HLIO - Earnings call transcript Q2 2021 | Helios Technologies, Inc.

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Operator

Greetings. Welcome to Helios Technologies Second Quarter 2021 Financial Results Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] Please note, this conference is being recorded. conference Investor your Relations the Vice Tania turn of President and now over host to Almond, I'll Corporate Communications.

begin. may You

Tania Almond

Thank press release everyone. morning, afternoon. second results and the yesterday call. operator, conference a Technologies financial quarter Welcome issued We Helios XXXX you, to good

website do you our that is available release, If hlio.com. it have on not at

will find slides conversation also there our You today. that will accompany

They me Chief our turn accelerating our line the with quarter Slide are find will spend Officer. Executive Safe recent rest our Chief will two, NIM and Harbor the our second for and our and Josef several On statement. President progress next XXXX Fulton, Officer; our Tricia If Financial our then we minutes outlook to will growth the Matosevic, to goals, of call with reviewing open our you acquisition, reviewing the discussing results, updating questions. your

be during As uncertainties you and are and that and where we Commission. as risks aware, make materially the we cause to also events other will may forward-looking actual other be well session. and statements risks from future apply this subject filed during factors today. that XX-Q to These factors Securities presentation as results Q&A These differ are to our and Exchange could to provided will be the in uncertainties statements with some

or also useful at find are measures, discuss I’ll our we out financial website can during on evaluating we sec.gov. which our in today’s will non-GAAP You performance. some these documents that point call, believe

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

call today’s that, with reconciliations that over of to in And the pleasure comparable it’s with We slides. measures to tables non-GAAP turn my have Josef. provided GAAP the now accompany

Josef Matosevic

our I'll thank you three to morning, QX. summarize and everyone. good turn for highlights and Please Slide Tania,

to expectations our strong I at hard Our and and to Helios' family for our of surpassing their with earnings want every customers. thank team delivered the another level. work sales dedication excellent entire tireless quarter

momentum operating the achieve strategy excellent accelerated by billion on in our revenue EBITDA adjusted is augmented two margins of have we that to tier $X goal XXXX path in the plans. top of end as while our our previous execute delivering years are We earlier and right

We growth by market. have our our well diversifying strong very double digit driven organic serving and customers

fact, market gaining we share we In times. we are industry-best provide as lead believe

very minds are We and flexible of to have on volatile macro over this we focused been winning the meet remaining hearts customers, environment. needs in our their

are to XX% the we at the In in more we accelerated had total, growth quarter products new addition, an them XX% pace organic growth. competitive with market well. to help as make In

line, In EBITDA solid help are expansion. gaining and addition to well. we driving operating the our as drive traction This strategy manufacturing top with margin

cash We're cash too. very self-funding months strategy the balance deliver and of quarter with quickly we growth from million operations $XX while the XXX% bolt-on trailing can XX acquisition excellent approximately strategy, generation flow with results free best shortages facing, fact, and material help In to supply and had have strategies is we higher pricing raw The industry We're in chain posted cash the offset focused price continuing components. that we the three targeted headwinds costs, of increases years. margin in our sheet and our our progress freight including acquisitions. implementing to through conversion the making

and region, credits. its NEM the and provides global also with the The applications NEM offering innovative technology-friendly our closed provides expansion hydraulic in XX us vehicle, NEM, area most address base. scale markets. Northern less in an Our product manufacturing be construction, material customers days. to customer ideally is industry. ag hydraulic company solution to OEM to among than success most geographic in NEM happens Italy us and capacity in enhances which handling, which and we recent global engineering is is industrial addition greater innovative world's providing the of electrohydraulic located the

deep in NEM very business. will application could expertise our Finally, valve and the team brand grow into pleased family. not OEM have enable Helios technology the has us to strong We recognition to be hydraulic more NEM welcomed

will outperformance, more our financial and we detail during Given five, remarks. our on her detail some will we Then prepared fully are in outlook Slide highlights in which the again, quarter. review four I our later touch more go raising Trisha into will remarks. for On

NEM to $XXX over of acquisitions. million from quarter grew second sales Our was million which $XX

year, adjusted we increase the with as building of of detail, better and performance points. deliver little entire by both XXX incredibly margin was second the to of tier team grew over excellent XXX% to to cash demonstrated last Helios our All-in we a EBITDA an drive over of the increase turn will to I basis and the last financial EPS and margins. EBITDA than execute expected execution Non-GAAP are strong the segments. XX.X% adjusted now quarter top year, more the growth, call I'm proud company. bit Our an review Tricia, Trisha compared XXX results the strategy in generate cash momentum outlook augmented reflecting

