HELIOS TECHNOLOGIES, INC. Q1 FY2025 earnings call

Key Points

• Sean completed a listening tour, refocusing the organization on customers to drive business success.
• Fortified the management team and reallocated resources to grow go-to-market initiatives.
• First quarter sales of $195 million exceeded guidance, with adjusted EBITDA margin 17.3% and cash from operations $19 million.
• Saw positive trends in order intake, with recent wins in construction and aerial work platforms using NEM's technology.
• Teams at Damon and Sun making progress on win-back strategy, and Enovation Controls, Balboa having new business wins.
• Accelerated new product launches driven by customer feedback.

Hydraulic sales declined 11% year-over-year, impacted by weakness in agriculture, mobile, and industrial end markets, with foreign exchange having an unfavorable $2.2 million impact. Hydraulics gross profit and margin contracted 16% and 170 basis points respectively. SEA expenses were down 12%. Electronics sales remained relatively unchanged year-over-year, with higher sales in health and wellness and recreational offsetting declines in other segments. Electronics gross profit slightly declined, but gross margin helped steady. SEA expenses were down 7%. Hydraulic sales contributed a certain percentage to total revenue, and Electronics sales another percentage, though specific contribution percentages weren't detailed in the transcript.

Forward-Looking

• Second quarter sales expected in the range of $198 to $206 million, a sequential step up from first quarter.
• Adjusted EBITDA margin projected to improve to 17.5% to 18.5%.
• Diluted non-GAAP earnings per share expected to sequentially increase in the range of plus five to plus 23% or $0.46 to $0.54.
• Still see a path for sales growth over 2024, focusing on near-term commitments and responding to demand outcomes.

Tariff-Related Risks

• Estimated $15 million cost impact on second half 2025 if no tariff risk mitigation action.
• Potential downstream effects on demand due to prolonged tariff escalation, including rising costs and pricing pressures.
• Need to manage through shifting geopolitical tensions and tariff dynamics using mitigation tools like pricing actions, alternative sourcing, etc.

Q: Chris Moore asked about the listening tour and specific actions from it, and on tariffs related to manufacturing in the US vs competitors importing from China.

A: Sean Bagan responded that the focus is on go-to-market, getting the right team on the bus, and portfolio assessment. On tariffs, they have manufacturing footprint in China and Asia, accelerating focus to assemble products there to mitigate risks and it's a pre-existing good strategy.

Q: Nathan Jones asked about competitive positioning around tariffs, opportunities, and go-to-market strategy.

A: Sean Bagan said there are market share gain opportunities as competitors import from China, with wins already in hydraulics and Faster businesses. Hunting strategy means being more aggressive with customer engagement, targeting segments, and incentivizing cross-selling.

Q: Jeff Hammond asked about portfolio assessment and divestitures.

A: Sean Bagan said they're keeping an open mind, evaluating strategic fit and financial performance of businesses, and not interested in cutting to grow but will evaluate portfolio for accretive returns.

Q: Mircea Dobre asked about Q2 guidance, demand, and capacity in hydraulics.

A: Sean Bagan said Q2 guidance is positive with first half ahead of plan. On demand, there were positive signs like recreational growth and order wins. On hydraulics capacity, absorption is key, and they're optimistic about green shoots but will consider actions if growth doesn't materialize.