- 3Q23 revenue of $201.4 million reflects impact of swift
change in demand dynamics as evolving macroeconomic conditions
influenced customer behavior with push out of orders and delivery
dates
- Margins impacted by lower volume and under absorption as
well as a mix of products; new customers and expanding end market
opportunities to build through 2024 to drive future volume and
margins
- Protecting margins by executing plans to control overhead
expenses while continuing to advance low-cost operations and
regional centers of excellence to gain further
efficiencies
- Strategy remains intact; looking beyond near-term
challenges; well positioned with innovative products and software,
expanded end markets, and regionalized capacity to drive
longer-term growth
- Updating full year outlook for 2023; expect slower start to
2024
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 September
30, 2023. Results include our most recent flywheel acquisitions of
Schultes Precision Manufacturing, Inc. (or “Schultes”), which was
acquired on January 27, 2023, and i3 Product Development, Inc. (or
“i3”), which was acquired on May 26, 2023.
“We entered this year working to advance our strategy to solve
our customers’ most challenging problems. Our best-in-class
manufacturing allows us to provide an integrated operating approach
with innovative, high quality and differentiated solutions. When we
presented our expectations for 2023, we recognized that global
macroeconomic uncertainties posed a headwind. We remain focused on
what we can control around product innovation, expanding into new
end markets, and our customer-centric ‘in the region for the
region’ manufacturing approach. The trailing second quarter was
encouraging as it began to demonstrate traction. However, we saw
swift shifts in demand from a broad set of customers and markets in
the third quarter. The combination of macroeconomic conditions and
geopolitical unrest caused push outs on delivery schedules and
delays in orders,” said Helios’ President and Chief Executive
Officer Josef Matosevic.
“To address these highly dynamic market conditions, we are
taking appropriate action to protect our margin by implementing
plans to minimize costs while balancing our resources to maintain
our top-notch customer service. Our long-term strategy remains on
track and our management team is excited to execute against our
many opportunities. We believe our investments will provide strong
returns, and our revolutionary technology, products and solutions
will continue to make Helios incredibly tough to follow,” Matosevic
concluded.
Third Quarter 2023 Consolidated Results
($ in millions, except per share data)(Unaudited)
Q3 2023
Q3 2022 Change % Change Net sales
$
201.4
$
207.2
$
(5.8
)
(3
%)
Gross profit
$
59.7
$
69.3
$
(9.6
)
(14
%)
Gross margin
29.6
%
33.4
%
(380
)
bps Operating income
$
13.8
$
30.7
$
(16.9
)
(55
%)
Operating margin
6.9
%
14.8
%
(790
)
bps Non-GAAP adjusted operating margin*
13.7
%
20.4
%
(670
)
bps Net income
$
3.5
$
20.4
$
(16.9
)
(83
%)
Diluted EPS
$
0.11
$
0.63
$
(0.52
)
(83
%)
Non-GAAP cash net income*
$
14.4
$
29.2
$
(14.8
)
(51
%)
Diluted Non-GAAP cash EPS*
$
0.44
$
0.90
$
(0.46
)
(51
%)
Adjusted EBITDA*
$
35.6
$
48.0
$
(12.4
)
(26
%)
Adjusted EBITDA margin*
17.7
%
23.2
%
(550
)
bps
* Adjusted numbers are not measures determined in accordance
with generally accepted accounting principles in the United States,
commonly known as GAAP. Nevertheless, Helios believes that
providing these specific Non-GAAP figures are important for
investors and other readers of Helios financial statements, as they
are used as analytical indicators by Helios management to better
understand operating performance. These Non-GAAP financial measures
should be considered in addition to results prepared in accordance
with GAAP and should not be considered a substitute for GAAP.
Please carefully review the attached Non-GAAP reconciliations to
the most directly comparable GAAP measures and the related
additional information provided throughout. Because these metrics
are Non-GAAP measures and are thus susceptible to varying
calculations, these figures, as presented, may not be directly
comparable to other similarly titled measures used by other
companies.
Sales
- Shift in demand: Modest 1% improvement in Hydraulics segment
revenue offset by a 9% decline in Electronics segment revenue
compared with the year ago period. Compared with second quarter
2023, rapid declines occurred in both the Hydraulics segment of 13%
and in the Electronics segment of 8% driven by macroeconomic
shifts.
- Variable impacts by market: Year-over-year sales were impacted
by reduced demand for products in our mobile, marine, industrial,
and the health and wellness markets. Compared with the second
quarter of 2023, declines in demand occurred across mobile,
agriculture, marine, industrial, and the health and wellness
markets. Sales included $13.3 million in revenue from acquisitions.
