HLIO - Earnings call transcript Q4 2018 | Helios Technologies, Inc.

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Operator

Greetings, and welcome to the Helios Technologies Fourth Quarter and Full Year 2018 Financial Results. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Karen Howard, Investor Relations for Helios Technologies. Thank you. Ms. begin. may you Howard,

Karen Howard

and known everyone. Quarter as Financial Year Jerry, Helios and to Technologies, XXXX Call. Conference formally Sun Results good you, Welcome morning, the Full Thank Hydraulics, Fourth

yesterday's and Wolfgang line the President Executive release Chief will and with press Officer. are be results after Tricia On published Dangel, reviewing in our Fulton, the market the me and our Chief Wolfgang close. Tricia Financial Officer; that distributed were

at website release, it's If available you do have our not that on www.heliostechnologies.com.

slides find accompany discussions also will You'll there our today. that

If find you look X, through the slide deck, our on slide statement. you'll Safe Harbor

by other are discuss may make earnings we future well factors the in are actual factors uncertainties that this Q&A. can during aware, release in where to risks filed will evaluating or that you These results at Commission. and be financial during As provided during and with and other at statements as other which to These be as to we as events some forward-looking the found uncertainties cause also from documents and measures, also will that today. performance. call, our could are today's statements materially as in the point I non-GAAP believe want Exchange website we Securities documents the to some are risks www.sec.gov. differ we apply These subject well out presentation and our company useful

consider a accordance not should of with additional in substitute as You presentation prepared or this results in information the for isolation GAAP.

the go then details release for with summarizing it's questions and tables of as to XXXX, get started the highlights that pleasure earnings with it today's our now answers. and And to introduce results of we turn in slides. for to guidance his Tricia reconciliations for measure will on that, GAAP the XXXX provided and have year, will up line we'll financial the comparable Wolfgang We well back for outlook our perspective Wolfgang. through Wolfgang and before as in key accompany the the quarter open non-GAAP my

Wolfgang Dangel

you, our slide X. Thank for around a start Good XXXX the Helios year very will has been and associates I busy exciting globe. everyone. Karen. certainly on morning,

two of meet we executing I about is increase XXXX. start division X.X have a times considerable XX% we more past summarizing at We of years, that the end $XXX strategic with reflects XXXX. out that Over plan we as and to million almost results. XXXX are our progress sales XXXX than XXXX laid achieved financial the you over will

during addition an also realized growth. XX% XXXX to this was after been organic amazing experiencing In growth acquisition rate in in XXXX. have growth period, organic XX% we significant

on bottom almost from up the reporting year. we related for other a have per Turning we consistent onetime and type and line how for share reported in realized $X.XX per XXXX non-GAAP $X.XX but non-cash share X% include XXXX been amortization basis. with That it to does EPS the expense We XXXX. double acquisition items excludes

net non-GAAP in on heads acquisition plan basis our in shortly. income to a about We'll more excluding expense. our a amortization start up, beginning cash we reporting normalized talk As that XXXX, EPS related

for operating recognize for presentation. but have touch the pleased we later that I margins this our generally are year, in room will We with to which on improvement

compared EBITDA XXXX basis was points XXXX margin net modest was These our points and adjusted results at margin Our adjusted respectively. with XXX erosion XX.X%. operating reflect XX basis XX.X% and

results. improvement However, those XXXX over metrics our reflect

the debt our cashflow cashflow XX% million we and generated of out that point year us sales operating and by $XX reduce target to in free at to strong cash allowed as want finish I XX% expected fourth quarter. Finally, net to the flow we This to our nearly sales. levels

Faster is our presence we accordance our we that three two with synergies opportunities. time, brought manufacturing driven us. in million plants. our Sarasota very to to leverage relationships summarize incremental our milestones This our we end our been to production customer of in leading achieved philosophy. me the Also in OEMs a transformational market, markets identified growth solid global with from strategic toward from year our began our the key the it innovative acquisition made very global faster times provides sales XXXX goal EBITDA a the in X mostly acquisition year base. XXXX. summarize which in to We by with Please CVT have year Slide agricultural times. been additional than was working to and which credit and ago, facilities of equity and markets quick expanding we our diligently a turn capital a in Since into I'll with adjacent Along We to in and significantly then manufacturing significant moving further penetration project facility. in lines we two one we financed business Allow in which enterprise amongst consolidation market we as at raise for and capital of $X.X manufacturing to us to diligently footprint us we for-the-region our at on In Europe diversified in-the-region less targeting back April the on solid European of progress applying principles, finished Sarasota. providing consolidate important by XXXX X.X teams EBITDA. Additionally, least our a lean amended About new expand the product reflect release of Strong growth. have XXXX, family a perspective. bank from our couplings. footprint and culture,

We expect to month. of complete end this the the project by next part of

project by of fine to we of we course this line, end up productivity and of which the Over our to our tune In next the phase we complete additional the free organized about of XXXX. as newly expect year, improve expect production XX% capacity. the

for excellence well Sarasota is two and third region a testing the hydraulic Americas from certain It establishing operating about administrative which as will facility our other our research are miles as activities house the activities. in two. center and We of

During XXXX, our strategically the Technology. half of announced as name Helios we to was important This new second business us.

