HLIO Helios Technologies Inc

• Organic growth of 37% achieved in the quarter driven by industry-best lead times, flexibility and new products
• Net income grew to $30.7 million, up 138% over the prior-year period and up 36% over the trailing first quarter
• Operating momentum gained from manufacturing strategies; protected profitability with targeted pricing actions; Adjusted EBITDA1 margin expanded 310 basis points over prior-year period to 25.7%
• Diluted EPS of $0.95 up 138% from last year; Non-GAAP Cash EPS of $1.20 up 118%
• Strong cash generation and free cash flow; further reduced net debt to adjusted EBITDA leverage ratio to 2.16x2
• Raising revenue and margin expectations for 2021 even while anticipating continued supply chain challenges and material cost headwinds in second half

Helios Technologies, Inc. (Nasdaq: 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 second quarter ended July 3, 2021. Results include BWG Holdings I Corp. (known as “Balboa Water Group” or “Balboa acquisition”), from the date of its acquisition on November 6, 2020.

Josef Matosevic, the Company’s President and Chief Executive Officer, commented, “We delivered excellent results in the quarter on all levels. The Helios team is executing very well on our plans to drive organic growth, generate cash, deliver top tier adjusted EBITDA margins and meet the accelerated goal that we recently outlined at our investor day to achieve $1 billion in revenue two years earlier than planned, by 2023. We believe we are gaining market share as we are providing best in class industry lead times, remaining agile in addressing customer requirements, and accelerating innovative new products. In addition, our manufacturing and operating strategies are gaining traction as we navigate supply chain challenges, material cost increases, and labor shortages to outpace the competition, delight our customers and protect our margins.”

He concluded, “Following the end of the quarter, we successfully closed the NEM acquisition. This acquisition accelerates the electrification of our global hydraulics product offering while leveraging the know-how of our Helios Center of Engineering Excellence. We are also advancing our electronics offering as a systems integrator in select niche markets. We believe our unique market position as a pure play electronics/hydraulics company provides us with competitive advantages as we pursue the many opportunities available to us.”

____________________________________

1

Adjusted EBITDA is a non-GAAP measure. See comments regarding the use of non-GAAP measures and the reconciliation of GAAP to non-GAAP measures in the tables of this release

2

On a pro-forma basis for Balboa Water Group

Second Quarter 2021 Consolidated Results

($ in millions, except per share data) Q2 2021 Q2 2020 Change % Change Net sales

$

223.4

 

$

119.3

 

$

104.1

 

87

%

Gross profit

$

82.2

 

$

44.7

 

$

37.5

 

84

%

Gross margin

 

36.8

%

 

37.5

%

 

(70

)

bps Operating income

$

42.1

 

$

16.7

 

$

25.4

 

152

%

Operating margin

 

18.8

%

 

14.0

%

 

480

 

bps Non-GAAP adjusted operating margin

 

23.2

%

 

19.3

%

 

390

 

bps Net income

$

30.7

 

$

12.9

 

$

17.8

 

138

%

Diluted EPS

$

0.95

 

$

0.40

 

$

0.55

 

138

%

Non-GAAP cash net income

$

38.6

 

$

17.7

 

$

20.9

 

118

%

Non-GAAP cash EPS

$

1.20

 

$

0.55

 

$

0.65

 

118

%

Adjusted EBITDA

$

57.5

 

$

27.0

 

$

30.5

 

113

%

Adjusted EBITDA margin

 

25.7

%

 

22.6

%

 

310

 

bps

See the attached tables for additional important disclosures regarding Helios’s use of non-GAAP adjusted operating income, non-GAAP adjusted operating margin, non-GAAP cash net income, non-GAAP cash earnings per share, adjusted EBITDA (earnings before net interest expense, income taxes, depreciation and amortization, and certain non-recurring charges) and adjusted EBITDA margin (adjusted EBITDA as a percentage of sales) as well as reconciliations of GAAP operating income to non-GAAP adjusted operating income and non-GAAP adjusted operating margin and GAAP net income to non-GAAP cash net income, non-GAAP cash earnings per share, adjusted EBITDA and Adjusted EBITDA margin. 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 reflected strong demand across all markets, in particular agriculture, construction equipment, recreation, and health & wellness. Results included $60.2 million in sales from acquisitions. (See the table in this release that provides acquired revenue by segment by quarter).
• Strength in demand across all regions as markets recovered from the impacts of the COVID-19 pandemic.
• Foreign currency translation adjustment on sales: $6.9 million favorable.