(See the Organic and Acquired Revenue table in this release that
provides acquired revenue by segment by quarter).
- By Region: Sales in the Americas were up slightly while there
was a 9% decline in Europe, the Middle East and Africa (“EMEA”) and
a 4% decline Asia Pacific ("APAC”) compared to the year ago
period.
- Other Impacts: Favorable foreign currency (FX) translation was
$2.2 million. Supply chain constraints delayed an estimated $11.2
million in sales.
Profits and margins
- Gross profit and margin impacts: Gross profit declined
primarily on lower volume, the different margin profile of acquired
businesses, restructuring costs, and higher wage and benefit costs
partially offset by pricing and FX benefit. Gross margin
contraction was primarily due to under absorption of overhead on
lower volume.
- Selling, engineering and administrative (“SEA”) expenses: SEA
sequentially were down slightly, but up $6.0 million, or 19%
compared with the third quarter of 2022. The year-over-year
increase was primarily related to incremental SEA from
acquisitions, restructuring, higher wage and benefit costs, and
increased R&D investment for new product development.
- Amortization of intangible assets: $8.2 million up 21% compared
with the prior year period reflecting the Company’s flywheel
acquisitions.
Non-operating items
- Net interest expense: up $0.9 million sequentially and up $4.6
million in the quarter compared with the prior year period
reflecting higher average rates and increased average net debt
balance related to acquisitions.
- Effective tax rate: 30.5% compared with 23.6% in the prior year
period reflecting the mix in income to various tax
jurisdictions.
Net income, earnings per share (“EPS”),
Non-GAAP cash earnings per share and adjusted EBITDA
- Net income and diluted earnings per share: The decline in net
income to $3.5 million, or $0.11 per share, was primarily the
result of lower volume, lower margins, increased interest and
amortization expenses.
- Diluted Non-GAAP cash earnings per share: $0.44 compared with
$0.90 in the third quarter of 2022 on lower volume, higher
operating expenses and increased interest expense of $0.09 per
share.
- Adjusted EBITDA margin: 17.7% contracted 550 basis points
compared with the year ago period driven by the items discussed
previously in this report.
Hydraulics Segment Review
(Refer to sales by geographic region and
segment data in accompanying tables)
($ in millions)(Unaudited)
Hydraulics For the
Three Months Ended Q3 2023 Q3 2022 Change
% Change Net Sales Americas
$
55.7
$
49.7
$
6.0
12
%
EMEA
38.8
41.3
(2.5
)
(6
%)
APAC
37.5
40.2
(2.7
)
(7
%)
Total Segment Sales
$
132.0
$
131.2
$
0.8
1
%
Gross Profit
$
41.1
$
46.5
$
(5.4
)
(12
%)
Gross Margin
31.1
%
35.4
%
(430
) bps
SEA Expenses
$
22.7
$
17.1
$
5.6
33
%
Operating Income
$
18.4
$
29.4
$
(11.0
)
(37
%)
Operating Margin
13.9
%
22.4
%
(850
) bps
Third Quarter Hydraulics Segment
Review
- Sales: Grew 12% in the Americas which offset weakness in EMEA
and APAC resulting in a 1% year-over-year improvement in segment
sales, primarily due to an $11.0 million contribution from
acquisitions. Sales declined in the mobile, industrial, and
agricultural end markets compared with the year ago period. Sales
declined 13% compared with the second quarter of 2023 driven by
swift changes in the mobile, agriculture, and industrial end
markets. FX had a favorable $2.2 million impact on sales and supply
chain constraints delayed an estimated $7.8 million in sales.
- Gross profit and margin drivers: Lower gross profit and margin
were primarily the result of lower volume, the different margin
profile of acquired businesses, restructuring costs, and higher
wage and benefit costs. Restructuring costs included in cost of
sales increased by $1.7 million to $2.0 million in the third
quarter of 2023, compared with the year ago period.
- Operating income and operating margin: Reflect impact of lower
volume on gross profit as well as costs related to acquisitions and
investments in operational changes and new product
development.