integrator the just our build at to of same was Sun other least started which relative EBITDA businesses its acquisition, from This synergies we driven for we South by working terms base we XXXX, up footage us from As with fast-growing by our facility business. identified diligently facility more the time, From of leased to the nearby. XXXX, previously this and X.X to CVT new targeting At our square $X XX production in But space Asia-Pacific Since mostly South purchasing incremental this at have is closing our the based Hydraulics stone project one innovation in significant name same of of about our us state-of-the-art Helios, exactly A times it but innovative months. to that. it serving maintained in other our operating acquisition, as very been significant referred or provides project which faster. in the hydraulic million in by running, businesses. getting We the announced its land about August with opportunities. importance businesses in to new service Fluidpower the we completed viewed region. Korea region, this we stepping stepping on complemented locations the an to to Asia own sales nearly be we us. At in Prior CFP and to Custom East seems time, as eight terms controls is size we for the on CFP. acquisition strategic as not stone of operating Australia.

addition which the to several is many XXXX. projects teams very were of one different synergies the is In from on our with A other realizing key broad and specific very these of achievements people during associates the focusing milestones, busy encompasses acquisition.

working organic I the particularly which the from CFP been on same EBITDA On of have XXXX. have mentioned, synergies and acquisition of already we least Controls focused be a hard to introducing we trend. at responsive been and products light second on market spots, the to day-to-day is At evident Faster our incremental achieve in geographic to identifying by million also addition progress targeted year. improvement continued we productivity we field Enovation which sales to initiative penetrating basis, our our have $X have and on new growth new half time, to opportunities work in the In including

industrial strength. year plan mass the goods to bit will overview, maintaining that to the quarter review a the while turn With profitability full All sector to superior call XXXX late and of now the critical detail. these more sales our technology actions are in in over financial results which for alignment financial with Tricia and in with we I back billion in leadership achieve in $X exceeding global vision announced XXXX

Tricia Fulton

good and Wolfgang you, Thank morning, everyone.

XX% X Slide with last fourth business the grew contributed with quarter XX.X of were consolidated on organic CFP quarter. review results. sales up our our compared begin million, Faster XX and Let's X%. contributed million year's Sales

Faster this touch currency the as in with Dollar left. million unfavorable slides pre-acquisition were press also Australian sales the as on chart well sales back which decline is organic in bar X.X the sales I'll rate. the now CFP a lower of Foreign on of businesses. by information. sales region, and and supplemental the XXX,XXX exchange consolidated in table designated impacted for by had compared here the their sales a resulting summarizing unfavorably impact on Euro There release are the in

markets can year-over-year growth. realize all you As see considerable geographic

Sales CFP, region addition Americas, of larger this APAC and XX% contributors base. total sales respectively. year, XX%, the the Last EMEA consolidated EMEA was to are respectively. XX% XX%, to XX% the APAC regions of APAC to and our Americas, and the Faster XX% now and EMEA With the were and and

XX.X our profitability, double fourth year's Regarding EBITDA adjusted consolidated was last of quarter. almost million

to quarter. is by the out. more share to earnings were I'd comparison bottom-line, higher per $X.XX year's few factors fourth than That a Turning than adjusted point like last XX% impacted

fourth quarter. First, offering quarter outstanding of shares number the was equity in XXXX first our to the last million year the than higher due in X.X primarily average

both $X.XX quarter. amortization intangibles a from our and $X.XX interest these expense and quarter quarter acquired debt have have interest comparison year’s two Together, in includes compared fourth and interest expense with fourth last businesses. more share we from the new on $X.XX for on Second, non-GAAP $X.XX related well amortization as of acquisition respectively a impact per and as resulting GAAP $X.XX year's basis. This amortization share and per expense on items for respectively

to of attention to mentioned, reiterate back for that the purpose. on be back the a Please plan EPS or amortization back XXXX, the so basis impacted refer adjusted I I of that for that reconciliations beginning non-GAAP our non-GAAP of to bring the now reporting shown cash will to GAAP your the slides release as that we we like adding Wolfgang and As items we adjusted press here. purposes want report our of for results EBITDA added tables to consolidated and numbers. EPS in normalized

fourth the XXXX, incurred the following. of quarter we During

reduction cost This was XXX,XXX purchase goods of inventory we a costs amortization accounting in intangible finalized of the assets. First, the resulting step-up valuations as Faster for to the revision from sold. in of

about related selling & incurred or and we costs acquisition expenses. engineering XX,XXX Next, SEA of administrative

innovation about a we on of for consideration the statement. line reported controls acquisition own charge its Next, contingent XXX,XXX the income recorded associated and with

Finally, some X.X the items to reform other tax impact of discrete million for items. specifically tax million we X.X related had favorable and

manufacturing Segment earnings amortization tables purposes including acquisition added Hydraulics turn the are and fourth Slide to in saw point Consistent costs slide. accumulated income which positively basis, EPS. numbers. also could growth with addition been XXX% in the year-over-year and back our realized X marketing impacted that consolidation operating grew corporate in region, On for segment periods, market the the growth continue it XX%, these in revenue want by of Sales for for and Faster geographies an dampened project. global quarter numbers growth APAC. and benefited initiative. demand They results. consistency, XX%. on Please adjusted we the sales driven I was for from disruption in and and and are release to our X% XX% was included back by segment we from those outpace end calculating higher except quarter a Those of organic out the growth other segment by to was and EMEA hydraulic CVT most markets related of not reporting review increased in our We Orders net our of prior our Americas For that even the CFP. have and

demand customer business impacted operating and of XX% freight was model. While unfavorably the Performance integrator sales profit the including by gross our doubled. shutdown and satisfied by Hydraulics the was quarter of CFP, strong by increased December legacy the on CVT holidays Faster higher business outbound CFP’s higher nearly income impact the addition Faster over Segment