Tricia Fulton

seven, I Thank consolidated our review quarter On Josef. good six And morning, will you, Slide everyone. second results. and

pleased saying greater to and better need are you that by to transparency our you start performance. your we for what heard on request acquired give understand revenue me Let strong

in revenue of and You acquisitions. shows organic will a by that the our find table contributions release quarter press

sales markets, operations growth strong our As most supported outstanding exceeded X% our managing acquisition Josef as sales over in growth prior expectations and times, on and grew quarter, delivered period, executed and and our noted, which take the XX% the second by we focus we Net efficiently channels, lead delivery our of year expanding to outperformed Balboa, again. share. end our sequentially transformative our recent continue plans market

challenges XX.X% for $XX.X and sequentially with period year higher year the Second XX% volumes. of and supply increased cost quarter by million carefully required or from was fixed improved given freight pricing costs. of quarter year the higher was profile compared chain juggling flat increased the the prior the input well We're million get well act products the over million leverage on Manufacturing gross difference profit managing also higher and from overcome volume trailing multiple and Balboa's while performing is X% business $X.X impacted implementing or strategies margin Gross to to door. the margin as $XX.X material as out costs.

quarter basis Our basis reflecting compared ship points available trailing manufacturing disciplined period our are productivity EBITDA over up and customers. and improvements efforts, extremely was Balboa. staffing improved grew trailing a XXX management to a year expected our and from the $X.XX than the all the balancing XX compared margin Balboa EPS demand products agile quarter, of performance operations Non-GAAP and same in $X.XX with up and materials up to across acquisition. the with points for ago and XX.X% strong prior industries quarter in $X.XX the the the cost year to Adjusted flexible better cash reflecting contributions to period, second

operating Slide expected rate which of second results. pricing Our transfer tax our hydraulics second effective quarter to turn than in segment Please of XX.X%, dispute. a the for due review eight to quarter was settlement the was lower

drivers over strategy. XX.X% margin showing periods Due with foreign production primarily partially reflects rates. point basis the while costs our very hydraulics volume, operating The Second operating prior benefited to our XXX%. year of second on results. disciplined offset an XXX of year from as were prior segment labor million included year. quarter Sales to ago XX% sales to over electronics from period, XX.X% execution nine leverage review growth well benefited $XX.X our These most in all efforts from broad-based a have exchange hydraulic provide impact gross year for were positive improved to reflecting million were deliveries Electronic XXX volume compared margin the on by we also fixed increase from regions. of sales $XX.X efficiencies. Notably, points in higher this expansion and sales million turn Please and segment growth time up million end $X.X the of cost profits on organic increased Slide leverage customers. in demand rapidly to year geographic freight strong up higher $XXX by increasing to as currency higher markets, driven on basis operating in quarter manufacturing period and our

impacted seeing for the positive to the recreational quarter. the new impact $XX.X are of time. some pandemic last Acquisitions heavily contributed million the this product year's We revenue for discussing comparison segment by rollouts second in was for sales been electronics most in our the that the by we've second quarter segment. And market

have made The meet addition, in expansion to Balboa demand. to growth our we In expectation. the capacity continues enabled Balboa ongoing exceed investments

mix segment. Please our profile Slide from second or related X.X% for prior XX.X% with year in was The trailing quarter from in and brought has improved income in $X.X prior strong margin the acquisition and higher different period. of and this well $XX.X turn in potential Electronics in electronics the acquisition the of leverage to to review to second the basis up of by gross from flow. the period. the million reflects our excited from this XX.X% the costs from XX million to points margin from Balboa chain increased segment what's primarily the quarter $XX.X profit $XXX,XXX period. cash very acquisition $XX.X Electronics inherent volumes. million the the in resulting a Cash are year as quarter demand. sequentially first Operating We $XX.X operations gross of million supply XXXX margin was up to XX Operating impact operating the increased prior was X.X% for strong up of increased meet the business. as customer margin challenges and reflects QX segment million year

deliveries We our timely requirements our provide working are customers carefully that our demand. efforts to significant balancing capital to with on

about quarter the of sales. $X.X X% represented million was CapEx For

to updated of million the We strong of year second to $XX order outlook. Free range flow Josef expected CapEx end our are free million full to XXX% million a conversion equating our cash the for on months approximately XXXX, X% cash $XX flow the remains which trailing sales a mentioned. based rate for of tightening XX $XX.X as at was

flexibility flywheel our we strategy. pursue further confident significant have are financial to acquisition We

