment on sales: $8.2 million
unfavorable.
Profits and margins
- Gross profit and margin drivers: gross profit was down $11.6
million compared with the prior-year period. Changes in foreign
currency exchange rates compared with the third quarter of 2021
reduced gross profit by $2.1 million. Gross margin declined by 280
basis points, driven by higher raw material costs and higher energy
costs in the EMEA region partially offset by the impact of price
increases.
- Selling, engineering and administrative (“SEA”) expenses
decreased 3% compared with the 2021 third quarter.
- Amortization of intangible assets: $6.8 million down from $7.4
million in the prior year reflecting timing related to the
Company’s acquisitions.
Non-operating items
- Net interest expense: $4.1 million in the quarter, up $0.3
million compared with the prior-year period due to rising interest
rates.
- Effective tax rate: 23.6% compared with 25.5% in the prior-year
period reflecting levels of income in varying tax
jurisdictions.
Net income, earnings per share, non-GAAP
cash earnings per share and adjusted EBITDA
- GAAP net income and diluted earnings per share: $20.4 million
and $0.63 per share.
- Diluted Non-GAAP cash earnings per share: $0.90 compared with
$1.07 last year, due to margin contraction related to rising
material costs along with impacts from Hurricane Ian of an
estimated ($0.05) and foreign exchange rates of ($0.03) per share,
respectively.
- Adjusted EBITDA margin: despite macro headwinds, hurricane and
FX impacts maintaining top-tier levels at 23.2% during rapid
inflationary environment. The hurricane impacted Adjusted EBITDA by
an estimated $2.1 million, 40 basis points when also considering
the $5.3 million impact on sales.
Year-to-date 2022 Consolidated Results
($ in millions, except per share data)
2022
2021
Change
% Change
Net sales
$
689.4
$
651.5
$
37.9
6
%
Gross profit
$
235.2
$
238.5
$
(3.3
)
(1
%)
Gross margin
34.1
%
36.6
%
(250
)
bps Operating income
$
116.6
$
117.4
$
(0.8
)
(1
%)
Operating margin
16.9
%
18.0
%
(110
)
bps Non-GAAP adjusted operating margin
21.4
%
22.8
%
(140
)
bps Net income
$
80.9
$
81.0
$
(0.1
)
(0
%)
Diluted EPS
$
2.48
$
2.50
$
(0.02
)
(1
%)
Non-GAAP cash net income
$
105.8
$
105.1
$
0.7
1
%
Diluted Non-GAAP cash EPS
$
3.25
$
3.26
$
(0.01
)
(0
%)
Adjusted EBITDA
$
166.1
$
164.7
$
1.4
1
%
Adjusted EBITDA margin
24.1
%
25.3
%
(120
)
bps
See the attached tables for additional important disclosures
regarding Helios’ use of non-GAAP adjusted operating income,
non-GAAP adjusted operating margin, non-GAAP cash net income,
non-GAAP cash net income per share, adjusted EBITDA (earnings
before net interest expense, income taxes, depreciation,
amortization and certain other charges), adjusted EBITDA margin
(adjusted EBITDA as a percentage of sales), net debt-to-adjusted
EBITDA, and sales in constant currency, as well as reconciliations
of GAAP operating income to non-GAAP adjusted operating income and
non-GAAP adjusted operating margin, GAAP net income to non-GAAP
cash net income, non-GAAP cash earnings per share, adjusted EBITDA
and Adjusted EBITDA margin, net debt-to-adjusted EBITDA, and net
sales to sales in constant currency. Helios believes that, when
used in conjunction with measures prepared in accordance with GAAP,
the non-GAAP measures described above help improve the
understanding of its operating performance.
Sales
- Sales were driven by strong demand regionally in the Americas
and solid growth in EMEA offset by declines in Asia. End market
demand saw strength in recreational, mobile, industrial, and
construction equipment. Hurricane Ian had an estimated $5.3 million
impact in sales for the current period. Results included $16.7
million in sales related to acquisitions. (See the table in this
release that provides acquired revenue by segment by quarter).
- Foreign currency translation adjustment on sales: $20.5 million
unfavorable.
Profits and margins
- Gross profit and margin drivers: gross profit nearly flat
compared with the same period of 2021 from pricing and increased
sales volumes partially offsetting rapid inflation. Changes in FX
compared to the first nine months of 2021 reduced year-to-date
gross profit by $6.2 million. Gross margin declined 250 basis
points driven by higher raw material costs partially offset by the
impact of price increases.
- SEA expenses: 14.2% as a percentage of sales, improving 50
basis points compared with the prior-year period, reflecting
improved leverage of our fixed cost base on the higher sales and
continued cost containment initiatives.
- Amortization of intangible assets decreased $4.7 million to
$20.6 million from the prior year reflecting timing related to the
Company’s acquisitions.
Non-operating items
- Net interest expense: $1.3 million decrease to $11.7 million
compared with the prior-year period reflecting lower debt
balances.
- Effective tax rate: 22.7% compared with 22.0% in the prior-year
period reflecting levels of income in varying tax jurisdictions and
the 2021 benefit from the resolution of transfer pricing
disputes.