fourth of XX.X% and engineering pressures this Faster SEA grew and review the from fourth and segment managed impacted million loss sales. of project for from X% which we as compared for quarter rate up drove and the quarter in realized year. productivity, of business. increased the significantly electronics Operating in effectively project quarter expenses year. or for cost This quarter turn fourth timing a operating of shifted Revenue third. to XX.X% last profit selling the our of X by X.X earlier recovered mix Our for to Favorable some into the the SEA operational the of to our businesses included from fourth the results. was Gross Please the last segment efficiency administrative Slide expenses year's year. fourth to in Sun was CFP growth sales we quarter revenue income

to our SEA for addition the contributed million year's turn In X of organic about quarter. Slide Acquisitions year X review the and XXX Sales in grew XX% a by was gross full XX%. primarily million. million businesses to included consolidated results. Please due margin costs over last expenses restructuring decreased XXX.X This to XXXX. up were of improvement,

the inefficiencies declined Regarding outbound of while CFP consolidation model. primarily the customer manufacturing our results EBITDA profitability, The integrator during adjusted grew costs project the the higher and XX% impact erosion to meet consolidated CVT business margin demand, freight from slightly.

$X.XX bottom-line, impacted strategy. prior the by Turning share acquisition to like comparing the when given but a adjusted the a earnings quarter were per are our factors few to year

$X.XX of in of and million XX%. had number with year's of period. turn non-GAAP includes expense to outstanding for was Together, a full XX $X.XX higher up these comparison for quarter for average XXXX XXXX in our interest $X.XX Gross and million operating related over both on on XXXX. last basis. the amortization of were XX% per year $X.XX a last items X.X $X.XX first in the due last the interest acquisition Please two income impact share XX% review Back to Americanization and a the Hydraulics expense and per EPS offering and Sales profit First, equity by year in XXX.X than year compared share and shares respectively respectively Slide year. full GAAP increased Segment. primarily increased

of of XX XX from higher of XX.X capitalization. turn operating by XX% Now over electronic XX% were increase by turn Slide and please profit to increased generated and Gross review Slide increased for Please activities, a more driven our XXXX, than full segment. XX% XXXX. review XX%. the cash In year up Sales for with earning. XXXX to million cash flow we the operating income

and cost pleased flow In the and million Faster we project production investments. flow-to-sales addition business CVT XXXX, our as ongoing CapEx associated to well productivity the costs to new Korea, of XX.X the complete South of was our in operating free other XX% are consolidation meet as cash cash targets cash facility flow-to-sales. XX% including Our our with

the back X nearly open Regarding and reduce pro profile, the the million to I'd Q&A. debt your XX by Strong lines like that with of XXX to in XXX our are guidance on net to million to cash the capitalization, on we our equity. before finished finished allowed year our turn times. Wolfgang, in quarter XX we year fourth perspective of of million our We cash, us our XXXX for of net EBITDA down outlook debt you debt quarter. X.X cash for With about we flow adjusted and million forma strong it to focused times. getting below flow with

Wolfgang Dangel

Please Tricia. XX. Thanks turn to Slide

returning expand all the been business slowing have are that with in expecting XXXX. growth Helios slowing and than market to are with our wide U.S. to in to solution. space in by As was mild introduce world, XXXX to products we expect increasing much we making outpace the penetrating Important we we our as any growth. more have in us and important turn Further, that Europe field the growth coverage we have continuing relationships we diversified the growth acquisitions our the XX XXXX. Western to with regions by thoughts forecasts before point help regarding we to in to Hydraulics Please where and plan, XXXX new Around XXXX. and growth innovative we vision legacy XXXX. Helios signals Economic of follow macroeconomic broadening resume XXXX cycles. nearly indicators and business are economies said cycle. Slide in expectations the already of Referring have weather leading in is our phase in XXXX in our factors the timing being investments mind our our This successfully accordance for these to Segment, impact recession in keep global accelerating will for a driven outlook that economic been for to the major to OEMs, to note, expect

Xst. first in of quarter indicated the April for at acquisition although but second continuing CFP. pace end last the see will will include market our of third and growth quarter our we end and then the to gas our slower both Most anniversary have Recall started Specifically, of softening include we markets CFP businesses Faster sector. growth a which as and quarter quarter Faster will and all anniversary grow are to for will our some oil for on part Xth acquisition on that August

taken the well from as fixed flow about encouraged improve results profitability, our production action with are manage our operating as are cost. we very Regarding to facilities we seeing

over month. manufacturing next complete to indicated, we project As expect consolidation Sarasota the our previously

better and in seeing we already that are those continue to will improve as workflow We expect progress. operations

are Turning sector. cadence, model affecting that opportunities the improving segment, and of But about a cautious consolidated are electronics On year. be flow. regarding new basis, to we we timing expected launches synergies given performance the well evenly quarterly expecting continuously customers spread our as throughout focused production on as we demand currently are to

our to However, be and and stronger segment based stronger the timing the bit we project. all accelerating in our by region facility am we second the a product start a to third manufacturing needed quarters to will China pleased service Segment on of Hydraulics launches. electronic capacity with provide I to to expect have that are that report new businesses. the of us year This