million repayment $XXX XXXX. during total on on Total ratio net end, of the at liquidity $XXX quarter of of Regarding Slide EBITDA the quarter At $XXX of our million to $XX million our we XX, we capital three X.XX debt had from adjusted a deliver total to end continues our leverage with improve available with pro-form continue times. more million. credit times than end, was quarter. reflecting lines of balance debt revolving structure This rapidly the sheet to at on

to quickly then financial that As and our strategy down. a disciplined reminder, pay increase leverage to for is acquisition,

remain Our debt new to growth priorities capital acquisitive and through growth and distributions technologies, shareholders. products reduction, organic

have We dividend last over paid year. done sequential a We XXth of dividend XXth XX on July years. cash pay this the consistent our quarterly recently

turn of to XX let’s discuss I Now XXXX. outlook Slide rest for the and our will

rates that our assumption Our pandemic. using guidance currency well markets are the impacted assumes for quarter by the as global XXXX constant further as end not

our million for XX.X%. We to to revenue growth XX% increasing which $XXX the million, XX.X% midpoint are the rate $XXX outlook of points to is range basis the EBITDA annual margin at raising range. XXXX Adjusted outlook of an of approximately XX implies

$XXX to We continue in implies dollars the annual efficiencies half expectation our rising of the we're rate to stronger range. raising range midpoint due manufacturing second to at or to adjusted This material headwinds for the costs. growth of offer $XXX EBITDA million XX% to our million leverage the

to continue we of invest the rewards reap improvement Additionally, into related strategy manufacturing items our margin through over non-tax the long-term. to

half ability to be continue chain our look that second cautious the disrupt as deliver the all continues our across could of robust, we we that being while challenges markets the pace been. at are of to we We have recognize at demand XXXX, served supply to

at of half supplies, obtaining outlook as freight from and to year. second even million we the and As our a are like as range draw and borrowing reflecting $XX as continuing challenges in guidance staffing result, inventories the and was levels of funds and well range. rates what material we production now parts should difficulties size we the guidance, inflated the balancing remains margin of the increasing to cost Depreciation our mix lines. XXXX be a The of with unchanged XX%. are to expected through to approximately I'd million current the tax million. range to million build $XX rate of $XX from XX% $XX earnings the with favorable $XX incentives, range XX% Due the between million in for XX% economic be in be million. now the is resolution a down million between expected now favorable to amortization expected million along $XX is in of $XX past geographies into now to be to to uncertain is effective shift advantage to to tax $XX positions, Interest

are cash remainder EPS XXXX XX% of a to year or We had share expect the range. by $X.XX of continue for XXXX. strong the of half of the in raising is first non-GAAP outlook we prior per kind and at increase the the $X.XX our in driven midpoint market guidance to increase between the throughout to the our demand over year The

to on logistics. able Josef are our fixed leverage With the base and margins, final material I comments. turn given to for supply costs maintain that, will cost strong back even the and headwinds We our some call the chain,

Josef Matosevic

driving our we're I excellent and Tricia. Again proud Thank team. performance am of extremely you,

up execution of driving facing plan. the are stepping we challenges amazing We while many XG to are

We our for are outsized our goal. accelerated to across please. organization meet efforts With Q&A up growth in uniting financial open long-term confident are deliver to the the that, line ability lets and

Operator

and with instructions] from Robert proceed W. Baird question. first Mig And [Operator with Company. question your our Please is Dobre

Mig Dobre

guidance, the Good I figured updated I question. Thanks your for start with morning, would maybe taking topline everyone. guidance. your

your had And million to in widened counterintuitive. months initial little dealing million a range. left only with actually year. The about guidance. We're six range So, updated $XX for your the a $XX it's in me, bit has guidance

what here if in of of you midpoint segments curious terms also $XX high end? the as when million the of line? curious kind versus I'm midpoint thinking end to embedded can the I'm I'm maybe low of by what's in bucketed contributed or at business kind curious So increase And I'm -- the that the the various

Tricia Fulton

for Thanks the Mig. Hi question.

demand in as the expand to that the that where market, little businesses, needed in very bit the we're high the but a that we you room But the going. bit little any little So a be markets we where felt side, we of problem are on ourselves challenges to the the because person to shipment third and electronic supply ourselves strong chain probably of give a on but we room. did all at seeing quarter. is across market that on the bit, what able really seeing events dealing this give the just guidance, turn we remember more that of a we Certainly we get quite the counterintuitive we is chain with. that businesses. agree think the needed little and in And important a we I to It order it And end, in fourth all is need the our given to demand and supply we're to there. thought that we're end constraint that pleased which a around in the intake range are with shows demand and point, we're it the of of with our bit have we seems levels

of doing Our the lot are door, getting pricing happy in products them of any 'XX. day. parts clearing that some make need to we we're year. see up an what with also but the the see we end been still where the There's it of job those teams need a in of is given on but to we before And we excellent are, some in report don't the

high of a top holding few able issues end being at going line and it, be I there's for to range, back is a us say think that logistics supply chain but sure. we handle that to the our that good have pretty are still on issues from