Net income, earnings per share, non-GAAP
cash earnings per share and adjusted EBITDA
- GAAP net income and diluted earnings per share: $80.9 million
and $2.48 per share nearly flat.
- Non-GAAP cash earnings per share: $3.25 compared with $3.26 in
the prior-year period, nearly flat. Improved demand across several
regions and end markets and operational efficiencies being achieved
through execution of the manufacturing and operating strategy were
offset by macro headwinds and rapid inflation.
- Adjusted EBITDA margin: maintaining top-tier levels at 24.1%
while down 120 basis points compared with the prior-year period due
to inflationary environment. The hurricane impacted Adjusted EBITDA
by an estimated $2.1 million, 10 basis points year to date when
also considering the $5.3 million impact on sales.
Hydraulics Segment Review
(Refer to sales by geographic region and segment data in
accompanying tables)
($ in millions)
Hydraulics
Three Months Ended
Q3 2022
Q3 2021
Change
% Change
Net Sales
Americas
$
49.7
$
45.2
$
4.5
10
%
EMEA
41.3
44.8
(3.5
)
(8
%)
APAC
40.2
43.4
(3.2
)
(7
%)
Total Segment Sales
$
131.2
$
133.4
$
(2.2
)
(2
%)
Gross Profit
$
46.5
$
50.2
$
(3.7
)
(7
%)
Gross Margin
35.4
%
37.6
%
(220
)
bps SEA Expenses
$
17.1
$
18.4
$
(1.3
)
(7
%)
Operating Income
$
29.4
$
31.8
$
(2.4
)
(8
%)
Operating Margin
22.4
%
23.8
%
(140
)
bps
Third Quarter Hydraulics Segment
Review
- Sales decreased 2% to $131.2 million as demand in Americas
helped to offset the impact of the hurricane and FX. On a constant
currency basis and excluding the estimated $5.3 million impact of
the hurricane, sales increased 8% driven by pricing and higher
volume in the Americas. This was somewhat offset by lower volume in
the APAC and supply chain constraints. FX had a $7.9 million
unfavorable adjustment on sales.
- Gross profit and margin drivers: gross profit decreased $3.7
million, or 7%, compared with the same quarter of the prior year
primarily due to the estimated impact from the hurricane of $2.3
million, unfavorable FX of $1.9 million, and inflation. Gross
margin reflects the impact of material and energy cost increases
along with an unfavorable product mix.
- Operating income decreased $2.4 million, or 8%, while operating
margin of 22.4% declined 140 basis points reflecting the flow
through of gross margin. In the quarter there were $0.8 million of
restructuring costs in SEA expenses primarily related to the EMEA
and APAC regions.
Electronics Segment Review
(Refer to sales by geographic region and segment data in
accompanying tables)
($ in millions)
Electronics
Three Months Ended
Q3 2022
Q3 2021
Change
% Change
Net Sales
Americas
$
65.0
$
64.2
$
0.8
1
%
EMEA
7.7
11.1
(3.4
)
(31
%)
APAC
3.3
14.5
(11.2
)
(77
%)
Total Segment Sales
$
76.0
$
89.8
$
(13.8
)
(15
%)
Gross Profit
$
22.8
$
31.3
$
(8.5
)
(27
%)
Gross Margin
30.0
%
34.9
%
(490
)
bps SEA Expenses
$
11.8
$
12.9
$
(1.1
)
(9
%)
Operating Income
$
11.0
$
18.4
$
(7.4
)
(40
%)
Operating Margin
14.5
%
20.5
%
(600
)
bps
Third Quarter Electronics Segment
Review
- Sales decreased 15% to $76.0 million, with slightly higher
demand in the Americas offsetting declines in the APAC and EMEA
regions. End market demand was driven by recreational, industrial
machinery markets, and construction which partially offset supply
chain constraints and a contracting health and wellness market.
Foreign currency exchange rates had a $0.3 million unfavorable
adjustment on sales.
- Gross profit and margin drivers: gross profit decreased $8.5
million, or 27%, compared with the same quarter of the prior year
primarily due to sales volume and unfavorable FX of $0.3 million.
Gross margin declined 490 basis points to 30.0%, reflecting
increases in raw material, one-time restructuring costs incurred to
realign the segments labor base, labor inefficiencies and reduced
fixed cost leverage on the lower sales.
- Operating income decreased $7.4 million to $11.0 million, or
40%, while operating margin declined 600 basis points to 14.5%
reflecting flow through of gross margin and additional
restructuring costs. In the quarter there were $0.4 million of
restructuring costs in SEA expenses.
Balance Sheet and Cash Flow Review
Tricia Fulton, Executive Vice President and Chief Financial
Officer, commented, “We have a strong balance sheet and significant
financial flexibility to execute our strategy for growth. We
believe this puts us in a solid position to capitalize on unstable
market conditions to make selective bolt-on acquisitions and
advance toward our financial goals for 2023. We are highly diligent
in our efforts and have a solid pipeline of opportunities.