We later expect production this year. to begin

service our globe. around our base our I we These Lastly, products. customer that guidance technologies you we Please market results as are ongoing proceed that highlight market with are want growing to invest we manufacturing have simplified outpacing we actual for projects XXXX our as to for XX Slide growth to and are continuing in XXXX. the for provided improvements on that compared items are driving aggressively guiding well allowing us the is will new notice that XXXX productivity leading to the where innovative that

on focusing along business Helios the advance have absorbing as journey. transformed the are that of We acquired past this that years strategic think couple we over we

segment. in expecting in We're about X% EPS growth to XX% XX% expecting growth $X.XX both over to our X%. to revenue to and our flat We growth GAAP to the On XX% between expecting $XXX X% in growth of of We're million XX% this to XXXX. of driven $X.XX, our are organic XX% includes Segment of reflecting revenue segments. basis, growth Hydraulics a of by consolidated consolidated a XX% electronic $XXX million, revenue

metric are expense non-GAAP We EPS convenience We're sections EPS our for will of currently calculation in onetime for amortization expecting basis. cash non-GAAP only and mentioned in effective $X.XX Tricia supplemental the cents XXXX. GAAP As of EPS cash up EPS XXXX of be predictable I of between XX% between your and Without we the slide. difference XXXX, and about items, XX% tax cash a $X.XX on cash a over release and to the XXXX. new earlier, visibility introducing provided

the midpoint, XXXX. expansion point expecting over that adjusted margin represent currently are XX-basis to an XX.X% EBITDA a of XX.X%. We At

Now let's for open the Q&A. lines

Operator

now Thank begin Nathan Instructions] go [Operator and ahead. We’ll Jones, question you. Please answer the session. Stifel. is first from The question

Nathan Jones

everyone. morning Good

Tricia Fulton

morning. Good

Wolfgang Dangel

morning, Good Nathan.

Nathan Jones

one the non-GAAP a GAAP Just on housekeeping EPS. and

that there this of I your XXXX? restructuring currently, you're think only the in in expectations anticipating and is you said Wolfgang intangibles. amortization of difference Any expense

Tricia Fulton

at Now the intangibles amortization point. of it's just this

we're We else anticipating the anything in I that provided numbers think. aren’t

Nathan Jones

price lot Okay. cost. Thanks. And and could couldn't it in a the you question think guys dynamic you Maybe Controls some pass first through XXXX some had where places with the I you to at you cost where is could probably think. How going I you know where inflation that price moment. then on improve guess you through of to about had deal pass it Enovation stand places you particularly through in can talk I be XXXX? that you

Wolfgang Dangel

Yeah, sure. Nathan.

previous As we conversation, two on the last hydraulic calls particularly significant long-term you half and basically from after the cost of agreements purchases the obviously business of seeing there know secured in least at of the LTA increases side year. through majority on first the the

As were increases know, at points had all in businesses in different in introduced that have also time in we our XXXX. you of price

legacy to the think fair it's I say business. on

mid-year in there new time very Overall, with of in snapshot With price have we seen as difficult increases what not through. say majority LTE’s regard business, business, on made the business the across obviously basically have if good And we businesses. obviously the increases is we when launches. in quarter fourth Enovation have is different on and when the in out progress numerous we to the place it's the of occasions pretty very everything launched regard price we OEM So I in to I the getting impose have line Sun pointed projected we had much driven. think price product meantime there the the the also a is with increases where to we

Nathan Jones

of increases successful shifting that's get innovation I bit the you've little being you that as side. through you pricing to through talk in Maybe doing on because new I How customers the maybe those you've on where know a XXXX XXXX about on side. anticipation OEM understand gone could products been the can

Wolfgang Dangel

Absolutely. innovation as to single has obviously that launches side, project new has product every on we would to very been over major shifting know the products solutions. you and new question have provides the I say product also re-discuss pricing year successful levels. and been opportunity XX The your I mean about major the launches to team in customers --

with pretty very strong one and You of Controls. know OEM I much that engineering approach and coming basis. to strengths That the we upgrades have on modifications true ongoing of are customers in an think they Enovation is suggesting the

pretty continue we have I'm that successful and from there we So we move here. very forward hopeful as been will

Nathan Jones

Is customers moved to or or you it like of quantify that? XX% customers all that possible like XX% anything at

Wolfgang Dangel

the It's launches difficult short very to know have between sides you to distinguish product existing product quantify you modification you relatively on because as are have sides. on the and you then new do electronics products

percentage to of in said are I hesitate year. would The put That's XX so an as the new business the more daily course of are modifications that I upgrades on the as would So size during launches that. forth. would about I but significant the I happening rest the in classify process and ongoing

Nathan Jones

pass I'll it for much very call. the Thanks on. Okay.

Wolfgang Dangel

Welcome

Operator

The next go sir. Please Blair Brian William is ahead, Drab, & question Company. from

Brian Drab

organic growth provide organic but didn't for or revenue for have that if number forecasts missed gave you on XXXX morning. I Good to the my ask you? I Thanks may segments, expectations. did taking you first for it questions. wanted

Tricia Fulton

organic we each but And we business we Yeah, give well not there. there. organic. we to not overall that were to and guidance X% guidance did We're did as focused that for on looking in consolidated guidance the provide guiding provided the segment at X%

Brian Drab

X, it is to X So Tricia?

Tricia Fulton

X% to in X% growth to is the to XXXX, XXX represent X% X%. consolidated XXX sales but

Brian Drab

Is our right? organic Okay. you're that's And saying. that

Tricia Fulton

Yes.