Profits and margins

• Gross profit and margin drivers: gross profit benefitted from increased volume during the quarter. Gross margin was driven by improved leverage on higher volume and manufacturing labor efficiencies. These tailwinds were offset by higher freight and raw material costs given the challenges with global supply chains. In addition, the business model of the Balboa acquisition has lower gross margins but higher operating margins.
• Selling, engineering and administrative (“SEA”) expenses: as a percentage of sales, improved 530 basis points to 14.5% compared with the 2020 second quarter and 40 basis points sequentially, reflecting both the business model of the Balboa acquisition and continued cost management initiatives.
• Amortization of intangible assets: $7.7 million was up from $4.4 million in the prior year reflecting the acquisition.

Non-operating items

• Net interest expense: $4.4 million in the quarter, up $1.5 million compared with the prior-year period due to higher debt balances.
• Effective tax rate: 17.6% compared with 4.7%, or 22.7% excluding certain one-time Italian tax benefits, in the prior-year period.

Net income, earnings per share, non-GAAP cash earnings per share and adjusted EBITDA

• GAAP net income and earnings per share: $30.7 million and $0.95 per share.
• Non-GAAP cash earnings per share: $1.20 compared with $0.55 last year on strong demand, operational efficiencies, and better-than-expected performance of the Balboa acquisition.
• Adjusted EBITDA margin: improved 310 and 60 basis points to 25.7% compared with the prior-year and sequential period, respectively, due to higher volume and operational efficiencies.

First Half 2021 Consolidated Results

($ in millions, except per share data)

2021

2020

Change % Change Net sales

$

428.3

 

$

248.8

 

$

179.5

 

72

%

Gross profit

$

157.5

 

$

96.6

 

$

60.9

 

63

%

Gross margin

 

36.8

%

 

38.8

%

 

(200

)

bps Operating income

$

76.7

 

$

6.7

 

$

70.0

 

1045

%

Operating margin

 

17.9

%

 

2.7

%

 

1520

 

bps Non-GAAP adjusted operating margin

 

23.0

%

 

19.9

%

 

310

 

bps Net income (loss)

$

53.3

 

$

(4.3

)

$

57.6

 

NM

 

Diluted EPS

$

1.65

 

$

(0.13

)

$

1.78

 

NM

 

Non-GAAP cash net income

$

70.4

 

$

35.7

 

$

34.7

 

97

%

Non-GAAP cash EPS

$

2.18

 

$

1.11

 

$

1.07

 

96

%

Adjusted EBITDA

$

108.8

 

$

57.4

 

$

51.4

 

90

%

Adjusted EBITDA margin

 

25.4

%

 

23.1

%

 

230

 

bps   NM = Not meaningful

See the attached tables for additional important disclosures regarding Helios’s use of non-GAAP adjusted operating income, non-GAAP adjusted operating margin, non-GAAP cash net income, non-GAAP cash earnings per share, adjusted EBITDA (earnings before net interest expense, income taxes, depreciation and amortization, and certain non-recurring charges) and adjusted EBITDA margin (adjusted EBITDA as a percentage of sales) as well as reconciliations of GAAP operating income to non-GAAP adjusted operating income and non-GAAP adjusted operating margin and GAAP net income to non-GAAP cash net income, non-GAAP cash earnings per share, adjusted EBITDA and Adjusted EBITDA margin. 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 reflected strong demand across all regions and markets, in particular agriculture, construction equipment, recreation, and health & wellness. Results included $116.5 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: $12.7 million favorable.

Profits and margins

• Gross profit and margin drivers: gross profit and margin were driven by higher volume and the mix of products sold offset by the headwinds related to supply chain challenges resulting in higher raw material and freight costs, and the business model of the Balboa acquisition.
• Selling, engineering and administrative (“SEA”) expenses: 14.7% as a percentage of sales, improved 510 basis points compared with the prior-year period, reflecting both the lower SEA expenses relative to sales for the acquisition and continued cost containment initiatives.
• Amortization of intangible assets: increased $9.1 million to $17.9 million from the prior year reflecting the Balboa acquisition.
• Goodwill impairment charge: last year’s first quarter included a $31.9 million impairment charge resulting from weakened market outlook primarily due to the COVID-19 pandemic.