Importantly, as supply chain constraints ease, we expect to
generate more cash from the release of working capital. We remain
very excited about our future despite the short-term challenging
operating environment.”
- Total debt at quarter-end was $457.5 million compared with
$419.1 million at end of the second quarter of 2022 as we used debt
to fund our recent acquisition. For the nine-month period,
borrowings, net of repayments, on our credit facilities amounted to
$27.9 million.
- Cash and cash equivalents at October 1, 2022 were 36.8 million,
down $4.5 million from the end of the second quarter of 2022, and
up $8.3 million from the end of 2021.
- Inventory increased $0.8 million to $179.7 million from the
second quarter of 2022 and were 9% higher than the end of 2021
driven by the macro issues in the supply chain. These issues
include the Company purchasing parts ahead of material shortages,
holding some inventory for past due orders where one or two
components have been delayed in the supply chain, along with
customers changing shipping schedules once the Company has already
manufactured the products.
- Pro-forma net debt-to-adjusted EBITDA increased slightly to
1.90x at the end of the third quarter of 2022 (pro-forma for Taimi
and Daman Products Company “Daman”) compared with 1.89x (pro-forma
for the NEM and Joyonway acquisitions) at the end of 2021, impacted
by the recent acquisition of Daman. At the end of third quarter
2022, the Company had $131.4 million available on its revolving
lines of credit.
- Net cash provided by operations was $30.0 million in the third
quarter 2022 compared with $32.5 million in the prior-year period,
bringing the nine-month cash flow from operations to $74.2 million
compared with $82.0 million for the comparable period in 2021.
- Capital expenditures were $8.5 million in the third quarter
2022, or approximately 4% of sales. This compares with $6.7
million, or approximately 3% of sales, in the year-ago period.
- Paid 103rd sequential quarterly cash dividend on October 20,
2022.
Updated 2022 Outlook
The Company is updating its outlook for 2022, which assumes
constant currency using quarter end rates, impacts from global
macro-economic conditions effecting market demand timing, material
and energy cost increases, and foreign currency exchange rates.
Guidance assumes that markets served are not further impacted by
the global pandemic or the geo-political environment.
2021 Actual
2022 Outlook (as of 8/8/22
low-
end of original range)
2022 Outlook (Updated)
Consolidated revenue
$869.2 million
~$930 million
$885 - $910 million
Adjusted EBITDA
$214.1 million
~$219 million
$200 - $215 million
Adjusted EBITDA margin
24.6%
~23.5%
22.6% - 23.6%
Interest expense
$16.9 million
$14 - $15 million
$16 - $17 million
Effective tax rate
20.3%
~23%
23% - 24%
Depreciation
$21.4 million
$24.5 - $26.5 million
$23 - $24 million
Amortization
$33.0 million
$28 - $29 million
$28 - $29 million
Capital expenditures % total
revenue
3%
3% - 5% of sales
3% - 4% of sales
Diluted Non-GAAP Cash EPS
$4.25
~4.35
$3.85 - $4.05
Webcast
The Company will host a conference call and webcast today,
November 7, at 9:00 a.m. Eastern Time to review its financial and
operating results and discuss its corporate strategies and outlook.
A question-and-answer session will follow. The conference call can
be accessed by calling (201) 689-8573. The audio webcast will be
available at www.heliostechnologies.com.
A telephonic replay will be available from approximately 12:00
p.m. ET on the day of the call through Monday, November 14, 2022.
To listen to the archived call, dial (412) 317-6671 and enter
conference ID number 13732763. The webcast replay will be available
in the investor relations section of the Company’s website at
www.heliostechnologies.com, where a transcript will also be posted
once available.
About Helios Technologies
Helios Technologies is a global leader in highly engineered
motion control and electronic controls technology for diverse end
markets, including construction, material handling, agriculture,
energy, recreational vehicles, marine and health and wellness.
Helios sells its products to customers in over 90 countries around
the world. Its strategy for growth is to be the leading provider in
niche markets, with premier products and solutions through
innovative product development and acquisition. The Company has
paid a cash dividend to its shareholders every quarter since
becoming a public company in 1997. For more information please
visit: www.heliostechnologies.com.
FORWARD-LOOKING INFORMATION
This news release contains “forward‐looking statements” within
the meaning of Section 21E of the Securities Exchange Act of 1934.
Forward‐looking statements involve risks and uncertainties, and
actual results may differ materially from those expressed or
implied by such statements. They include statements regarding
current expectations, estimates, forecasts, projections, our
beliefs, and assumptions made by Helios Technologies, Inc.