Electronics Segment Review
(Refer to sales by geographic region and
segment data in accompanying tables)
($ in millions)(Unaudited)
Electronics For the Three
Months Ended Q3 2023 Q3 2022 Change %
Change Net Sales Americas
$
59.4
$
65.0
$
(5.6
)
(9
%)
EMEA
5.7
7.7
(2.0
)
(26
%)
APAC
4.3
3.3
1.0
30
%
Total Segment Sales
$
69.4
$
76.0
$
(6.6
)
(9
%)
Gross Profit
$
18.6
$
22.8
$
(4.2
)
(18
%)
Gross Margin
26.8
%
30.0
%
(320
) bps
SEA Expenses
$
14.4
$
11.8
$
2.6
22
%
Operating Income
$
4.2
$
11.0
$
(6.8
)
(62
%)
Operating Margin
6.1
%
14.5
%
(840
) bps
Third Quarter Electronics Segment
Review
- Sales: Declined 9% over the prior year driven by declines in
the Americas and EMEA partially offset by growth in APAC combined
with a $2.3 million contribution from acquisitions. Sales declined
in the health and wellness, marine, and industrial machinery end
markets partially offset by increases to the off-road vehicles end
market. Sales declined 8% compared with the second quarter of 2023
driven by a swift sharp change in the marine market along with
declines in health and wellness, industrial and mobile. Foreign
currency exchange rates did not impact sales and supply chain
constraints delayed an estimated $3.4 million in sales.
- Gross profit and margin drivers: Compared with the year ago
period, lower gross profit and margin reflects decreased sales
volume, higher material costs, the different margin profile of
acquired businesses, and restructuring costs.
- Operating income and operating margin: Compared with the year
ago period declines were the result of lower gross profit and
higher SEA expenses related to investments in expansion, new
product development and other growth initiatives.
Balance Sheet and Cash Flow Review
- Total debt: at quarter-end was $544.5 million, down from $549.1
million at the end of the second quarter as the Company’s capital
allocation priorities include debt reduction. Higher debt balances
compared with the year ago period reflect the acquisition of
Schultes and i3.
- Cash and cash equivalents: as of September 30, 2023 were $35.2
million, relatively flat from the year ago period of $36.8
million.
- Inventory: increased $3.0 million to $208.7 million from the
second quarter of 2023. The increase was the result of the decline
in volume.
- Pro-forma net debt-to-adjusted EBITDA: increased slightly to
3.0x at the end of the third quarter of 2023 (pro-forma for
Schultes and i3.) At the end of third quarter 2023, the Company had
$183.3 million available on its revolving lines of credit.
- Net cash provided by operations: was $11.8 million in the third
quarter 2023 compared with $26.1 million in the second quarter
2023.
- Capital expenditures: were $5.9 million in the third quarter
2023, or 2.9% of sales as capacity expansion projects start to near
completion. This compares with $8.5 million, or 4.1% of sales, in
the year ago period.
- Dividends: Paid 107th sequential quarterly cash dividend on
October 20, 2023.
Updating Full Year 2023 Outlook:
Sean Bagan, Chief Financial Officer, commented, “It is a
privilege to have joined Helios Technologies. I have gained a deep
appreciation of the Company’s purpose driven culture and its
steadfast values that drive the organization each day. The talented
global teams deliver technology solutions to our dedicated
customers that ensure safety, reliability, connectivity and
control. Our strategy combined with our expanding markets,
innovative products, global footprint, leading positions, and
extensive manufacturing capabilities provides a solid foundation to
weather market fluctuations. Helios has invested in its future and
is well positioned to benefit as market dynamics improve. As a
result of the change in customer behavior, we are moderating our
outlook for the balance of the year. This is a very skilled
enterprise with a great culture, great team and great future. The
Company’s underlying strong financial profile can deliver top tier
margins and efficient cash flow generation, which gives me
confidence that we will continue to build momentum to grow
shareholder value over time.”
The following provides the Company’s expectations for 2023 as of
November 2, 2023. This assumes constant currency, using quarter end
rates, and that markets served are not further impacted by the
macroeconomic or the geopolitical environment.
Previous
2023 Outlook
Updated
2023 Outlook
Consolidated revenue
$880 - $900 million
$820 - $835 million
Net income
$65 - $66 million
$35 - $39 million
Adjusted EBITDA
$187 - $196 million
$152 - $167 million
Adjusted EBITDA margin
21.0% - 22.0%
18.5% - 20.0%
Interest expense
$30 - $32 million
$31 - $32 million
Effective tax rate
21% - 23%
23% - 24%
Depreciation
$31 - $33 million
$31 - $32 million
Amortization
$33 - $35 million
$34 - $35 million
Capital expenditures % total revenue
3% - 5% of sales
4% - 5% of sales
Diluted EPS
$1.96 - $2.00
$1.07 - $1.17
Diluted Non-GAAP Cash EPS
$3.04 - $3.12
$2.17 - $2.39
Adjusted EBITDA, Adjusted EBITDA margin and Diluted Non-GAAP
Cash EPS represent Non-GAAP financial measures. The Company has
presented the comparable GAAP figures in the table above. For 2023
Outlook, Adjusted EBITDA excludes an estimated $15 million to $18
million of costs for restructuring activities and acquisition
related costs including integration. For 2023 Outlook, Diluted
Non-GAAP Cash EPS excludes an estimated $1.10 to $1.21 per diluted
share of costs primarily for amortization, restructuring
activities, acquisition related costs including integration and the
related tax impact on these items.