Wolfgang Dangel

organic growth. is Yes. That

Brian Drab

Okay. I got it.

guess but don’t was needed I doing just Okay some I I here. to do math

as about a So was two CapEx? I headwind one saying from point to

Tricia Fulton

euro from seeing fair most we're you know probably that's the business. and for that of Faster the Yeah,

Brian Drab

Right.

as Okay get about was the of little I something bit during great. Or with half hydraulics start? demand There's start we a can we And then mentioned of movement. in maybe getting stronger were a the up orders in you stacking that pent-up do stronger you business the more first some XXXX. talk out why these facility

Wolfgang Dangel

Yeah.

of tailwind We XXXX. wouldn't of obviously because good moved mean having actually facility a out obviously the lot I -- all of through are seeing but coming I just say

to I emphasize we half the fair representative. that is first businesses. year truly visibility backlog We The of that of is as the all good here expected facility the with can first well say first I relatively why are not progressing work half half across of and a for have And visibility higher of year. course year increase half It's quick the numbers are Brian seeing year position off. output for is obviously the not the consolidation in the in we to now good we think second reason of the

forecasts pieces environment fundamental projections too underline I would think many I with very now. think macroeconomic we give data moving there and we is the cannot that in right

Brian Drab

up half at business just now you on of in kind you and And look Okay. just then know Faster some expecting to versus that that for it the given in have basis business so a your standalone one challenging end be market of with XXXX? be forecast know in I that XXXX maybe more Thanks. if Ag the business you

Wolfgang Dangel

mean Oh, don't the Ag forget market. to I only is yeah, absolutely. Brian XX% exposed of business that And

equipment in least Enovation. with maybe synergies Sun generating but sectors industrial and are here construction not last seeing development and We also strong the in collaboration still

Brian Drab

Thank Okay. you. I’ll follow up later. more

Wolfgang Dangel

Thank you.

Operator

ahead KeyBanc. Mr. from Hammond. I Please Mr. go Jeff Now Hammond, a have question

Unidentified Analyst

good on this is Hey, Jeff. morning, Brad for

which know color some XQ fourth project levels give us you of was like it drag a was once that quarter extent much how on in much to Just the on could the CVT continued to the from progressed that to sounds quarter on you but a stays or in the completes drag of half how XQ the project then the year. know the of lingering of know you kind that back then it you until fourth us headwind with

Wolfgang Dangel

Sure Brad.

you So exactly have first QX into in the as told earnings last things QX of year. queue we progressed and all release already

rank So probably say and of had that quantify QX. if I between I your in specific to X it's to question XX% to QX come would was that impacted in output

the We completed that Now to the move as of and pretty month basically of machinery week the is end equipment do and project far then already as and finalize March have the the of progressing this then at as are end we can streamlining maneuvering during to concerned. of is at much March.

reducing quarter X referred through gradually. are So that obviously I QX XX% first as we to move to deficit that we the for

So that we still I manufacturing benefit playing we increase a hopeful by the level QX field am more of the streamlined are a where capacity. reap of can on then and

Unidentified Analyst

helpful. left few along you at the just margin the it like look the you or lines know Okay. That's of there's I hydraulic side there away guide on quite seems and if XXXX headwinds a same then in know those And XXXX. a majority in primarily go altogether

the there you and you new upside can completes in gaining once some you the upside margins that I hydraulics maybe some the guess I So know of you if talk to know layer that as exist well. are project out on guess then productivity factors about might

Wolfgang Dangel

to would you caution not want too I mean I are the that upside make on little potential the a because bit sure I Yeah high. expectations

As I actually increases we year. price out that last earlier pointed

point price but an at planning in situation the now increase are We obviously right time. not we this are monitoring imminent

that probably months. the pricing few from So do for a next for to anything not level we'll

productivity concerned. efficiency as As is far and

completed. impact is I capacity, the said and will As consolidation there. a everything ramp should positive side see streamline up We’ll project the

the same the well. We are pretty on much Faster as side doing

some have talking hydraulic ongoing of to only we here So in not we more the efficient of streamline that projects place sure and further I about of here on and a Sarasota mean in I number make business manufacturing Faster are manufacturing streamlining side to there. want become the

Unidentified Analyst

Okay. it color. And the for thanks pass on. I’ll

Wolfgang Dangel

Thanks.

Operator

Robert sir. is question & from Company. Blair Please [Indiscernible], go Next W. ahead, Nick

Unidentified Analyst

morning everyone. are Baird. How It’s Good Robert W. you?

Tricia Fulton

Good morning.

Wolfgang Dangel

Good morning.

Unidentified Analyst

margin expansion in here a operating looking missed something, versus should Where guide. But that on confirmed clarify of perhaps terms want with kind of this? I I'm to I'm changes expect we is is the DNA EBITDA core any at this. I going XXXX in XXXX.