(“Helios” or the “Company”), its directors or its officers about
the Company and the industry in which it operates, and assumptions
made by management, and include among other items, (i) the
Company’s strategies regarding growth, including its intention to
develop new products and make acquisitions; (ii) the effectiveness
of creating the Center of Engineering Excellence; (iii) the
Company’s financing plans; (iv) trends affecting the Company’s
financial condition or results of operations; (v) the Company’s
ability to continue to control costs and to meet its liquidity and
other financing needs; (vi) the declaration and payment of
dividends; and (vii) the Company’s ability to respond to changes in
customer demand domestically and internationally, including as a
result of standardization. In addition, we may make other written
or oral statements, which constitute forward-looking statements,
from time to time. Words such as “may,” “expects,” “projects,”
“anticipates,” “intends,” “plans,” “believes,” “seeks,”
“estimates,” variations of such words, and similar expressions are
intended to identify such forward-looking statements. Similarly,
statements that describe our future plans, objectives or goals also
are forward-looking statements. These statements are not
guaranteeing future performance and are subject to a number of
risks and uncertainties. Our actual results may differ materially
from what is expressed or forecasted in such forward-looking
statements, and undue reliance should not be placed on such
statements. All forward-looking statements are made as of the date
hereof, and we undertake no obligation to update any
forward-looking statements, whether as a result of new information,
future events or otherwise.
Factors that could cause the actual results to differ materially
from what is expressed or forecasted in such forward‐looking
statements include, but are not limited to, (i) supply chain
disruption and the potential inability to procure goods; (ii)
conditions in the capital markets, including the interest rate
environment and the availability of capital; (iii) inflation
(including hyperinflation) or recession; (iv) changes in the
competitive marketplace that could affect the Company’s revenue
and/or cost bases, such as increased competition, lack of qualified
engineering, marketing, management or other personnel, and
increased labor and raw materials costs; (v) risks related to
health epidemics, pandemics and similar outbreaks, including,
without limitation, the current COVID-19 pandemic, which may among
other things, adversely affect our supply chain, material costs,
and work force and may have material adverse effects on our
business, financial position, results of operations and/or cash
flows; (vi) risks related to our international operations,
including the potential impact of the ongoing conflict between
Russia and Ukraine; and (vii) new product introductions, product
sales mix and the geographic mix of sales nationally and
internationally; (viii) our failure to realize the benefits
expected from acquisitions, our failure to promptly and effectively
integrate acquisitions and the ability of Helios to retain and hire
key personnel, and maintain relationships with suppliers. Further
information relating to factors that could cause actual results to
differ from those anticipated is included but not limited to
information under the heading Item 1. “Business” and Item 1A. “Risk
Factors” in the Company’s Form 10-K for the year ended January 1,
2022.
This news release will discuss some historical non-GAAP
financial measures, which the Company believes are useful in
evaluating its performance. The determination of the amounts that
are excluded from these non-GAAP measures is a matter of management
judgment and depends upon, among other factors, the nature of the
underlying expense or income recognized in a given period. You
should not consider the inclusion of this additional information in
isolation or as a substitute for results prepared in accordance
with GAAP.
This news release also presents forward-looking statements
regarding non-GAAP measures. The Company is unable to present a
quantitative reconciliation of these forward-looking non-GAAP
financial measures to their most directly comparable
forward-looking GAAP financial measures because such information is
not available, and management cannot reliably predict the necessary