Webcast
The Company will host a conference call and webcast tomorrow,
November 3, 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 1:00
p.m. ET on the day of the call through Friday, November 10, 2023.
To listen to the archived call, dial (412) 317-6671 and enter
conference ID number 13740935. 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 and follow us on LinkedIn.
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 Centers of 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
the cyclical nature of our business and the 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) the Company’s
ability to respond to global economic trends and changes in
customer demand domestically and internationally, including as a
result of standardization and the cyclical nature of our business,
which can adversely affect the demand for capital goods; (ii)
supply chain disruption and the potential inability to procure
goods; (iii) conditions in the capital markets, including the
interest rate environment and the availability of capital; (iv)
inflation (including hyperinflation) or recession; (v) 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; (vi) risks related to
health epidemics, pandemics and similar outbreaks, 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; (vii) risks related to our international operations,
including the potential impact of the ongoing conflict in Ukraine
and the Middle East; and (viii) new product introductions, product
sales mix and the geographic mix of sales nationally and
internationally; (ix) 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 December 31,
2022 filed with the Securities and Exchange Commission on February
28, 2023.
This news release will discuss some historical Non-GAAP
financial measures, which Helios believes that providing these
specific Non-GAAP figures are important for investors and other
readers of Helios financial statements, as they are used as
analytical indicators by Helios management to better understand
operating 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. Please carefully review the Non-GAAP reconciliations to
the most directly comparable GAAP measures and the related
additional information provided throughout. Because these metrics
are Non-GAAP measures and are thus susceptible to varying
calculations, these figures, as presented, may not be directly
comparable to other similarly titled measures used by other
companies.
This news release also presents forward-looking statements
regarding Non-GAAP measures, including Adjusted EBITDA, Adjusted
EBITDA margin, cash net income and cash net income per diluted
share. 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 2023 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 millions, except per share
data)
(Unaudited)
For the Three Months
Ended
For the Nine Months
Ended
September 30,
2023
October 1,
2022
% Change
September 30,
2023
October 1,
2022
% Change
Net sales
$
201.4
$
207.2
(3
)%
$
642.2
$
689.4
(7
)%
Cost of sales
141.7
137.9
3
%
435.7
454.2
(4
)%
Gross profit
59.7
69.3
(14
)%
206.5
235.2
(12
)%
Gross margin
29.6
%
33.4
%
32.2
%
34.1
%
Selling, engineering and administrative expenses
37.7
31.7
19
%
113.8
98.1
16
%
Amortization of intangible assets
8.2
6.8
21
%
24.7
20.6
20
%
Operating income
13.8
30.7
(55
)%
68.0
116.6
(42
)%
Operating margin
6.9
%
14.8
%
10.6
%
16.9
%
Interest expense, net
8.7
4.1
112
%
22.6
11.7
93
%
Foreign currency transaction loss (gain), net
0.1
(0.2
)
(150
)%
0.6
(1.3
)
(146
)%
Other non-operating expense, net
-
0.2
(100
