Helios Technologies Inc ((HLIO)) has held its Q3 earnings call. Read on for the main highlights of the call.
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In the latest earnings call, Helios Technologies Inc. delivered a message of optimism and strategic progress. The company reported a robust return to growth and margin expansion, underscored by strategic restructuring and exceptional performance in the Electronics segment. Despite facing challenges such as a significant goodwill impairment and increased SG&A expenses in the Hydraulics segment, the overall sentiment was positive, with highlights significantly outweighing the lowlights, indicating strong business momentum.
Return to Growth and Margin Expansion
Helios Technologies reported a 13% increase in sales year-over-year, showcasing growth across all regions and business segments. The company achieved a record quarter for Enovation Controls and delivered an impressive adjusted EBITDA margin exceeding 20%. This marks a significant milestone in the company’s growth trajectory.
Strong Performance in Electronics
The Electronics segment was a standout performer, growing 21% year-over-year. This growth was driven by record performance at Enovation Controls, which contributed to a gross margin expansion of 420 basis points due to higher volumes and a favorable mix.
Debt Reduction and Improved Leverage
Helios made significant strides in reducing its net debt-to-adjusted EBITDA leverage ratio to 2.4x after nine consecutive quarters of debt repayment. The company aims to further lower this ratio to around 2x by the end of the year, demonstrating strong financial discipline.
Strategic Divestitures and Focused Portfolio
The sale of Custom Fluidpower was completed with a gain of $21 million, allowing Helios to refocus its i3PD resources on core business projects and strategic goals. This move aligns with the company’s strategy to streamline operations and enhance its portfolio.
Goodwill Impairment and Operating Income Decline
Helios recorded a $25.9 million goodwill impairment related to i3 product development, which contributed to a decline in operating income for the quarter. This was a notable challenge, but the company remains focused on addressing these issues.
Challenges in Hydraulics Segment
Despite overall growth, the Hydraulics segment faced a 30% increase in SG&A expenses due to higher wages and benefits, impacting operating income. This remains an area of concern that the company is actively working to manage.
Forward-Looking Guidance
Looking ahead, Helios Technologies provided a positive outlook for the remainder of the year. The company projects sales between $192 million and $202 million for the fourth quarter, with an adjusted EBITDA margin ranging from 20% to 21%. Helios also aims to reduce its net debt-to-adjusted EBITDA leverage ratio to around 2x by year-end, reflecting strong financial discipline and a focus on future growth.
In summary, Helios Technologies Inc.’s earnings call conveyed a strong message of growth and strategic progress. While challenges remain, particularly in the Hydraulics segment, the company’s overall performance and forward-looking guidance suggest a positive trajectory. Investors and market watchers can take confidence in Helios’s strategic initiatives and financial discipline as it continues to build momentum.