components of such GAAP measures without unreasonable effort or
expense. In addition, the Company believes that such
reconciliations would imply a degree of precision that would be
confusing or misleading to investors. The unavailable information
could have a significant impact on the Company’s 2022 financial
results. These non-GAAP financial measures are preliminary
estimates and are subject to risks and uncertainties, including,
among others, changes in connection with quarter-end and year-end
adjustments. Any variation between the Company’s actual results and
preliminary financial data set forth above may be material.
Financial Tables Follow:
HELIOS TECHNOLOGIES
CONSOLIDATED STATEMENTS OF
OPERATIONS
(In thousands, except per
share data)
(Unaudited)
Three Months Ended
Nine Months Ended
October 1, 2022
October 2, 2021
% Change
October 1, 2022
October 2, 2021
% Change
Net sales
$
207,205
$
223,241
(7
)%
$
689,420
$
651,499
6
%
Cost of sales
137,939
142,299
(3
)%
454,202
413,036
10
%
Gross profit
69,266
80,942
(14
)%
235,218
238,463
(1
)%
Gross margin
33.4
%
36.2
%
34.1
%
36.6
%
Selling, engineering and administrative expenses
31,749
32,786
(3
)%
98,059
95,757
2
%
Amortization of intangible assets
6,774
7,407
(9
)%
20,554
25,285
(19
)%
Operating income
30,743
40,749
(25
)%
116,605
117,421
(1
)%
Operating margin
14.8
%
18.2
%
16.9
%
18.0
%
Interest expense, net
4,098
3,813
7
%
11,719
12,965
(10
)%
Foreign currency transaction (gain) loss, net
(199
)
304
(165
)%
(1,296
)
1,271
(202
)%
Other non-operating expense (income), net
177
(616
)
(129
)%
1,508
(727
)
(307
)%
Income before income taxes
26,667
37,248
(28
)%
104,674
103,912
1
%
Income tax provision
6,289
9,488
(34
)%
23,782
22,870
4
%
Net income
$
20,378
$
27,760
(27
)%
$
80,892
$
81,042
(0
)%
Net income per share: Basic
$
0.63
$
0.86
(27
)%
$
2.49
$
2.51
(1
)%
Diluted
$
0.63
$
0.85
(26
)%
$
2.48
$
2.50
(1
)%
Weighted average shares outstanding: Basic
32,541
32,385
32,493
32,272
Diluted
32,585
32,539
32,597
32,437
Dividends declared per share
$
0.09
$
0.09
$
0.27
$
0.27
HELIOS TECHNOLOGIES
CONSOLIDATED BALANCE
SHEETS
(In thousands, except per
share data)
October 1, 2022
January 1, 2022
(Unaudited)
Assets Current assets: Cash and cash equivalents
$
36,813
$
28,540
Restricted cash
33
41
Accounts receivable, net of allowance for credit losses of $1,122
and $1,212
131,649
134,561
Inventories, net
179,718
165,629
Income taxes receivable
6,517
2,762
Other current assets
19,543
20,101
Total current assets
374,273
351,634
Property, plant and equipment, net
171,323
174,210
Deferred income taxes
6,008
2,934
Goodwill
447,140
459,936
Other intangible assets, net
396,528
412,759
Other assets
24,295
13,873
Total assets
$
1,419,567
$
1,415,346
Liabilities and shareholders’ equity Current liabilities:
Accounts payable
$
64,921
$
85,301
Accrued compensation and benefits
19,004
28,595
Other accrued expenses and current liabilities
30,890
28,254
Current portion of long-term non-revolving debt, net
18,897
18,125
Dividends payable
2,930
2,917
Income taxes payable
7,489
6,328
Total current liabilities
144,131
169,520
Revolving line of credit
267,693
242,312
Long-term non-revolving debt, net
169,332
183,897
Deferred income taxes
57,042
71,836
Other noncurrent liabilities
29,932
38,818
Total liabilities
668,130
706,383
Commitments and contingencies
-
-
Shareholders’ equity: Preferred stock, par value $0.001,
2,000 shares authorized, no shares issued or outstanding
-
-
Common stock, par value $0.001, 100,000 shares authorized, 32,544
and 32,407 shares issued and outstanding
33
32
Capital in excess of par value
401,549
394,641
Retained earnings
435,392
363,279
Accumulated other comprehensive loss
(85,537
)
(48,989
)
Total shareholders’ equity
751,437
708,963
Total liabilities and shareholders’ equity
$
1,419,567
$
1,415,346
HELIOS TECHNOLOGIES
CONSOLIDATED STATEMENTS OF
CASH FLOWS
(In thousands)
(Unaudited)
Nine Months Ended
October 1, 2022
October 2, 2021
Cash flows from operating activities: Net income
$
80,892
$
81,042
Adjustments to reconcile net income to net cash provided by
operating activities: Depreciation and amortization
37,360
41,131
Stock-based compensation expense
6,212
6,233
Amortization of debt issuance costs
374
374
(Benefit) provision for deferred income taxes
(2,055
)
2,230
Forward contract gains, net
(6,433
)
(3,401
)
Other, net
1,039
(135
)
(Increase) decrease in: Accounts receivable
(2,861
)
(36,634
)
Inventories
(19,666
)
(35,759
)