Tricia Fulton

will was Yes, the than for side, amortization XXXX so on be XXXX. it in lower amortization

on the through for of lived backlog. items amortization that are short come Some like intangibles the

the somewhere increase XX.X XX in as And with an the depreciation the year to well in XXXX. addition we're as XX.X assets XX the at and we're and for year are more expect of depreciation of probably to the amortization looking ended that as Faster place over side, we we the we million. ended what So for CFP million well between looking on XX XXXX do at XX the of put year

Unidentified Analyst

kind speaking looking cash Okay. have Thank And flow? the also how with for you That's confirm view about of here, that. minutia also XXXX tax and the helpful. then a to on for you're rate do you thinking

Tricia Fulton

Yes.

tax year of with ended the noted But we in also XX tax new an remarks the do of there. laws. So rate prepared onetime effective benefit we impacts in our get or as U.S. we some the

expect for to XXXX question you we beyond forward XX% our a cash and rate be free had on we going how and somewhere and view between flow. So XX

our targets of significant free expecting XXXX. XX% flow of even are of CapEx the looking at we given cash sales in and we're that So still that's

Unidentified Analyst

and back to And think to the and I get margin helpful. maybe at then person That's this. previous going Okay. try I

how XX and segment at expansion the looking you this midpoint So that basis guidance or think for hydraulics when similar other. expansion is than flows you're do one is level bake in point essentially more you at essentially do both your electronic benefiting for

Wolfgang Dangel

look we at mean necessarily I it don't make. that No like

perspective all side to to of levels begin electronic the you are as a margin on the with. margin be higher gross from First know

Unidentified Analyst

you're impact trying figure Yes. change of mean more see margin and to number. I out about where improvement talking the I'm you talking year-over-year But an if want about Right. all here. I’m at that

Wolfgang Dangel

It be both will in segments.

there both segments. So positive from be will a contribution

Unidentified Analyst

the me call instance XXXX. know you pricing of cannot you are either for it have on one on terms But based dynamics headwinds out know strikes you in it which that other had resolved you some you've hydraulics lot mean in what efficient in getting I you what based a of versus of know or itself

So I that relatively margin imagine there. you'd have would I traction would instance for good

Wolfgang Dangel

is project the hydraulic as electronics is have there. to five driven. a My more we lot There not referring to probably opening little by statement mean margins. goes superior assessment, to That's consolidations a hydraulic fair fixed contributed The gross a absolutely where of was already segments. bit the room I is that improve model benefit costs business Sarasota side know on in back our you the still

the is. the it better So is higher the utilization

us to machinery less We’re the invest are and actually manufacturing that equipment. that creating in we more principles lean through capacity helps applying

more question based. to export coming that’s your to squeezing just the definitely machine back margin existing are of out And contribute then improvement. will We

Tricia Fulton

costs to side. capital on the electronic segment in the can we significant costs little think those bit hydraulic leverage more I we quickly the can fixed than a primarily With related

the revenue So think Hydraulics as margin more does increases I more generate Segment quickly. we to see start

Unidentified Analyst

that that consolidations your the that front sense that XXXX. And Then backlog throughout above you said to maybe guess versus going I know you hydraulics growth one role backlog I'm conversion essentially heard and get facility it years? That to or has half this the playing that in of essentially how give a growth how also you prior build Can I'm terms quarter. supporting or now know in know understand in you is to some a complete building this out to the your I now size of a dynamic if book correctly and maybe as back of implies played to disruption in looking orders. and sense been backlog is you I know what not your you you've trying whether that And us drives then orders this backlog had eventually bill mentioned remained you have backlog this so built from early. or that XXXX. you you outgrowth

Wolfgang Dangel

Brad I mean as numbers on. and the at think backlog I such I is elevated If actual but I already answered as look earlier it exceptionally it is not the was high.

backlog last started April its site in certain the consolidation degree project the to because is So of also elevated a definitely year.

If you QX QX know the quantifying and we in had very between strong XX%. order intake impact X in and QX, and been I've QX

an impact reason quarters first So that backlog. feel on we we is the why This comfortable seeing. the two what in XXXX for also pretty had we’re feel

and eating year. more hydraulic time. same solid see to continue and of orders on comfortable the compared about still at half are first into backlog order the the of that we basically half intake side the That's second the year So why to the

Unidentified Analyst

Okay. over in acquisition hydraulics running terms questions I seems growth me and roughly it CFP two of One of versus you're call effects the on but figure looking Correct be X% if to of increases I'm driven me this is I'm understand be as to here it only again if you math know the quantified left that price would half like about of have increases. are seems kind would the It we essentially how contributing much at wrong basis. faster trying on the hydraulics earlier what year-over-year I'm to like volume of related organic a price implying left. from X%. and that

Wolfgang Dangel

in where I price you to simply on we because think to there price sell more the stated. numbers that you've work impact increases to ballpark. channel ballpark the business through impose is thing are and that numbers higher regard you're know the probably with on general, difficult think in faster the it's as through more the do I But to with more are compared and OEMs we in something customers. The the your legacy only

Unidentified Analyst

sure quarterly slide quarterly comment than. cadence that mean lastly how I'm your right. your it that I is looking XX I I then that took EPS in as essentially And an that's cadence part Okay. rather on to understand comment make of

Tricia Fulton

can It's both. the necessarily. without I have know one you don't that other

was cover it as. revenue to I So intended

Unidentified Analyst

Okay. Alright. Thank much. you so

Tricia Fulton

Yes.

Operator

ahead. SunTrust. go Charley question next The is Please from Brady,

Patrick Wu

Thanks my in taking for This morning. Good is question. actually Patrick for Charley. standing Wu

Tricia Fulton

Patrick Hi,

Wolfgang Dangel

Good Patrick. morning,

Patrick Wu

at the detail bit for outlook costs are just incremental the view That's guys to related at It And of generally the facility? the do the ramp later expect expecting overall a one. I provide what guess on of in like you you production year. for of electronics? the China is production this begin establishment project to sounds Can in more full capabilities you John facility little for XXXX associated When moment. your then sort what and that costs are China

Wolfgang Dangel

Sure Patrick.

with last the me question. let start So with the

overall the China for First remains outlook positive on us.