Mig Dobre

was well? helpful. can that with that's electronics mostly the in wondering as Was makes a as where you of out your electronics lot revenue Are That'd million hydraulics a be thanks. constraint, help sense. of any there that any more That seeing $XX also increase? or areas of of of And Yeah. particular, helpful us business the buckets and you're to that thinking, I'm I'm

Tricia Fulton

for half electronics. chain The we two for probably that first of second so what in really seeing the was half be higher across end all the challenges is Where segments anticipate and between as split at on the is than the range, the we've I hydraulics board, but the It well. we're supply on more businesses, the specifically across constraints think electronic or side. had electronics, hydraulic the the will

we according make aren't tied that in get customer components those found, but shipments getting its product things ports the delivery get of in in to Some from wants a schedule lost up to to we from transit the were time able the products perspective. that had the then

seeing don't the that anyone regard. creative while come we And electronic those of all to think else to. really I pushing we out the on chain that us we're So ways we're the products to broker when the We're we're than need. side, things supply going with different get need to in market any happen teams up

the someone steel's On the I going hydraulic constraint side, costs material think and up. that's

some really it's suppliers constraints all So are that our very whether very though, busy ours in The that markets industries are effect. right now, other has or strong. are because

very are well. suppliers busy the So as

Mig Dobre

I see.

Okay. has driving than year traction see revenue of year to where, this? of that thank here just half, business of on first And here the the And from higher I'm and had is aware how is pretty or be the relative in think modeled. this to has question terms you? seasonality you do any growth And the what's there sustainable half back we I me Balboa what this been be curious last considerably expected

Josef Matosevic

businesses, other with coming weeks and much best look from other Look, the BJN of good, certainly better, to a out have markets markets demand, large you for you morning, want heard to laid path to but Mig. acquisition like our avoid develop really but next to the we what surely slowly comes our if exactly traction. in the the particular pent diversify with and get innovation up piece a would pretty family products during to each into of meeting to some of Good generation strategy things also then and but work our few collaboratively browsing, see ago, Investor here, to

marches in and your with question, to summarize up some So backlog pent combined and customers. demand UN new clearly diversification

Mig Dobre

question Josef. seasonality the on And

Josef Matosevic

Look, as right year. of baked we guidance have into remainder far for the our as everything we the can see now,

We strong we continue filled business, to we see quite honestly a we'll very all now. see with that don't get as but right pattern, honestly communicate educated, analogy accordingly, at

Operator

question And next your Jones is from with proceed question. Please Nathan with Stifel. our

UnidentifiedAnalyst

Good [indiscernible] for Nathan. on morning. following Its

As times able we couple providing maintain you on [indiscernible]? noted times, look of up but that picking to share, how and a the describe class you're could do in market you're lead that best how advantage

Josef Matosevic

the or side, and flow talent clearly bringing also year on the to and in not actually a in renewed processes, operation some for supply for from what strategy we additional invested, improving really great the the understand our that but material Look, were competition. and took If the heavily bottlenecks. question hydraulic separate we can only chain an some here investments effort manufacturing ago, areas ourselves in

times. notion market fill are our B, require suppliers market customers position extremely working that in area part got through to point investment weekly share in that it folks understand We collaborative in with the our is the and area. the actually And basis. a knew we're lining the education We up where and by this stationed does our in us core on would drove share? our to this we operations clearly into need competencies we what that the to a process going [ph] else a and holding this base a gain But strategy get of strategy having following really at invested to for supply and and investment what result. So us manufacturing maintain strong lead and hear where

UnidentifiedAnalyst

inflation know any are cost. half, Okay. is pricing I price contracts the to price able now to second increases in sort electronics, negotiate pick Helios of product and And then up in switching thanks. plans especially how over some share from on

Tricia Fulton

those contracts, like back them so up related We many the even the go do been on get in contracts businesses the cost said, as through customers to have surcharge. half those fixed specifically increase some to being materials go that on the pricing have that go the some to degree. for all in and fixed of price the with increases a to seeing we're but we've we especially able end material long of negotiation you pricing price of through for been price some And the our

to cover increased but the that Some to we are the have that's have been temporary, certainly through of tough important maintaining of I discussions try in and to able those get material year or some half back so some are surcharges costs margins. the and we permanent pricing can strong these think our