Non-operating items

• Net interest expense: $3.3 million increase to $9.2 million compared with the prior-year period reflecting higher debt balances.
• Effective tax rate: 20.1% compared with 15.0% in prior year, excludes non-taxable goodwill impairment charge, included certain one-time benefits in the second quarter of 2020 that reduced the effective tax rate for the period.

Net income, earnings per share, non-GAAP cash earnings per share and adjusted EBITDA

• GAAP net income and earnings per share: $53.3 million and $1.65 per share.
• Non-GAAP cash earnings per share: $2.18 compared with $1.11 in the prior-year period driven by strong demand, operational efficiencies, and strong performance of the Balboa acquisition.
• Adjusted EBITDA margin: 25.4%, up 230 basis points compared with the prior-year period due higher volume and operational efficiencies.

Hydraulics Segment Review

(Refer to sales by geographic region and segment data in accompanying tables)

($ in millions) Hydraulics Three Months Ended Q2 2021 Q2 2020 Change % Change Net Sales Americas

$

41.7

 

$

34.2

 

$

7.5

22

%

EMEA

 

46.6

 

 

31.2

 

 

15.4

49

%

APAC

 

44.7

 

 

36.7

 

 

8.0

22

%

Total Segment Sales

$

133.0

 

$

102.1

 

$

30.9

30

%

Gross Profit

$

50.9

 

$

37.5

 

$

13.4

36

%

Gross Margin

 

38.3

%

 

36.7

%

 

160

bps SEA Expenses

$

18.6

 

$

15.5

 

$

3.1

20

%

Operating Income

$

32.3

 

$

22.0

 

$

10.3

47

%

Operating Margin

 

24.3

%

 

21.5

%

 

280

bps

Second Quarter Hydraulics Segment Review

• Higher sales in all regions were driven by demand from the construction, agriculture, mobile and industrial equipment end markets; foreign currency exchange rates had a $6.7 million favorable adjustment on sales.
• Gross margin of 38.3%, up 160 basis points, was driven by improved leverage on higher volume and production labor efficiencies.
• Operating margin improved 280 basis points, reflecting disciplined cost management efforts.

Electronics Segment Review

(Refer to sales by geographic region and segment data in accompanying tables)

($ in millions) Electronics Three Months Ended Q2 2021 Q2 2020 Change % Change Net Sales Americas

$

64.1

 

$

13.4

 

$

50.7

 

378

%

EMEA

 

11.0

 

 

1.9

 

 

9.1

 

479

%

APAC

 

15.3

 

 

1.9

 

 

13.4

 

705

%

Total Segment Sales

$

90.4

 

$

17.2

 

$

73.2

 

426

%

Gross Profit

$

31.2

 

$

7.2

 

$

24.0

 

333

%

Gross Margin

 

34.5

%

 

42.1

%

 

(760

)

bps SEA Expenses

$

11.6

 

$

6.3

 

$

5.3

 

84

%

Operating Income

$

19.6

 

$

0.9

 

$

18.7

 

2,078

%

Operating Margin

 

21.7

%

 

5.5

%

 

1620

 

bps

Second Quarter Electronics Segment Review

• Higher sales included $60.2 million related to the acquisition. Strong demand from health & wellness and recreational markets drove sales despite headwinds from supply chain constraints.
• Gross margin reflects the different business model of the Balboa acquisition, which has lower gross margins that are offset by a lower SEA expense structure. Additionally, raw material, freight, and logistics costs increased as a result of materials shortages and efforts to meet customer requirements on a timely basis.
• Operating margin of 21.7% demonstrates the business model of the Balboa acquisition, which has an inherently lower operating expense structure, and higher volume in the organic business. SEA expenses increased due to the incremental expenses from the acquisition.

Balance Sheet and Cash Flow Review

• Total debt was reduced by $25.3 million to $437.1 million from $462.4 million at January 2, 2021.
• Cash and cash equivalents at July 3, 2021 were $34.4 million, up $9.2 million from the end of 2020.
• Pro-forma net debt-to-adjusted EBITDA improved to 2.16x at the end of the second quarter 2021 compared with 3.0x (pro-forma for Balboa) at the end of 2020 demonstrating the Company’s ability to rapidly de-lever the balance sheet following an acquisition. At the end of the second quarter 2021, the Company had $161.4 million available on its revolving lines of credit.
• Net cash provided by operations increased $9.2 million, or 36.4%, to $34.5 million in the second quarter 2021 compared with the prior-year period.
• Capital expenditures were $5.3 million in the quarter, or approximately 2% of sales. The Company continues to expect to spend between $30 to $32 million in capital investments in 2021.
• Paid 99th sequential quarterly cash dividend on July 20, 2021.