We team to very over built the have eight business the legacy last we strong particularly on have five years. a

in the of We are seeing the that marketplace. benefit

the business partners in that grow channel the to China excellent have and despite have all We us tremendously geopolitical helped turmoil.

and Chinese lots the about do be to I'm And very components scale class and with will that's export on sophisticated continue on that they optimistic and competitive very they to machinery of best their and are We companies China we because deal why And that. order in in global need equipment solutions. positive so.

tariff that in the the have we for day from the this and In just context the end facility of of of Reason want not being project. one exposure outcome were it the facility current point our importing out don't exposed the question the we discussions accelerate that let of place this XXXX products one, plant years philosophy We year. by out about to at the Now earlier of to coming two of accelerating come that the region I the up right be what the we of products to then move the get we and decided looking of of me QX now planned pretty a want we building already a on facility, regard in put China. are a we out in much your this that into to XXXX. to building with obviously to full-scale we region ago. this have competence have engineering pointed probably in in manufacturing. time, At is XXXX have the at stage

So and do will we in assembly stage one, test.

phase X will phase want still a of parts localized then to China, and in we outside we parts in obviously go manufacturing. lot be scale there into from was So X Greater of coming full there

embark does. and this make And well answer of pull is point that activities businesses the in foremost Patrick referring other The and business on were particular might to is case end China first to this questions? the Does this the electronics wanted the as at in manufacturing and not I you being day manufacturing Nevertheless, value-add in that business. here for Helios hydraulics legacy an for your we the that's all the compound. first

Patrick Wu

and that That's stage say two to XXXX Does be to that sounds I'm I that. Yeah, up. obviously post thanks I so declare for accurate that three. guess clearing it going like a event.

Wolfgang Dangel

Yes. That's correct.

year. a You CapEx have this still I on for think question

So CapEx we the will because about. exposure be talking minimal this are year

leasing facility. that are We

as overall year test our but own So facility will a minimal Korea. are than we looking assemble leased number CapEx the higher year and in facility the and we there on Helios we it's CapEx be CapEx the basically group. have material in this that for XXXX exposure It's did not XX applied at being building relatively a in is this the

Patrick Wu

to Got and it. the And beginning in and a color ag. that I then, can you gas bit softness on particular in the see you're provide oil little guess Ag more

like just ag and to Sun as you that want with see like But both I more faster wanted XX. appreciating that of which AG color and and on Just oil fully that the how diversifying little to margins OEM carries I is of market. in imply the with business. for harder construction think that Faster get sort a relationship softness this are gas and might your margins and begin because to higher implies pricing more how XX But bit earlier get business margins to the through comments sounds it guys

Wolfgang Dangel

gas Let the first. oil and with start me

in So of gas have exposure only oil and we two the business.

making clarify segments. and years just gas since year assumptions about and we our there. outside with want it that gas or last was that So change oil and reduced on forecast is to the is that three that the the last ago time came legacy this Enovation to diversifying seeing and sun Murphy begin less of at for to mining in years four a the to have the in expecting of we by year But that exposure the our are three already probably are already I innovation actually. for both Sun the and not and we oil business the we Sun into softening and on And four business over Enovation then other mid are balance of the gas and exposure brand for through but oil significantly that's than for significant

to to bit and we you In referring I also So pointed drive to that level we at started margin things time. early that perspective I am to have product the if what softening were there to course the ag that's moderate for room see that the the of out a quarter business pretty of as high levels. confident seen already has that level probably to of since to a protect fourth Europe expected that soften little the of historically cost are have has well. balance in beginning some and the other I It's faster that expanded in the streamline year. point regions on think more levels from some also out during softening year. been meantime, we also lot manufacturing the the ag, a in a of the initiatives system. we seek from the In of have the margin place enough we the high protect margin the you of the

Patrick Wu

Appreciated. you. Thank Okay.

Wolfgang Dangel

Welcome.

Operator

Please Parker's go Stanley. We have Josh sir. Morgan a question Windskey, for ahead, Mr.

Unidentified Analyst

move the has amortization conversion The is the been few [Indiscernible], ask is on back to the this EPS. if but deal at been cash Hi, about you years gentlemen has I for looking given I'm relatively past low. wanted Josh. cash understandable

changing So we going cash about think forward here? from conversion should how that

Tricia Fulton

Yeah.

historical -- CapEx that that that Obviously, XXXX. investments lower had expected we pretty XXXX for back and and said historically be that make and to we're X% XXXX of to So sales be expected to last get that CapEx and above for in years before X level. we we above the investments expected two projecting have we're would significant we I think to those we've know need the XXXX you think

to with EPS we're at think that generate now the able right XX% be in I to net able debt are the to to generate flow us So for the sales. we EBITDA. target good of a that cash down as down you below pay is two we're know quickly pay the debt to cash to times as or that possible happy free think get We cash able

Unidentified Analyst

you And driver was looking you. thank Okay, timing mentioned at that just project electronics a there. big then

more I So saw customers tariff. And can any on from if any of more forward. you of was movement that you any guess provide color that whole inventory just then broadly ahead

Wolfgang Dangel

pretty mean was tariff this think influential the with side second just movement have that on first. pure more channel but extended saw actually bit at insignificant. question end times it partner the your is was once of a regard you lead the it's movement first We such. inventory Let's I the We day the little product question of see inventory start timing With if because launches situation. I to probably the more side a to than it

have amount we bit. a So this back these year we if have I are pushed out of single same pointed the major little much But pretty launches launches every year.

