HLIO - Earnings call transcript Q2 2022 | Helios Technologies, Inc.

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Operator

Greetings, and welcome to the Helios Technologies Second Quarter Fiscal Year 2022 Financial Results Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Tania Almond, Vice President, Investor Relations, Corporate Communications and Risk Management. you. Thank

begin. may You

Tania Almond

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

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

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

our Tricia discussing are the Financial Chief Officer. open progress will spend On questions. me our your accelerated affirming and our Josef the growth line results, Chief call the XXXX, our Fulton, President several second minutes with our outlook reviewing next to Matosevic, will our and with Executive quarter Officer; and goals, we then They for

will you our statement. safe to harbor X, If turn you find Slide

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

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

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

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

Josef Matosevic

everyone. day, you, and Tanya, good thank

delivered quarter ninth macro this Our environment. team in and strong for results the extremely consecutive performed yet well challenging again

solid to executing system across against increases regions. margins. staying create most delivered the We are strategy business We our growth and of with accelerated markets top-tier our laser-focused and on

shift value. that proving we've diversification than offset our fact, is mobile market markets in the strategy other quarter. areas more recreational this industrial, strength and We its seen saw in In our

lie that We engineering as we fronts. application the strategy pure-play many know-how, advantages our in competition competitive well our are expertise, outpacing as and on are executing. our manufacturing operating We believe focus,

new a that rollout in solutions. our segment our validate innovative Electronics have We customers product for

segment introduce changing even Hydraulic the that continues our own solutions engineer new their Our to products. are customers way

top business Beyond This driving are strategy. manufacturing to helps operating leverage. the strengthening drive operating greater we line, constantly our and model our

to tier earnings We U.S. customers taking capabilities proposition. look at currency. it footprint despite on maximizing solid are foreign the with greatest our This impact global margins strength better and and the of our has top that enabling a is are the and value the serve our strategy dollar

our face strength fuels after great day how of so your determination I and am hard constraints. the and impressed and people hyperinflation collective thank performance with work day. The a colleagues build company. strength to dedication for world strong continue power want together to each and solid to produce to our chain around flexibility. are work of Our remarkable Helios financial results the consistent in always delivering operational our I the supply teams

company we would last Investor into is you manufacturing into a have company. to areas to ability adjusted Day, closed like us from operating and understand highlights giving we acquisition. Taimi help to Mid-July, remain Our fit opportunistic major as ratio Slide significant second operating X. the flywheel better At strategy the some for EBITDA on being transform to progress our Hydraulics we Please to our presented integration net turn provide our made. the acquisition, holding an down segment. we of quarter, now times bolt-on debt end X.XX the the perfect a leverage for at to the I

tactics and projects and good of lot ideation in execution. We phases a of various have accomplished have the to on several strategies work out flushing

Of and with of years the segment stretch is structure the moved Helios business the multiple owners. forward Hydraulics over Electronics to underpinned of projects We projects started comprised on have multiple course, each several by a moving and the manufacturing then roadmaps clear couple system. simultaneously. are Work might with segment. programs is and objectives all We developed programs that and

of For alone, represent that This a and is growth, multiple global which product continuous improvement there line each risk. electronics process, example, are can at is global our already projects Helios. in XX move Currently, here DNA of profitability mitigate a enables chain supply projects increased consisting part our phases.

integrating larger, more an acquisitions, this business fold grow something as company in that and a we sets unit at We find be there level. up now always upon. of We This story. are will global our operating company further versus is the enhancement for I us long-term disciplined a margin long-term can doing into to that improve most about investment do more and one approach exciting aspects

just past, started. are have I the getting in said As we

turn to reaffirmed Let over to review before our remarks. come for in detail results back discuss closing some please? financial me Tricia, and now the I Tricia the more call outlook

Tricia Fulton

Thank X you, through XXXX our Josef, quarter and results. consolidated hello, will review second X, everyone. I On Slide

million rapid basis As Josef sales currency grew a as $X.X we on expanded was schedule on production by work about delayed shortages which sales. delivering and against adjustments sales currency strategic in in are million. despite XX% base, inflation. Supply supply impacted constant foreign $XX performance of inventory, redesigns. In product headwinds the chain extensive foreign financial currency, continued constraints This X%, investments rates an mentioned, impressive and supply quarter, exchange

and in demand We markets. have end recreational a agricultural solid mobile, industrial,

and half health latter modest Americas more strong product quarter. the the remained have quite Europe. Asia the in of with of in slowed Geographically, wellness serving shipping out the Europe growth While Balboa specifically industry,

profit operations. $X.X higher to headwind. APAC specifically a quarter increased optimal prevent COVID against Continued restrictions margin Gross supply related currency in have as the and the chain logistics region, challenges on contracted in volume million China. Gross weakened

strategic additional actions pricing have We planned.