2021 Outlook

The following provides the Company’s expectations for 2021. This assumes constant currency, using quarter end rates, and that markets served are not further impacted by the global pandemic.

Previous 2021Guidance providedon 5/10/21 Updated 2021Guidance % Change atMid-Point fromPrevious Guidance Consolidated revenue $740 - $750 million $800 - $830 million

9%

Adjusted EBITDA $170 - $180 million $188 - $203 million

12%

Adjusted EBITDA margin 23% - 24% 23.5% - 24.5%

50 bps

Interest expense $16 - $18 million $16 - $18 million

unchanged

Effective tax rate 24% - 26% 22% - 24%

-200 bps

Depreciation $22 - $24 million $22 - $23 million

-2%

Amortization $30 - $31 million $32 - $33 million

7%

Capital expenditures $30 - $35 million $30 - $32 million

-5%

Capital expenditures % total revenue ~4% of sales ~4% of sales

unchanged

Non-GAAP Cash EPS $3.30 - $3.50 $3.60 -$3.80

9%

Webcast

The Company will host a conference call and webcast tomorrow, August 10, 2021 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 Tuesday, August 17, 2021. To listen to the archived call, dial (412) 317-6671 and enter conference ID number 13721131. 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, 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) conditions in the capital markets, including the interest rate environment and the availability of capital; (ii) our failure to realize the benefits expected from the Balboa acquisition, our failure to promptly and effectively integrate the Balboa acquisition and the ability of Helios to retain and hire key personnel, and maintain relationships with suppliers (iii) risks related to health epidemics, pandemics and similar outbreaks and similar outbreaks, including, without limitation, the current COVID-19 pandemic, which may among other things, adversely affect our supply chain and material costs and have material adverse effects on our business, financial position, results of operations and/or cash flows; (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; and (v) new product introductions, product sales mix and the geographic mix of sales nationally and internationally. 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 2, 2021.

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 Adjusted EBITDA margin. 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 2021 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 Six Months Ended July 3,2021 June 27,2020 % Change July 3,2021 June 27,2020 % Change     Net sales

$

223,413

 

$

119,294

 

87

%

$

428,258

 

$

248,777

 

72

%

Cost of sales

 

141,261

 

 

74,575

 

89

%

 

270,738

 

 

152,208

 

78

%

Gross profit

 

82,152

 

 

44,719

 

84

%

 

157,520

 

 

96,569

 

63

%

Gross margin

 

36.8

%

 

37.5

%

 

36.8

%

 

38.8

%

  Selling, engineering and administrative expenses

 

32,410

 

 

23,600

 

37

%

 

62,971

 

 

49,264

 

28

%

Amortization of intangible assets

 

7,680

 

 

4,417

 

74

%

 

17,878

 

 

8,765

 

104

%

Goodwill impairment

 

-

 

 

-

 

NM

 

 

-

 

 

31,871

 

NM

 

Operating income

 

42,062

 

 

16,702

 

152

%

 

76,671

 

 

6,669

 

NM

 

Operating margin

 

18.8

%

 

14.0

%

 

17.9

%

 

2.7

%

  Interest expense, net

 

4,400

 

 

2,891

 

52

%

 

9,151

 

 

5,842

 

57

%

Foreign currency transaction loss, net

 

503

 

 

283

 

78

%

 

967

 

 

408

 

137

%

Other non-operating income, net

 

(110

)

 

(16

)

NM

 

 

(111

)

 

(110

)

1

%

Income before income taxes

 

37,269

 

 

13,544

 

175

%

 

66,664

 

 

529

 

NM

 

Income tax provision

 

6,575

 

 

636

 

NM

 

 

13,382

 

 

4,844

 

176

%

Net income (loss)

$

30,694

 

$

12,908

 

138

%

$

53,282

 

$

(4,315

)

NM

 

  Basic and diluted net income (loss) per common share

$

0.95

 

$

0.40

 

138

%

$

1.65

 

$

(0.13

)

NM

 

  Basic and diluted weighted average shares outstanding

 

32,237

 

 

32,081

 

 

32,215

 

 

32,071

 

  Dividends declared per share

$

0.09

 

$

0.09

 

$

0.18

 

$

0.18

 

  NM = Not meaningful

HELIOS TECHNOLOGIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)

 

