Helios Technologies (HLIO) Baird 2024 Global Industrials Conference summary

Company Overview and Leadership

• Provides diversified motion control solutions in electronics and hydraulics, with a global footprint and balanced end-market exposure.

• Underwent significant transformation via $1.3 billion in M&A over the past eight years, expanding brands and geographic reach.

• Transitioning from a holding company to an integrated operating company, streamlining customer experience and internal efficiencies.

• Interim CEO role filled internally; CEO search underway with Spencer Stuart, targeting a six-month process for permanent leadership.

• Strong, stable management team with no turnover since the CEO transition.

Strategic Direction and Transformation

• Focus on leveraging strengths at the intersection of hydraulics and electronics to deliver subsystem solutions.

• Strategic investments in product innovation, acquisitions, capacity expansion, regional structure, and software to drive growth and recurring revenue.

• Emphasis on regional Centers of Excellence and 'in the region, for the region' manufacturing to maximize quality and efficiency.

• Diversification across end markets and geographies to mitigate cyclicality and expand opportunities.

• System sales strategy aims to integrate electronics and hydraulics, with long sales cycles but growing customer engagement.

Financial Performance and Outlook

• Q3 2024 net sales were $194.5M, down 3% YoY, with adjusted EBITDA margin at 20.9% (+320 bps YoY).

• Cash from operations rose 195% YoY; debt leverage ratio reduced to 2.8x, with debt paid down for five consecutive quarters.

• Full-year 2024 outlook updated to $800–$805M net sales, 19.0–19.6% adjusted EBITDA margin, and $2.10–$2.20 diluted non-GAAP EPS, reflecting softer end markets and hurricane impacts.

• Gross profit and margin expanded YoY despite lower volumes, driven by lower material costs and operational efficiencies.

• Continued focus on protecting margins, generating cash, and reducing debt while investing in organic growth and dividends.