)%
-
1.5
(100
)%
Income before income taxes
5.0
26.7
(81
)%
44.8
104.7
(57
)%
Income tax provision
1.5
6.3
(76
)%
10.7
23.8
(55
)%
Net income
$
3.5
$
20.4
(83
)%
$
34.1
$
80.9
(58
)%
Net income per share: Basic
$
0.11
$
0.63
(83
)%
$
1.04
$
2.49
(58
)%
Diluted
$
0.11
$
0.63
(83
)%
$
1.04
$
2.48
(58
)%
Weighted average shares outstanding: Basic
33.0
32.5
32.8
32.5
Diluted
33.1
32.6
33.0
32.6
Dividends declared per share
$
0.09
$
0.09
$
0.27
$
0.27
HELIOS TECHNOLOGIES
CONSOLIDATED BALANCE
SHEETS
(In millions, except per share
data)
September 30, 2023
December 31, 2022
(Unaudited)
Assets Current assets: Cash and cash equivalents
$
35.2
$
43.7
Accounts receivable, net of allowance for credit losses of $2.0 and
$1.5
131.2
125.1
Inventories, net
208.7
191.6
Income taxes receivable
10.1
10.2
Other current assets
25.0
17.9
Total current assets
410.2
388.5
Property, plant and equipment, net
220.3
175.7
Deferred income taxes
2.1
1.6
Goodwill
502.7
468.5
Other intangible assets, net
426.4
405.6
Other assets
28.9
23.8
Total assets
$
1,590.6
$
1,463.7
Liabilities and shareholders’ equity Current liabilities:
Accounts payable
$
65.0
$
73.7
Accrued compensation and benefits
19.2
21.1
Other accrued expenses and current liabilities
22.3
32.0
Current portion of long-term non-revolving debt, net
21.8
19.0
Dividends payable
2.9
2.9
Income taxes payable
5.1
3.6
Total current liabilities
136.3
152.3
Revolving lines of credit
217.9
261.3
Long-term non-revolving debt, net
304.2
164.2
Deferred income taxes
57.2
61.0
Other noncurrent liabilities
33.0
30.0
Total liabilities
748.6
668.8
Commitments and contingencies
-
-
Shareholders’ equity: Preferred stock, par value $0.001, 2.0
shares authorized, no shares issued or outstanding
-
-
Common stock, par value $0.001, 100.0 shares authorized, 33.0 and
32.6 shares issued and outstanding
-
-
Capital in excess of par value
431.6
404.3
Retained earnings
475.3
450.0
Accumulated other comprehensive loss
(64.9
)
(59.4
)
Total shareholders’ equity
842.0
794.9
Total liabilities and shareholders’ equity
$
1,590.6
$
1,463.7
HELIOS TECHNOLOGIES
CONSOLIDATED STATEMENTS OF
CASH FLOWS
(In millions)
(Unaudited)
For the Nine Months
Ended
September 30, 2023
October 1, 2022
Cash flows from operating activities: Net income
$
34.1
$
80.9
Adjustments to reconcile net income to net cash provided by
operating activities: Depreciation and amortization
47.7
37.4
Stock-based compensation expense
9.2
6.2
Amortization of debt issuance costs
0.5
0.4
Benefit for deferred income taxes
(3.1
)
(2.1
)
Forward contract losses (gains), net
0.1
(6.4
)
Other, net
0.5
1.0
(Increase) decrease in, net of acquisitions: Accounts receivable
(1.5
)
(2.9
)
Inventories
(14.4
)
(19.7
)
Income taxes receivable
0.3
(1.8
)
Other current assets
(7.5
)
0.6
Other assets
5.8
6.2
Increase (decrease) in, net of acquisitions: Accounts payable
(9.1
)
(17.2
)
Accrued expenses and other liabilities
(6.9
)
(5.7
)
Income taxes payable
1.8
2.5
Other noncurrent liabilities
(4.6
)
(5.4
)
Contingent consideration payments in excess acquisition date fair
value
(2.7
)
-
Net cash provided by operating activities
50.2
74.2
Cash flows from investing activities: Business acquisitions,
net of cash acquired
(114.8
)
(67.3
)
Capital expenditures
(25.5
)
(21.9
)
Proceeds from dispositions of property, plant and equipment
0.3
1.9
Cash settlement of forward contracts
0.6
4.4
Software development costs
(5.1
)
(2.3
)
Net cash used in investing activities
(144.5
)
(85.2
)
Cash flows from financing activities: Borrowings on
revolving credit facilities