July 3, 2021

January 2, 2021

  Assets (Unaudited) Current assets: Cash and cash equivalents

$

34,371

 

$

25,216

 

Restricted cash

 

41

 

 

41

 

Accounts receivable, net of allowance for credit losses of $1,319 and $1,493

 

134,018

 

 

97,623

 

Inventories, net

 

132,318

 

 

110,372

 

Income taxes receivable

 

1,916

 

 

1,103

 

Other current assets

 

21,761

 

 

19,664

 

Total current assets

 

324,425

 

 

254,019

 

Property, plant and equipment, net

 

163,201

 

 

163,177

 

Deferred income taxes

 

3,551

 

 

6,645

 

Goodwill

 

436,233

 

 

443,533

 

Other intangible assets, net

 

401,483

 

 

419,375

 

Other assets

 

11,499

 

 

10,230

 

Total assets

$

1,340,392

 

$

1,296,979

 

Liabilities and shareholders’ equity Current liabilities: Accounts payable

$

74,553

 

$

59,477

 

Accrued compensation and benefits

 

23,706

 

 

22,985

 

Other accrued expenses and current liabilities

 

27,299

 

 

24,941

 

Current portion of long-term non-revolving debt, net

 

15,662

 

 

16,229

 

Dividends payable

 

2,902

 

 

2,891

 

Income taxes payable

 

6,868

 

 

1,489

 

Total current liabilities

 

150,990

 

 

128,012

 

Revolving line of credit

 

238,777

 

 

255,909

 

Long-term non-revolving debt, net

 

182,272

 

 

189,932

 

Deferred income taxes

 

76,417

 

 

78,864

 

Other noncurrent liabilities

 

33,591

 

 

36,472

 

Total liabilities

 

682,047

 

 

689,189

 

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, 32,249 and 32,121 issued and outstanding

 

32

 

 

32

 

Capital in excess of par value

 

379,299

 

 

371,778

 

Retained earnings

 

317,799

 

 

270,320

 

Accumulated other comprehensive loss

 

(38,785

)

 

(34,340

)

Total shareholders’ equity

 

658,345

 

 

607,790

 

Total liabilities and shareholders’ equity

$

1,340,392

 

$

1,296,979

 

HELIOS TECHNOLOGIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

  Six Months Ended

July 3, 2021

June 27, 2020

  Cash flows from operating activities: Net income (loss)

$

53,282

 

$

(4,315

)

Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization

 

28,142

 

 

17,021

 

Goodwill Impairment

 

-

 

 

31,871

 

Stock-based compensation expense

 

4,183

 

 

2,447

 

Amortization of debt issuance costs

 

249

 

 

358

 

Provision (benefit) for deferred income taxes

 

3,249

 

 

(2,370

)

Forward contract gains, net

 

(1,909

)

 

(41

)

Other, net

 

(173

)

 

625

 

(Increase) decrease in operating assets: Accounts receivable

 

(37,386

)

 

(7,040

)

Inventories

 

(22,917

)

 

(724

)

Income taxes receivable

 

(808

)

 

327

 

Other current assets

 

(2,247

)

 

(1,736

)

Other assets

 

2,921

 

 

1,855

 

Increase (decrease) in operating liabilities: Accounts payable

 

15,530

 

 

(18

)

Accrued expenses and other liabilities

 

6,058

 

 

(1,424

)

Income taxes payable

 

5,284

 

 

4,885

 

Other noncurrent liabilities

 

(3,925

)

 

(1,390

)

Net cash provided by operating activities

 

49,533

 

 

40,331

 

Cash flows from investing activities: Acquisition of a business, net of cash acquired

 

(1,000

)

 

-

 

Amounts paid for net assets acquired

 

(2,400

)

 

-

 

Capital expenditures

 

(10,305

)

 

(5,215

)

Proceeds from dispositions of equipment

 

62

 

 

67

 

Cash settlement of forward contracts

 

947

 

 

(357

)

Software development costs

 

(1,490

)

 

-

 

Net cash used in investing activities

 

(14,186

)

 

(5,505

)

Cash flows from financing activities: Borrowings on revolving credit facilities

 

9,602

 

 

11,000

 

Repayment of borrowings on revolving credit facilities

 

(23,500

)

 

(26,359

)

Borrowings on long-term non-revolving debt

 

-

 

 

5,714

 

Repayment of borrowings on long-term non-revolving debt

 

(8,163

)

 

(4,001

)