year. compared So that's last the to only difference

has with not last in electronics the through even highly We're on they I grew in really in equipment lot XX% not two into their factor this because in since requested. beginning additional been as years been you acquired two and the successful is were organically years generated solutions. they also business coming of we think even I second the that innovation play we think know a here have highly is successful pull

scene growth that Now single rates cannot year XXXX and every XXXX. but we that are see in saw continuing we we doing the

Unidentified Analyst

all you That’s Vision, your XXXX. healthy it. helpful. pretty growth looking XXXX have at got through then just And Okay, rates

off require would oil more and Are of year XXXX to or would starting afterwards. AG see is that to expected the already that up gas vision than we're which slower first growth you after where were at cry the and this rate year. this markets you you lot a into this up X catch So or X% growth catch baked the

Wolfgang Dangel

of integral an is vision. the part This XXXX

is If of an here it's sectors. dependency of of at material this it end the having ago oil material and as out because the markets of we was kind mobile, the you market. recreational on but individual is sectors on of significant. we is if the in of still I the clusters couple even it's day look at our years impact industrial, sluggish those diversified And earlier the the pointed end the Today business mean But major diversification at the have gas our a those have over this four day spread I is And way of and clusters end lot market one think dampening declining we of diversification is time. agriculture best any or longer impact into or the a cyclical. a period

Unidentified Analyst

you. Thank Okay.

Wolfgang Dangel

You’re welcome.

Operator

We Please sir. Mondillo, Company. go Joe final & question a Sidoti have ahead, from

Joe Mondillo

good Hi, Tricia. Wolfgang morning, and

Tricia Fulton

morning, Good Joe.

Wolfgang Dangel

Good morning, Joe.

Joe Mondillo

want I'm at little Hydraulics unclear the still the a I -- So on little especially gross I’m having difficulty. Segment. to margins

in you Sarasota. But pieces and was doing so big been that's there's a you CFP and because throughout think the I a productivity Just price early issue got moving and many year you're cost in improved XXXX. still what then acquired

the us fourth that the going the given assuming margin hydraulics. some remind sort improvements quarter expecting Sarasota gross of at forward? sort then consolidation. of can the sort role looking of we sort complete the how about I'm things plays So seasonality thing that you you're productivity the of amongst How in quarters. And once think

Tricia Fulton

Yes.

a So little it hydraulics included little at there's bit. bit of that margin gross quarter down looking a that's in bringing step-up the fourth

XXXX margins we higher see in should what that we the QX. than then hydraulic gross saw for segment just So in

will of the bit that that in of actually to we the business in increase XXXX. segments some different their the is the gross have price the there of actualize to in the challenges modest little gross but You're throughout that back some margin were in XXXX we do expect in improvement profit with to at half right playing some in margins addition that models a CFP CVT both which segment changes The helped year in level.

Joe Mondillo

there know And Correct seasonality, could in posted I at that at and seasonality. wondering quarter fourth taking the us how sort me electronic you that tends margin of then fall of fourth there's think of look if you electronic to wrong just in remind off. about into terms you seasonality terms gross to I'm hydraulics seasonality any account if quarter the

Tricia Fulton

prepared that I up in this changes the the at discussion consolidated play Yeah, about and trying segment dynamic There having things rollout year. our some mean in take even by year we're talked here are quarters electronics to little ramp of last seasonality out guiding specifically to of year year. throughout sort to remarks different QX from model we the QX

are from like to that four we'd about with of stay quarterly way I a So perspective pretty spread think quarters it consolidated across XXXX. the we've of the evenly expecting talked results

Joe Mondillo

Okay. And then the retail market construction most question of sort looking look sale terms just in the at of recent the at last geographical if particularly January region see Caterpillar's they're to pressure. continuing you

I or sort America markets up you of Asia of data sort just sort Could Europe market. February following have. your declines take geographic how be the whatever on of seems off. are think through give to in their North they're trending you and us holding until accelerating in

Wolfgang Dangel

sure. Yeah

expected can I is a moderate in general I basis. continue we growth think So on that here think see global to

Joe here right concerning the the now. in Europe down pieces you it break we situation quite seeing you still is probably say correctly as And strongest America. are would North said the trade I into If most is probably

East will think shake to Asia in out. we see I this particular how have Asia

recent particularly solid are months. seeing stage and at weeks quite We still in this tailwind

reason stage no this at a So for in Asia. concern

Joe Mondillo

Okay.

follow to just up So Europe on

Wolfgang Dangel

that construction for mean that is just applicable is machinery. and not think Europe I the weakest what piece I

that's think for I today's production. I just for was looking preparation industrial call. in

to much at flat. into of moved total could some I be the second if towards territory machinery pretty negative look it's mean the expected at half again in it of And even be numbers you production the year. Looking Europe

Joe Mondillo

questions. Thanks for Alright. taking Okay. my

Wolfgang Dangel

Sure.

Operator

this at like management time. the conference remarks. for to I'd to There are over no questions turn further closing back

Wolfgang Dangel

all participation interest and driving Thanks hardworking employees the morning. to these are this in want Also of Helios thank I for Helios for results. your to your who

very Thank all XXXX forward much the first we quarter updating you to So have day. and May. look in on results you of great a

Operator

you your This time. lines for may at participation. this your concludes today's you teleconference, disconnect Thank

Helios (HLIO) 26 Feb 192018 Q4 Earnings call transcript