175.7
112.7
Repayment of borrowings on revolving credit facilities
(219.0
)
(72.2
)
Borrowings on long-term non-revolving debt
160.0
-
Repayment of borrowings on long-term non-revolving debt
(16.3
)
(12.6
)
Proceeds from stock issued
1.6
1.7
Dividends to shareholders
(8.8
)
(8.8
)
Payment of employee tax withholding on equity award vestings
(2.2
)
(2.6
)
Payment of contingent consideration liability
(3.4
)
(1.1
)
Other financing activities
(1.9
)
(1.6
)
Net cash provided by financing activities
85.7
15.5
Effect of exchange rate changes on cash and cash equivalents
0.1
3.7
Net (decrease) increase in cash and cash equivalents
(8.5
)
8.3
Cash and cash equivalents, beginning of period
43.7
28.6
Cash and cash equivalents, end of period
$
35.2
$
36.8
HELIOS TECHNOLOGIES
SEGMENT DATA
(In millions)
(Unaudited)
For the Three Months
Ended
For the Nine Months
Ended
September 30, 2023
October 1, 2022
September 30, 2023
October 1, 2022
Sales: Hydraulics
$
132.0
$
131.2
$
432.1
$
411.1
Electronics
69.4
76.0
210.1
278.3
Consolidated
$
201.4
$
207.2
$
642.2
$
689.4
Gross profit and margin: Hydraulics
$
41.1
$
46.5
$
140.7
$
146.8
31.1
%
35.4
%
32.6
%
35.7
%
Electronics
18.6
22.8
65.8
88.4
26.8
%
30.0
%
31.3
%
31.8
%
Consolidated
$
59.7
$
69.3
$
206.5
$
235.2
29.6
%
33.4
%
32.2
%
34.1
%
Operating income (loss) and margin: Hydraulics
$
18.4
$
29.4
$
73.3
$
92.1
13.9
%
22.4
%
17.0
%
22.4
%
Electronics
4.2
11.0
23.8
51.8
6.1
%
14.5
%
11.3
%
18.6
%
Corporate and other
(8.8
)
(9.6
)
(29.1
)
(27.3
)
Consolidated
$
13.8
$
30.7
$
68.0
$
116.6
6.9
%
14.8
%
10.6
%
16.9
%
ORGANIC AND ACQUIRED REVENUE
1
(In millions)
(Unaudited)
Three Months Ended
Full Year Ended
Three Months Ended
Nine Months Ended
April 2,
July 2,
October 1,
December 31,
December 31,
April 1,
July 1,
September 30,
September 30,
2022
2022
2022
2022
2022
2023
2023
2023
2023
Hydraulics Organic
$
130.7
$
137.1
$
129.1
$
132.0
$
528.9
$
134.0
$
137.2
$
121.0
$
392.2
Acquisition
6.4
5.7
2.1
8.2
22.4
13.7
15.2
11.0
39.9
Total
$
137.1
$
142.8
$
131.2
$
140.2
$
551.3
$
147.7
$
152.4
$
132.0
$
432.1
Electronics Organic
$
102.7
$
97.9
$
75.2
$
55.8
$
331.6
$
65.5
$
74.0
$
67.1
$
206.6
Acquisition
0.8
1.0
0.7
-
2.5
-
1.2
2.3
3.5
Total
$
103.4
$
98.9
$
75.9
$
55.8
$
334.1
$
65.5
$
75.2
$
69.4
$
210.1
Consolidated Organic
$
233.4
$
235.0
$
204.3
$
187.8
$
860.5
$
199.5
$
211.2
$
188.1
$
598.8
Acquisition
7.2
6.6
2.9
8.2
24.9
13.7
16.4
13.3
43.4
Total
$
240.5
$
241.7
$
207.2
$
196.0
$
885.4
$
213.2
$
227.6
$
201.4
$
642.2
____________________
1 Revenue is considered to be acquisition
related until the acquisition has been included in the Company’s
financial results for one full year.
HELIOS TECHNOLOGIES
ADDITIONAL INFORMATION
(Unaudited)
2023 Sales by Geographic Region and Segment ($ in
millions)
Q1
% Change
y/y
Q2
% Change
y/y
Q3
% Change
y/y
YTD 2023
% Change
y/y
Americas: Hydraulics
$
57.9
34
%
$
60.6
21
%
$
55.7
12
%
$
174.2
22
%
Electronics
55.1
(29
%)
63.2
(21
%)
59.4
(9
%)
177.7
(20
%)
Consol. Americas
113.0
(6
%)
123.8
(5
%)
115.1
0
%
351.9
(4
%)
% of total
53
%
54
%
57
%
55
%
EMEA: Hydraulics
$
49.4
(7
%)
$
51.3
5
%
$
38.8
(6
%)
$
139.5
(3
%)
Electronics
6.7
(43
%)
7.0
(43
%)
5.7
(26
%)
19.4
(39
%)
Consol. EMEA
56.1
(13
%)
58.3
(5
%)
44.5
(9
%)
158.9
(9
%)
% of total
26
%
26
%
22
%
25
%
APAC: Hydraulics
$
40.4
(2
%)
$
40.5
(8
%)
$
37.5
(7
%)
$
118.4
(5
%)
Electronics
3.7
(73
%)
5.0
(22
%)
4.3
30
%
13.0
(45
%)
Consol. APAC
44.1
(20
%)
45.5
(10
%)
41.8
(4
%)
131.4
(12
%)
% of total
21
%
20
%
21
%
20
%
Total
$
213.2
(11
%)
$
227.6
(6
%)
$
201.4
(3
%)