Proceeds from stock issued

 

814

 

 

723

 

Dividends to shareholders

 

(5,791

)

 

(5,772

)

Other financing activities

 

(1,686

)

 

(960

)

Net cash used in financing activities

 

(28,724

)

 

(19,655

)

Effect of exchange rate changes on cash, cash equivalents and restricted cash

 

2,532

 

 

(331

)

Net increase in cash, cash equivalents and restricted cash

 

9,155

 

 

14,840

 

Cash, cash equivalents and restricted cash, beginning of period

 

25,257

 

 

22,162

 

Cash, cash equivalents and restricted cash, end of period

$

34,412

 

$

37,002

 

HELIOS TECHNOLOGIES

SEGMENT DATA

(In thousands)

(Unaudited)

  Three Months Ended Six Months Ended

July 3, 2021

June 27, 2020

July 3, 2021

June 27, 2020

  Sales: Hydraulics

$

133,039

 

$

102,089

 

$

252,145

 

$

205,907

 

Electronics

 

90,374

 

 

17,205

 

 

176,113

 

 

42,870

 

Consolidated

$

223,413

 

$

119,294

 

$

428,258

 

$

248,777

 

  Gross profit and margin: Hydraulics

$

50,915

 

$

37,473

 

$

96,325

 

$

77,147

 

 

38.3

%

 

36.7

%

 

38.2

%

 

37.5

%

Electronics

 

31,237

 

 

7,246

 

 

61,195

 

 

19,422

 

 

34.5

%

 

42.1

%

 

34.8

%

 

45.3

%

Consolidated

$

82,152

 

$

44,719

 

$

157,520

 

$

96,569

 

 

36.8

%

 

37.5

%

 

36.8

%

 

38.8

%

  Operating income (loss) and margin: Hydraulics

$

32,328

 

$

21,989

 

$

60,401

 

$

43,471

 

 

24.3

%

 

21.5

%

 

24.0

%

 

21.1

%

Electronics

 

19,599

 

 

939

 

 

37,879

 

 

5,717

 

 

21.7

%

 

5.5

%

 

21.5

%

 

13.3

%

Corporate and other

 

(9,865

)

 

(6,226

)

 

(21,609

)

 

(42,519

)

Consolidated

$

42,062

 

$

16,702

 

$

76,671

 

$

6,669

 

 

18.8

%

 

14.0

%

 

17.9

%

 

2.7

%

ORGANIC AND ACQUIRED REVENUE

(In thousands)

(Unaudited)

  Three Months Ended Full Year Ended Three Months Ended Six Months Ended March 28, June 27, September 26, January 2, January 2, April 3, July 3, July 3,

2020

2020

2020

2021

2021

2021

2021

2021

Hydraulics Organic

$

103,818

$

102,089

$

98,206

$

103,079

$

407,192

$

119,106

$

133,039

$

252,145

Acquisition

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

Total

$

103,818

$

102,089

$

98,206

$

103,079

$

407,192

$

119,106

$

133,039

$

252,145

  Electronics Organic

$

25,665

$

17,205

$

24,439

$

22,481

$

89,790

$

29,459

$

30,191

$

59,651

Acquisition

 

-

 

-

 

-

 

26,058

 

26,058

 

56,279

 

60,183

 

116,462

Total

$

25,665

$

17,205

$

24,439

$

48,539

$

115,848

$

85,738

$

90,374

$

176,113

  Consolidated Organic

$

129,483

$

119,294

$

122,645

$

125,560

$

496,982

$

148,565

$

163,230

$

311,796

Acquisition

 

-

 

-

 

-

 

26,058

 

26,058

 

56,279

 

60,183

 

116,462

Total

$

129,483

$

119,294

$

122,645

$

151,618

$

523,040

$

204,844

$

223,413

$

428,258

HELIOS TECHNOLOGIES

ADDITIONAL INFORMATION

(Unaudited)

  2021 Sales by Geographic Region and Segment ($ in millions) Q1 % Changey/y Q2 % Changey/y YTD 2021 % Changey/y Americas: Hydraulics

$

34.3

 

(8

%)

$

41.7

 

22

%

$

76.0

 

6

%

Electronics

 

65.0

 

201

%

 

64.1

 

378

%

 

129.1

 

269

%

Consol. Americas

 

99.3

 

69

%

 

105.8

 

122

%

 

205.1

 

93

%

% of total

 

48

%

 

47

%

 