Income taxes receivable
(1,775
)
(1,893
)
Other current assets
633
(288
)
Other assets
6,240
3,989
Increase (decrease) in: Accounts payable
(17,230
)
11,945
Accrued expenses and other liabilities
(5,658
)
8,079
Income taxes payable
2,485
9,599
Other noncurrent liabilities
(5,364
)
(4,527
)
Net cash provided by operating activities
74,193
81,985
Cash flows from investing activities: Business acquisitions,
net of cash acquired
(67,252
)
(48,481
)
Amounts paid for net assets acquired
-
(2,400
)
Capital expenditures
(21,916
)
(17,054
)
Proceeds from dispositions of property, plant and equipment
1,903
82
Cash settlement of forward contracts
4,448
1,433
Software development costs
(2,345
)
(1,785
)
Net cash used in investing activities
(85,162
)
(68,205
)
Cash flows from financing activities: Borrowings on
revolving credit facilities
112,720
71,198
Repayment of borrowings on revolving credit facilities
(72,167
)
(44,500
)
Repayment of borrowings on long-term non-revolving debt
(12,616
)
(12,178
)
Proceeds from stock issued
1,683
1,353
Dividends to shareholders
(8,766
)
(8,694
)
Other financing activities
(5,307
)
(2,851
)
Net cash used in financing activities
15,547
4,328
Effect of exchange rate changes on cash, cash equivalents and
restricted cash
3,687
4,363
Net increase in cash, cash equivalents and restricted cash
8,265
22,471
Cash, cash equivalents and restricted cash, beginning of period
28,581
25,257
Cash, cash equivalents and restricted cash, end of period
$
36,846
$
47,728
HELIOS TECHNOLOGIES
SEGMENT DATA
(In thousands)
(Unaudited)
Three Months Ended
Nine Months Ended
October 1, 2022
October 2, 2021
October 1, 2022
October 2, 2021
Sales: Hydraulics
$
131,204
$
133,404
$
411,118
$
385,549
Electronics
76,001
89,837
278,302
265,950
Consolidated
$
207,205
$
223,241
$
689,420
$
651,499
Gross profit and margin: Hydraulics
$
46,498
$
50,223
$
146,819
$
146,548
35.4
%
37.6
%
35.7
%
38.0
%
Electronics
22,768
31,277
88,399
92,473
30.0
%
34.9
%
31.8
%
34.8
%
Corporate and other
-
(558
)
-
(558
)
Consolidated
$
69,266
$
80,942
$
235,218
$
238,463
33.4
%
36.2
%
34.1
%
36.6
%
Operating income (loss) and margin: Hydraulics
$
29,411
$
31,799
$
92,097
$
92,200
22.4
%
23.8
%
22.4
%
23.9
%
Electronics
10,964
18,445
51,778
56,324
14.5
%
20.5
%
18.6
%
21.2
%
Corporate and other
(9,632
)
(9,495
)
(27,270
)
(31,103
)
Consolidated
$
30,743
$
40,749
$
116,605
$
117,421
14.8
%
18.2
%
16.9
%
18.0
%
ORGANIC AND ACQUIRED
REVENUE
(In thousands)
(Unaudited)
Three Months Ended
Full Year Ended
Three Months Ended
Nine Months Ended
April 3,
July 3,
October 2,
January 1,
January 1,
April 2,
July 2,
October 1,
October 1,
2021
2021
2021
2022
2022
2022
2022
2022
2022
Hydraulics Organic
$
119,106
$
133,039
$
128,672
$
125,200
$
506,017
$
130,691
$
137,140
$
129,079
$
396,910
Acquisition
-
-
4,732
5,700
10,432
6,415
5,667
2,125
14,208
Total
$
119,106
$
133,039
$
133,404
$
130,900
$
516,449
$
137,106
$
142,807
$
131,204
$
411,118
Electronics Organic
$
29,459
$
30,191
$
30,808
$
66,107
$
156,565
$
102,663
$
97,909
$
75,210
$
275,782
Acquisition
56,279
60,183
59,029
20,680
196,171
778
952
791
2,520
Total
$
85,738
$
90,374
$
89,837
$
86,787
$
352,736
$
103,441
$
98,861
$
76,001
$
278,302
Consolidated Organic
$
148,565
$
163,230
$
159,480
$
191,307
$
662,582
$
233,354
$
235,049
$
204,289
$
672,692
Acquisition
56,279
60,183
63,761
26,380
206,603
7,193
6,619
2,916
16,728
Total
$
204,844
$
223,413
$
223,241
$
217,687
$
869,185
$
240,547
$
241,668
$
207,205
$
689,420
HELIOS TECHNOLOGIES
ADDITIONAL INFORMATION
(Unaudited)
2022 Sales by Geographic Region and Segment ($ in
millions)
Q1
% Change
y/y
Q2
% Change
y/y
Q3
% Change
y/y
YTD 2022
% Change
y/y
Americas: Hydraulics
$
43.1
26
%
$
49.9
20
%
$
49.7
10
%
$
142.7
18
%
Electronics
77.7
20
%
80.2
25
%
65.0
1
%
222.9
15
%
Consol. Americas
120.8
22
%
130.1
23
%
114.7
5
%
365.6
16
%
% of total
50
%
54
%
55
%
53
%
EMEA: Hydraulics
$
52.9
22
%
$
49.0
5
%
$
41.3
(8
%)
$
143.2
6
%
Electronics
11.8
27
%
12.3
12
%
7.7
(31
%)
31.8
1
%
Consol. EMEA
64.7
23
%
61.3
6
%
49.0
(12
%)
175.0
5
%
% of total
27
%
25
%
24
%
25
%
APAC: Hydraulics
$
41.1
(1
%)
$
43.9
(2
%)
$
40.2
(7
%)
$
125.2
(3
%)
Electronics
13.9
22
%
6.4
(58
%)
3.3
(77
%)
23.6
(43
%)
Consol. APAC
55.0
4
%
50.3
(16
%)
43.5
(25
%)
148.8
(13
%)
% of total
23
%
21
%
21
%
22
%
Total
$
240.5
17
%
$
241.7
8
%
$
207.2
(7
%)
$
689.4
6
%
2021 Sales by Geographic Region and Segment ($ in millions)
Q1
% Change
y/y
Q2
% Change