Operator

question with [indiscernible]. your our And Please next from question. proceed is John

UnidentifiedAnalyst

segment. new in you revenues the platform last your months, seen new about just the talked iceberg the driving tip about the see we the and unfolding of And, over Are little months? in terms Tricia, months. that we do platforms, nine How next electronics sort of six for commentary, nine you contributions? the a that of bit the talked in

Tricia Fulton

team. out related meeting just year, those we a we've commitments that And haven't we over our they this become any In rollouts have their reached the the a first year we'll some We vehicles. the make those and And see the, but the year, point are have of come low had the of because more and half And but maturity year specifically it's recreational they're out. been those. have on the them percent rollout, that to have as to mature, I out And to on those total Especially know, electronics ready bigger a have chain making parts seeing started with key time, the revenue. is to roll we side, high, we're But on will very in make that the focus able we certainly for Yes. in sure to ready adding that couple place contributor be a supply rolling products. significant. we're to the think the we it model you sure those of revenue seen that At go this that back year not customers. to that beginning rollouts. the them become we're digit, rolled level of to single product. slowly clearly of That's

UnidentifiedAnalyst

many platforms the How next over do see different you couple of quarters?

Tricia Fulton

Over the next do -- a we as the couple they're consider But others for three perspective, four of significant year. a they get and that from quarters, to intense. we and would them important to little have smaller rest revenue right. have this probably have what important roll-outs less well significant We are

UnidentifiedAnalyst

times, you'd business, allows competitors, you improved for the times you would to your on Josef improve market product lead able the I to the lead that from that others as times do the lead that retain that think take take be Okay. share able new improved you're to deliver share?

Josef Matosevic

We our of shift know, side, products is of hydraulic distribution. most

comfortable six we currently anywhere will and cases in we lead lead our So clearly customers seven week upper we well. hand we and times we with those extremely have time, times. And know between maintain the believe lead to improved some feel

get get that difficult years, into the lead strong or very three our you're also business, into path process, of five Once we side, to you times it's and out. business the on electronics it's very OEM to its differentiation if have the next John. On

that So invested a we and we as into protect to how really differentiation wisely company could there margin. knowing our have a

separate that that times, working areas on we is. also other answers from lead comfortable those does competition. the your So but question that we're We're will will have that we maintain us

Operator

Our with [Operator Jeff is Markets. question next from Please proceed with Capital KeyBanc question. instructions] Hammond your

UnidentifiedAnalyst

puts there, Hey. about Good this in out off, quarter This outlook healthy Jeff. had business the the second and in all pretty is and for headwinds in of seasonality XX% of you takes how modest go through some incremental despite you the down there morning. the Could just the [indiscernible] half. guidance? step Starting all and and out on headwinds the

Tricia Fulton

and are we level we're we going perform the markets in from then to margin chain, look to at what think a that in seasonality. that good it sure seasonality half that being expectations able a With believe the of And is there of probably when really QX. that the workdays I from to markets there's a keep of we you back of those we on the the us expect to we're at that demand it's by normal honest. supply are of Yeah, that supply year. have the end perspective quite and seeing in not the that year, markedly, the back saw of less to challenges be certainly difficult that this the again, incremental, seeing continue say half in it's part at across I'm year, couple that end have markets. did the in especially year the growth the we the end revenue chain things But the side. with positive what But some the team really seeing half is back perspective primarily driven you In demand We're the are supply all

UnidentifiedAnalyst

but And then you the of you're little you about for year? and of in price price talked it rest a what could quantify the you're cost for expecting bit, amount expecting QX the

Tricia Fulton

we did seeing The pricing that our selective to that it's price half the specific increases of in cover the impact. products price low some of costs cost on were the single year really put increase year on helped date we through but digit few the side, first a million for

a contributor that will likely have a It be September, half the price back larger through significant the few not timeframe. it's a October the August, So we not are to year. rolling first half contributor of until because in increases

there, it through put to more and impact will material we're those having. the us help there really, but constraint are offset issues really increases be increases So some chain price that cost supply

Operator

And call for turn now Josef to received Matosevic Thank the over question-and-answer session. closing have Ill the we you. remarks.

Josef Matosevic

joining you our to for in November. much a of to and quarter great of your of in us stakeholders. updating and remain operator. forward healthy. We ability Thank our all day today. and you, deliver in really stay our grow to interest continue all value third look you super confident on Have Helios appreciate all Thank We for

Operator

concludes at disconnect this may your This you conference, today's line and time.

Helios (HLIO) 10 Aug 212021 Q2 Earnings call transcript