48

%

EMEA: Hydraulics

$

43.3

 

29

%

$

46.6

 

49

%

$

89.9

 

39

%

Electronics

 

9.3

 

272

%

 

11.0

 

479

%

 

20.4

 

364

%

Consol. EMEA

 

52.6

 

46

%

 

57.6

 

74

%

 

110.3

 

60

%

% of total

 

26

%

 

26

%

 

26

%

APAC: Hydraulics

$

41.5

 

26

%

$

44.7

 

22

%

$

86.2

 

24

%

Electronics

 

11.4

 

613

%

 

15.3

 

705

%

 

26.6

 

659

%

Consol. APAC

 

52.9

 

53

%

 

60.0

 

55

%

 

112.9

 

54

%

% of total

 

26

%

 

27

%

 

26

%

Total

$

204.8

 

58

%

$

223.4

 

87

%

$

428.3

 

72

%

2020 Sales by Geographic Region and Segment ($ in millions) Q1 % Changey/y Q2 % Changey/y Q3 % Changey/y Q4 % Changey/y YTD 2020 % Changey/y Americas: Hydraulics

$

37.3

 

(10

%)

$

34.2

 

(17

%)

$

27.7

 

(36

%)

$

31.3

 

(14

%)

$

130.5

 

(20

%)

Electronics

 

21.6

 

(17

%)

 

13.4

 

(50

%)

 

21.4

 

(11

%)

 

37.5

 

92

%

 

93.9

 

(2

%)

Consol. Americas

 

58.9

 

(13

%)

 

47.6

 

(30

%)

 

49.1

 

(27

%)

 

68.8

 

24

%

 

224.4

 

(13

%)

% of total

 

45

%

 

40

%

 

40

%

 

45

%

 

43

%

EMEA: Hydraulics

$

33.5

 

(20

%)

$

31.2

 

(15

%)

$

32.1

 

1

%

$

34.4

 

11

%

$

131.2

 

(7

%)

Electronics

 

2.5

 

0

%

 

1.9

 

6

%

 

1.5

 

(29

%)

 

4.9

 

145

%

 

10.8

 

29

%

Consol. EMEA

 

36.0

 

(19

%)

 

33.1

 

(14

%)

 

33.6

 

(1

%)

 

39.3

 

19

%

 

142.0

 

(5

%)

% of total

 

28

%

 

28

%

 

27

%

 

26

%

 

27

%

APAC: Hydraulics

$

33.0

 

(0

%)

$

36.7

 

3

%

$

38.4

 

10

%

$

37.4

 

6

%

$

145.5

 

5

%

Electronics

 

1.6

 

(11

%)

 

1.9

 

12

%

 

1.5

 

(17

%)

 

6.1

 

221

%

 

11.1

 

54

%

Consol. APAC

 

34.6

 

(1

%)

 

38.6

 

3

%

 

39.9

 

9

%

 

43.5

 

17

%

 

156.6

 

7

%

% of total

 

27

%

 

32

%

 

33

%

 

29

%

 

30

%

Total

$

129.5

 

(12

%)

$

119.3

 

(17

%)

$

122.6

 

(11

%)

$

151.6

 

20

%

$

523.0

 

(6

%)

HELIOS TECHNOLOGIES

Non-GAAP Adjusted Operating Income RECONCILIATION

(In thousands)

(Unaudited)

  Three Months Ended Six Months Ended July 3,2021 June 27,2020 July 3,2021 June 27,2020   GAAP operating income

$

42,062

 

$

16,702

 

$

76,671

 

$

6,669

 

Acquisition-related amortization of intangible assets

 

7,680

 

 

4,417

 

 

17,878

 

 

8,765

 

Acquisition and financing-related expenses

 

1,325

 

 

-

 

 

2,247

 

 

74

 

Restructuring charges

 

-

 

 

298

 

 

418

 

 

298

 

CEO and officer transition costs

 

569

 

 

1,644

 

 

569

 

 

1,809

 

Goodwill impairment

 

-

 

 

-

 

 

-

 

 

31,871

 

Acquisition integration costs

 

289

 

 

-

 

 

884

 

 

-

 

Non-GAAP adjusted operating income

$

51,925

 

$

23,061

 

$

98,667

 

$

49,486

 

GAAP operating margin

 

18.8

%

 

14.0

%

 

17.9

%

 

2.7

%

Non-GAAP adjusted operating margin

 

23.2

%

 

19.3

%

 

23.0

%

 