y/y
Q3
% Change
y/y
Q4
% Change
y/y
YTD 2021
% Change
y/y
Americas: Hydraulics
$
34.3
(8
%)
$
41.7
22
%
$
45.2
63
%
$
46.5
49
%
$
167.7
29
%
Electronics
65.0
201
%
64.1
378
%
64.2
200
%
$
64.5
72
%
257.8
175
%
Consol. Americas
99.3
69
%
105.8
122
%
109.4
123
%
111.0
61
%
425.5
90
%
% of total
48
%
47
%
49
%
51
%
49
%
EMEA: Hydraulics
$
43.3
29
%
$
46.6
49
%
$
44.8
40
%
$
45.3
32
%
$
180.0
37
%
Electronics
9.3
272
%
11.0
479
%
11.1
640
%
10.6
116
%
42.0
289
%
Consol. EMEA
52.6
46
%
57.6
74
%
55.9
66
%
55.9
42
%
222.0
56
%
% of total
26
%
26
%
25
%
26
%
26
%
APAC: Hydraulics
$
41.5
26
%
$
44.7
22
%
$
43.4
13
%
$
39.1
5
%
$
168.7
16
%
Electronics
11.4
613
%
15.3
705
%
14.5
867
%
$
11.7
92
%
52.9
377
%
Consol. APAC
52.9
53
%
60.0
55
%
57.9
45
%
50.8
17
%
221.7
42
%
% of total
26
%
27
%
26
%
23
%
26
%
Total
$
204.8
58
%
$
223.4
87
%
$
223.2
82
%
$
217.7
44
%
$
869.2
66
%
HELIOS TECHNOLOGIES
Non-GAAP Adjusted Operating
Income RECONCILIATION
(In thousands)
(Unaudited)
Three Months Ended
Nine Months Ended
October 1, 2022
October 2, 2021
October 1, 2022
October 2, 2021
GAAP operating income
$
30,743
$
40,749
$
116,605
$
117,421
Acquisition-related amortization of intangible assets
6,774
7,407
20,554
25,285
Acquisition and financing-related expenses(1)
2,190
654
3,991
2,901
Restructuring charges(2)
1,835
55
3,785
472
Officer transition costs
-
-
301
569
Inventory step-up amortization
-
558
-
558
Acquisition integration costs(3)
649
845
2,377
1,729
Other
41
(99
)
232
(99
)
Non-GAAP adjusted operating income
$
42,232
$
50,169
$
147,845
$
148,836
GAAP operating margin
14.8
%
18.2
%
16.9
%
18.0
%
Non-GAAP adjusted operating margin
20.4
%
22.5
%
21.4
%
22.8
%
Adjusted EBITDA
RECONCILIATION
(In thousands)
(Unaudited)
Three Months Ended
Nine Months Ended
Twelve Months Ended
October 1, 2022
October 2, 2021
October 1, 2022
October 2, 2021
October 1, 2022
Net income
$
20,378
$
27,760
$
80,892
$
81,042
$
104,447
Interest expense, net
4,098
3,813
11,719
12,965
15,627
Income tax provision
6,289
9,488
23,782
22,870
27,496
Depreciation and amortization
12,381
12,989
37,355
41,131
50,628
EBITDA
43,146
54,050
153,748
158,008
198,198
Acquisition and financing-related expenses(1)
2,190
654
3,991
2,901
6,831
Restructuring charges(2)
1,835
55
3,785
472
3,784
Officer transition costs
-
-
301
569
50
Inventory step-up amortization
-
558
-
558
-
Acquisition integration costs(3)
649
845
2,377
1,729
3,498
Change in fair value of contingent consideration
152
-
1,621
-
2,670
Other
41
(216
)
233
481
376
Adjusted EBITDA
$
48,013
$
55,946
$
166,056
$
164,718
$
215,407
Adjusted EBITDA margin
23.2
%
25.1
%
24.1
%
25.3
%
23.7
%
Pre-acquisition adjusted EBITDA, Taimi and Daman
6,203
TTM Pro forma adjusted EBITDA
$
221,610
HELIOS TECHNOLOGIES
Non-GAAP Cash Net Income
RECONCILIATION
(In thousands)
(Unaudited)
Three Months Ended
Nine Months Ended
October 1, 2022
October 2, 2021
October 1, 2022
October 2, 2021
Net income
$
20,378
$
27,760
$
80,892
$
81,042
Amortization of intangible assets
6,925
7,487
20,956
25,431
Acquisition and financing-related expenses(1)
2,190
654
3,991
2,901
Restructuring charges(2)
1,835
55
3,785
472
Officer transition costs
-
-
301
569
Inventory step-up amortization
-
558
-
558
Acquisition integration costs(3)
649
845
2,377
1,729
Change in fair value of contingent consideration
152
-
1,621
-
Other
41
(216
)
233
481
Tax effect of above
(2,946
)
(2,347
)
(8,313
)
(8,035
)
Non-GAAP cash net income
$
29,224
$
34,796
$
105,843
$
105,148
Non-GAAP cash net income per diluted share
$
0.90
$
1.07
$
3.25
$
3.26
(1) Acquisition and financing-related
expenses include costs associated with our M&A activities.
These activities include all phases of the M&A process from
analyzing targets, to raising funding, to due diligence and
transaction costs at closing. We utilize internal resources for a
significant amount of time spent on our acquisition activities and
have chosen not to staff a full M&A department or use
significant outside services. We believe these costs are not
representative of the Company's operational performance and it is
therefore more meaningful to analyze results with the costs
excluded. For the three and nine months ended Oct 1, 2022, the
charges include recurring labor costs of $0.7 million and $1.9
million, professional fees of $0.8 million and $1.1 million, travel
costs of $0.4 million and $0.5 million and other M&A related
costs of $0.3 million and $0.5 million, respectively.