conditions with will chain supply and help efficiencies. improve, As this absorption output,

our more from time capture we manufacturing over Additionally, strategy. operating and to expect benefits

believe operating these ideal conditions. we we that efficiencies advance also to as We the than greater even highlighted, less find Josef continue strategy can in

our SEA We the expenses of SEA percent quarter. was XXX are line XX.X% of and quarter sales. $XX to last with disciplined a sales highly in strengthen operating Adjusted improved X% million as leverage. second total year's EBITDA basis to points trailing with of up over

the impacts despite holding Importantly, at performance are margins outlined, I just we levels. top-tier

rate on second Slide Hydraulics Sales grew driven of of to acquisitions on a Our this XX.X% and demand an sales results. of higher segment team's I of given rates tax $X due $X [ph]. of the was rate whereas would our volatile across XX, year-over-year, challenges $X.X normalized unsurpassed in segment of find resolution to more exchange XX% was a the review to effective maintain of sales to lower transfer environment. improved obtainable demonstrating from points highlights the by turn this basis was from year's shortages. The total leverage pricing ability the well the revenue, on work the FX lead Slide million. our trailing was despite On unfavorable profit estimated results. last dispute will most based XX.X%, benefited strong up was margins you a X%, amount related which markets. through We basis, impacted total quarter of growth by currency delays delivered to Electronics constant currency chain XXX XX like impact million the supply note Please very segment segment held to our foreign million. sales. in Hydraulic Profits the quarter sales and delayed gross improved and times. our for SEA

trailing is Delays segment more X%, in XX% about U.S., so million was a shipments million, shortages of currency first quarter. on from an has on currency basis constant improved foreign Sales impact because of grew year-over-year. $X of couple which Electronics in Our a less the concentrated was revenue. supply which the

about strong the expenses X% improved SEA to review our improve a even this volume from of as points expect margin remained few revenue, The cases, profit of QX higher in we on at for segment product basis XX.X% to flow. the elevated strength CapEx of and increases X% inventory top of continue down. in reflecting been to $XX.X period period, making. from year-ago was gross is leverage level the continue this years million a an to segment the Electronics some maintain see XX.X% XX.X% XX we XX are pricing. in on sales We support raw X.X% in line. this generation reflecting increased the down year that higher prior in lead for in Cash of came costs. to material in new to gross primarily realizing have Slide to year-to-date. and quarter related segment times. in Electronics cash turn and, rollouts further come Please

the of cash near expected likely quarter. end year X% will We almost in million flow was lower the $XX of end our to Free the X%. range

are working to on commitments. the investing outpace competition We and demand intentionally deliver meet in customer capital

than can on to balance execute we financial You more have Slide sufficient see and strategy. a XX sheet flexibility strong our that

organic paying regular dry our building We are growth, paying down debt, and up powder funding acquisitions. dividend for

million. liquidity of total quarter at was $XXX fact, the the In end

system be operational, Now believe continues Despite a war recessionary the in of we in to environment. provides There structure FX XX. remains discipline of China, in this, not good including let's impacts the to globally us plans. Slide backdrop, business execute Helios fully a that to Ukraine, deal the that turn global uncertainty and our all

EBITDA full based expecting top a We than range while the now forecasted bit QX of year the end distribution. effective may adjusted annual our at the rates We and be anticipate are tax revenue, low geographic QX maintaining guidance, end the of and original range. earnings on higher the

Guidance manufacturing Our Josef ability we our is our supply of our execute for financially operating plans. chain, the to also turn closed guidance some not that, original confidence I our and material. comments. on, With pricing, but call in on execution Taimi, our expectations recently include will to final back includes strategy which and assumptions against

Josef Matosevic

Thank you Tricia. much,

important it As last to do I very we to to said said call, what us we do. continue on our is would

regional for year. the doing that through We our are maintaining range guidance

the assume range, diligently and we momentum offset lower creative to and of create better working will the ways the find we the from have While tailwinds. to been end headwinds

billion track accelerated of by have XXXX. on X milestones reaching some to that achieve we remain also $X revenue by We at least in years

type manufacturing the our from probably we operating are with tell doing and work of strategy. can You

all needs, accelerated our pandemic, new products innovating customers an mix we been and to on ahead We have size business and segments, across diversification including broad a we us. each our of business, of The coming the opportunities while at have fruition. beginning scope end close their Since the laser staying of remained that focused geographic the is and runway on penetration of long of market have and to working the deeper understanding rate.