19.9

%

Adjusted EBITDA RECONCILIATION

(In thousands)

(Unaudited)

  Three Months Ended Six Months Ended Twelve MonthsEnded July 3,2021 June 27,2020 July 3,2021 June 27,2020 July 3,2021   Net income (loss)

$

30,694

 

$

12,908

 

$

53,282

 

$

(4,315

)

$

71,814

 

Interest expense, net

 

4,400

 

 

2,891

 

 

9,151

 

 

5,842

 

 

16,595

 

Income tax provision

 

6,575

 

 

636

 

 

13,382

 

 

4,844

 

 

18,367

 

Depreciation and amortization

 

12,905

 

 

8,645

 

 

28,142

 

 

17,021

 

 

50,816

 

EBITDA

 

54,574

 

 

25,080

 

 

103,957

 

 

23,392

 

 

157,592

 

Acquisition and financing-related expenses

 

1,325

 

 

-

 

 

2,247

 

 

74

 

 

9,436

 

Restructuring charges

 

-

 

 

298

 

 

418

 

 

298

 

 

482

 

CEO and officer transition costs

 

569

 

 

1,644

 

 

569

 

 

1,809

 

 

1,352

 

Goodwill impairment

 

-

 

 

-

 

 

-

 

 

31,871

 

 

-

 

Inventory step-up amortization

 

-

 

 

-

 

 

-

 

 

-

 

 

1,874

 

Acquisition integration costs

 

289

 

 

-

 

 

884

 

 

-

 

 

1,140

 

Other

 

698

 

 

(34

)

 

698

 

 

(34

)

 

685

 

Adjusted EBITDA

$

57,455

 

$

26,988

 

$

108,773

 

$

57,410

 

$

172,561

 

Adjusted EBITDA margin

 

25.7

%

 

22.6

%

 

25.4

%

 

23.1

%

 

24.6

%

  Balboa Water Group pre-acquisition adjusted EBITDA

 

14,141

 

TTM Pro forma adjusted EBITDA

$

186,702

 

HELIOS TECHNOLOGIES

Non-GAAP Cash Net Income RECONCILIATION

(In thousands)

(Unaudited)

  Three Months Ended Six Months Ended July 3,2021 June 27,2020 July 3,2021 June 27,2020   Net income (loss)

$

30,694

 

$

12,908

 

$

53,282

 

$

(4,315

)

Amortization of intangible assets

 

7,713

 

 

4,417

 

 

17,944

 

 

8,765

 

Acquisition and financing-related expenses

 

1,325

 

 

-

 

 

2,247

 

 

74

 

Restructuring charges

 

-

 

 

298

 

 

418

 

 

298

 

CEO and officer transition costs

 

569

 

 

1,644

 

 

569

 

 

1,809

 

Goodwill impairment

 

-

 

 

-

 

 

-

 

 

31,871

 

Acquisition integration costs

 

289

 

 

-

 

 

884

 

 

-

 

Other

 

698

 

 

(34

)

 

698

 

 

(34

)

Tax effect of above

 

(2,649

)

 

(1,581

)

 

(5,690

)

 

(2,728

)

Non-GAAP cash net income

$

38,639

 

$

17,652

 

$

70,352

 

$

35,740

 

Non-GAAP cash net income per diluted share

$

1.20

 

$

0.55

 

$

2.18

 

$

1.11

 

 

Net Debt-to-Adjusted EBITDA RECONCILIATION

(In thousands)

(Unaudited)

  As of

July 3, 2021

  Current portion of long-term non-revolving debt, net

$

15,662

Revolving lines of credit

 

239,198

Long-term non-revolving debt, net

 

182,272

Total debt

 

437,132

Less: Cash and cash equivalents

 

34,371

Net debt

$

402,761

  TTM Pro forma adjusted EBITDA*

$

186,702

Ratio of net debt to TTM pro forma adjusted EBITDA

 

2.16

*On a pro-forma basis for Balboa Water Group

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 and cash net income per diluted share 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 2021 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. When planning, forecasting and analyzing future periods, the Company does so primarily on a non-GAAP basis without preparing a GAAP analysis.

View source version on businesswire.com: https://www.businesswire.com/news/home/20210809005569/en/

Tania Almond Vice President, Investor Relations & Corporate Communications (941) 362-1333 tania.almond@HLIO.com

Deborah Pawlowski Kei Advisors LLC (716) 843-3908 dpawlowski@keiadvisors.com