$
642.2
(7
%)
2022 Sales by Geographic Region and Segment ($
in millions)
Q1
% Change
y/y
Q2
% Change
y/y
Q3
% Change
y/y
Q4
% Change
y/y
2022
% Change
y/y
Americas: Hydraulics
$
43.1
26
%
$
49.9
20
%
$
49.7
10
%
$
56.8
22
%
$
199.5
19
%
Electronics
77.7
20
%
80.2
25
%
65.0
1
%
48.0
(26
%)
270.9
5
%
Consol. Americas
120.8
22
%
130.1
23
%
114.7
5
%
104.8
(6
%)
470.4
11
%
% of total
50
%
54
%
55
%
53
%
53
%
EMEA: Hydraulics
$
52.9
22
%
$
49.0
5
%
$
41.3
(8
%)
$
43.3
(4
%)
$
186.5
4
%
Electronics
11.8
27
%
12.3
12
%
7.7
(31
%)
5.3
(50
%)
37.1
(12
%)
Consol. EMEA
64.7
23
%
61.3
6
%
49.0
(12
%)
48.6
(13
%)
223.6
1
%
% of total
27
%
25
%
24
%
25
%
25
%
APAC: Hydraulics
$
41.1
(1
%)
$
43.9
(2
%)
$
40.2
(7
%)
$
40.1
3
%
$
165.3
(2
%)
Electronics
13.9
23
%
6.4
(58
%)
3.3
(77
%)
2.5
(79
%)
26.1
(51
%)
Consol. APAC
55.0
4
%
50.3
(16
%)
43.5
(25
%)
42.6
(16
%)
191.4
(14
%)
% of total
23
%
21
%
21
%
22
%
22
%
Total
$
240.5
17
%
$
241.7
8
%
$
207.2
(7
%)
$
196.0
(10
%)
$
885.4
2
%
HELIOS TECHNOLOGIES
Non-GAAP Adjusted Operating
Income RECONCILIATION
(In millions)
(Unaudited)
Three Months Ended
Nine Months Ended
September 30, 2023
October 1, 2022
September 30, 2023
October 1, 2022
GAAP operating income
$
13.8
$
30.7
$
68.0
$
116.6
Acquisition-related amortization of intangible assets
8.2
6.8
24.7
20.6
Acquisition and financing-related expenses
(A)
0.5
2.2
3.3
4.0
Restructuring charges
(B)
4.8
1.8
9.0
3.8
Officer transition costs
0.1
-
1.0
0.3
Acquisition integration costs
(C)
-
0.6
0.2
2.4
Other
0.1
-
-
0.2
Non-GAAP adjusted operating income
$
27.5
$
42.2
$
106.2
$
147.8
GAAP operating margin
6.9
%
14.8
%
10.6
%
16.9
%
Non-GAAP adjusted operating margin
13.7
%
20.4
%
16.5
%
21.4
%
Adjusted EBITDA
RECONCILIATION
(In millions)
(Unaudited)
Three Months Ended Nine Months Ended Twelve
Months Ended September 30, 2023 October 1, 2022
September 30, 2023 October 1, 2022 September 30,
2023 Net income
$
3.5
$
20.4
$
34.1
$
80.9
$
51.7
Interest expense, net
8.7
4.1
22.6
11.7
27.7
Income tax provision
1.5
6.3
10.7
23.8
10.2
Depreciation and amortization
16.4
12.4
47.7
37.4
61.9
EBITDA
30.1
43.1
115.1
153.7
151.5
Acquisition and financing-related expenses
(A)
0.5
2.2
3.3
4.0
5.2
Restructuring charges
(B)
4.8
1.8
9.0
3.8
8.8
Officer transition costs
0.1
-
1.0
0.3
0.9
Acquisition integration costs
(C)
-
0.6
0.2
2.4
1.4
Change in fair value of contingent consideration
-
0.2
0.8
1.6
0.9
Other
0.1
-
(0.4
)
0.2
(0.5
)
Adjusted EBITDA
$
35.6
$
48.0
$
129.0
$
166.1
$
168.2
Adjusted EBITDA margin
17.7
%
23.2
%
20.1
%
24.1
%
20.1
%
Pre-acquisition adjusted EBITDA, 2023 Schultes and i3
2.9
TTM Pro forma adjusted EBITDA
$
171.1
HELIOS TECHNOLOGIES
Non-GAAP Cash Net Income
RECONCILIATION
(In millions)
(Unaudited)
Three Months Ended
Nine Months Ended
September 30, 2023
October 1, 2022
September 30, 2023
October 1, 2022
Net income
$
3.5
$
20.4
$
34.1
$
80.9
Amortization of intangible assets
(D)
8.4
6.9
25.2
21.0
Acquisition and financing-related expenses
(A)
0.5
2.2
3.3
4.0
Restructuring charges
(B)
4.8
1.8
9.0
3.8
Officer transition costs
0.1
-
1.0
0.3
Acquisition integration costs
(C)
-
0.6
0.2
2.4
Change in fair value of contingent consideration
-
0.2
0.8
1.6
Other
0.1
-
(0.4
)
0.2
Tax effect of above
(3.0
)
(2.9
)
(8.6
)
(8.3
)
Non-GAAP cash net income
$
14.4
$
29.2
$
64.6
$
105.8
Non-GAAP cash net income per diluted share
$
0.44
$
0.90
$
1.96
$
3.25
(A) Acquisition and financing-related expenses include costs
associated with our M&A activities. 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 months and nine months ended September 30,