(2) Restructuring activities include costs
associated with our actions to improve operating efficiencies and
rationalize our cost structure. The 2022 costs relate to an
operational restructuring that combined the manufacturing
operations at two of our locations into one location as well as
organizational restructures among several locations which aligned
employee talent with the strategic operational goals of the
company. For the three and nine months ended Oct 1, 2022, the
charges include recurring labor costs of $0.5 million and $1.8
million, severance-related costs of $1.1 million and $1.7 million
and manufacturing relocation and other costs of $0.2 million and
$0.3 million, respectively.
(3) Acquisition integration activities
include costs associated with integrating our acquired businesses,
which can occur up to 18 months after acquisition date. We believe
these costs are not representative of the Company's operational
performance and it is therefore more meaningful to analyze results
with the costs excluded. For the three and nine months ended Oct 1,
2022, the charges include recurring labor costs of $0.4 million and
$1.6 million, professional fees of $0.2 million and $0.7 million
and travel and other costs of $0.1 million and $0.1 million,
respectively.
HELIOS TECHNOLOGIES
Non-GAAP Sales Growth
RECONCILIATION
(In millions)
(Unaudited)
Three Months Ended
Nine Months Ended
Hydraulics
Electronics
Consolidated
Hydraulics
Electronics
Consolidated
Q3 2022 Net Sales
$
131.2
$
76.0
$
207.2
$
411.1
$
278.3
$
689.4
Impact of foreign currency translation(1)
7.9
0.3
8.2
19.4
1.1
20.5
Net Sales in constant currency
139.1
76.3
215.4
430.5
279.4
709.9
Less: Acquisition related sales
(2.1
)
(0.8
)
(2.9
)
(14.2
)
(2.5
)
(16.7
)
Organic sales in constant currency
$
137.0
$
75.5
$
212.5
$
416.3
$
276.9
$
693.2
Q3 2021 Net Sales
$
133.4
$
89.8
$
223.2
$
385.5
$
266.0
$
651.5
Net sales growth
-2
%
-15
%
-7
%
7
%
5
%
6
%
Net sales growth in constant currency
4
%
-15
%
-3
%
12
%
5
%
9
%
Organic net sales growth in constant currency
3
%
-16
%
-5
%
8
%
4
%
6
%
(1) The impact from foreign currency translation is calculated
by translating current period activity at average prior period
exchange rates.
Net Debt-to-Adjusted EBITDA
RECONCILIATION
(In thousands)
(Unaudited)
As of
October 1, 2022
Current portion of long-term non-revolving debt, net
$
18,897
Revolving lines of credit
269,286
Long-term non-revolving debt, net
169,332
Total debt
457,515
Less: Cash and cash equivalents
36,813
Net debt
$
420,702
TTM Pro forma adjusted EBITDA*
$
221,610
Ratio of net debt to TTM pro
forma adjusted EBITDA
1.90
*On a pro-forma basis for Taimi
and Daman
Non-GAAP Financial Measures and Non-GAAP Forward-looking
Financial Measures:
Adjusted operating income, adjusted operating margin, EBITDA,
adjusted EBITDA, adjusted EBITDA margin, net debt-to-adjusted
EBITDA, cash net income, cash net income per diluted share and
sales in constant currency are not measures determined in
accordance with generally accepted accounting principles in the
United States, commonly known as GAAP. Nevertheless, Helios
believes that providing non-GAAP information such as adjusted
operating income, adjusted operating margin, EBITDA, adjusted
EBITDA, adjusted EBITDA margin, net debt-to-adjusted EBITDA, cash
net income and cash net income per diluted share are important for
investors and other readers of Helios’s financial statements, as
they are used as analytical indicators by Helios’s management to
better understand operating performance. Because adjusted operating
income, adjusted operating margin, adjusted EBITDA, adjusted EBITDA
margin, net debt-to-adjusted EBITDA, cash net income and cash net
income per diluted share are non-GAAP measures and are thus
susceptible to varying calculations, adjusted operating income,
adjusted operating margin, EBITDA, adjusted EBITDA, adjusted EBITDA
margin, net debt-to-adjusted EBITDA, cash net income and cash net
income per diluted share, as presented, may not be directly
comparable with other similarly titled measures used by other
companies. The Company does not provide a reconciliation of
forward-looking non-GAAP financial measures, such as adjusted
EBITDA, adjusted EBITDA margin and cash net income and cash net
income per diluted share disclosed above in our 2022 Outlook, to
their comparable GAAP financial measures because it could not do so
without unreasonable effort due to the unavailability of the
information needed to calculate reconciling items and due to the
variability, complexity and limited visibility of the adjusting
items that would be excluded from the non-GAAP financial measures
in future periods.
1 On a pro-forma basis for Taimi and Daman
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version on businesswire.com: https://www.businesswire.com/news/home/20221107005420/en/
Tania Almond Vice President, Investor Relations and Corporate
Communication (941) 362-1333 tania.almond@HLIO.com
Deborah Pawlowski Kei Advisors LLC (716) 843-3908
dpawlowski@keiadvisors.com
Helios Technologies (NYSE:HLIO)
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