2023, the charges include recurring labor costs of $0.2 million and
$0.6 million, professional fees of $0.1 million and $1.8 million
and other M&A related costs of $0.2 million and $0.9 million,
respectively.
(B) Restructuring activities include costs associated with the
creation of our two new Regional Operational Centers of Excellence.
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 months and
nine months ended September 30, 2023, the charges include
non-recurring labor costs of $3.0 million and $5.7 million, travel
costs of $0.2 million and $0.7 million and manufacturing relocation
and other costs of $1.6 million and $2.6 million, respectively.
(C) Acquisition integration activities include costs associated
with integrating our recently 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 months and nine months ended September 30,
2023, the costs totaled $0.0 million and $0.2 million,
respectively.
(D) Amortization of intangible assets presented here includes
$0.2 million and $0.5 million of amortization for capitalized
software development costs included within cost of sales in the
income statement for the three months and nine months ended
September 30, 2023, respectively.
HELIOS TECHNOLOGIES
Non-GAAP Sales Growth
RECONCILIATION
(In millions)
(Unaudited)
Three Months Ended Nine Months Ended
Hydraulics Electronics Consolidated
Hydraulics Electronics Consolidated Q3 2023
Net Sales
$
132.0
$
69.4
$
201.4
$
432.1
$
210.1
$
642.2
Impact of foreign currency translation
(E)
(2.2
)
-
(2.2
)
1.3
0.3
1.6
Net Sales in constant currency
129.8
69.4
199.2
433.4
210.4
643.8
Less: Acquisition related sales
(11.0
)
(2.3
)
(13.3
)
(39.9
)
(3.5
)
(43.4
)
Organic sales in constant currency
$
118.8
$
67.1
$
185.9
$
393.5
$
206.9
$
600.4
Q3 2022 Net Sales
$
131.2
$
76.0
$
207.2
$
411.1
$
278.3
$
689.4
Net sales growth
1
%
-9
%
-3
%
5
%
-25
%
-7
%
Net sales growth in constant currency
-1
%
-9
%
-4
%
5
%
-24
%
-7
%
Organic net sales growth in constant currency
-9
%
-12
%
-10
%
-4
%
-26
%
-13
%
(E) 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 millions)
(Unaudited)
As of September 30, 2023 Current portion of
long-term non-revolving debt, net
21.8
Revolving lines of credit
218.5
Long-term non-revolving debt, net
304.2
Total debt
544.5
Less: Cash and cash equivalents
35.2
Net debt
509.3
TTM Pro forma adjusted EBITDA
(F)
171.1
Ratio of net debt to TTM pro forma adjusted EBITDA
2.98
(F) On a pro-forma basis for Schultes and i3.
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 these specific Non-GAAP figures are
important for investors and other readers of Helios financial
statements, as they are used as analytical indicators by Helios
management to better understand operating performance. These
Non-GAAP financial measures should be considered in addition to
results prepared in accordance with GAAP and should not be
considered a substitute for GAAP. Please carefully review the
attached Non-GAAP reconciliations to the most directly comparable
GAAP measures and the related additional information provided
throughout. Because these metrics are Non-GAAP measures and are
thus susceptible to varying calculations, these figures, as
presented, may not be directly comparable to 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 2023
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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231102870651/en/
For more information: 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
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