we can consumption fact, announced and ago of improve The In energy weeks several boost reduce efficiency, solutions to fuel a couple ecoline significantly and efficient from new program system recently has Hydraulics a customize our business. saving savings. program cost provide that the

We for have believe coming we could announcements this fall that multiple be industries. game changing more

our Q&A, our let's is ability about to focus the leapfrog please. optimistic on our corporate to will future time. time competition exciting a build open remain company over our We us innovation further broad cap large intense With in Our class our very position. an market that, allow for This extending lines history. up [ph] leading and

Operator

the Hammond comes proceed Capital Thank with question KeyBanc question. Markets. Instructions] line first your Our from with Jeff you. of Please [Operator

Jeff Hammond

morning, Good everyone. Hey.

Josef Matosevic

good Jeff, morning.

Tricia Fulton

Good morning, Jeff.

Jeff Hammond

trying towards guidance things. to the number So kind end. lower just just better change - a I'm of you on the cited of

slower, I being maybe just FX, a little think uncertainty. the electronics

of think the about order headwinds? how you Just do magnitude,

Tricia Fulton

than that's chain and been are continuing one but impact say pretty Yes. to electronic steel number this the dollar headwinds with coupled the constraints strength We're new, of We're that supply anticipated I with some looking U.S. chain. the FX the I And I have against think the we dramatic would in the energy is think has the don't also point. at then But having costs, supply to are components. driver. see increases see we euro. still European and it more at which seeing on the that,

Jeff Hammond

and just could you I'm what's it's more and if spa. seen wellness, than on it's And there. weakness if destocking? think versus if weakness, if I destocking And Okay. some explain evidence color pool health demand wondering if that, going shipping We've on little mentioned then just of of in just more there. - a Europe, Just into it's Asia broad it's you Europe kind

Josef Matosevic

Jeff. Yes,

wellness holding health the steady. Balboa impact Europe, and in segment, is our the is America in particular On China clearly and North followed on Balboa by biggest

and Europe. would tied I into question, how Jeff. being the of China China impact, answer kind that's largely So your largest

Jeff Hammond

the Okay. And go Tricia… – then like ahead,

Tricia Fulton

areas that And inventory also some needs that of in well. seeing the those be on a issues over to that short impact unbalanced mean, demand through there's inventory then as hopefully we're worked of period there's time. I Yeah, of of both a

from both APAC and Europe. coming it's sides So both in in

Jeff Hammond

that's And then demand related the noise that's weaker around China or China, is lockdown?

Josef Matosevic

mostly of related, Combination but demand the both, Jeff.

Jeff Hammond

Thanks I'll get queue. Okay. back so much. in

Josef Matosevic

Thank you.

Operator

you. Thank

line Barrington Please question. Our next Research. the proceed Chris question comes Howe from with your with of

Chris Howe

taking everyone. Good Thanks my morning, questions. for

Josef Matosevic

Sure.

Chris Howe

Morning.

your think both of we mentioned that of in you As the footprint? the last made where provide kind call, remarks, is it some demand that can segments? of utilization prepared comments an about on see briefly on you support the in the You across capacity update you today trends

Josef Matosevic

Chris. Yeah, certainly,

current beyond and it to going differentiation. our capacity. unfolding create we a So like look additional very as we're we now what should in global here a where at starting is position think acquisitions really And this and active XXXX forward, flywheel look taking more think journey further to

talking We then of we growth. and added an have been arm a recurring team sales, terms system about of the in new

up years on team by coupled backlog, we're investments done the products. picking of X orders the some and have new pretty in over last So terms we nice

three are all So now. those areas together coming

capacity. are we process question, your Where of companies. are of terms answer at to acquired looking in carrying So now in the the

Our is to up XX% of goal free an additional global XX% capacity. to

that take. end year. with a by We the of methodical goal plan will reach our we the need step, to That's

here is communicate on final of QX development provide business. getting product will additional color we certainly and the So we where call outcome and the good also progress. our on new will other oven The areas baked

Chris Howe

All right.

Just factored challenges to the on are Jeff's different follow into into, the let's range. question end guidance up that about you're say, that of falling lower seeing the

the what are think business of we half, you about you seeing prior question visibility that are areas detail, kind your areas business about the or you some transparency, more of as what a second in little compare the visibility? the about comments talk this seeing we of As better improved into perhaps can regions with what bit

Josef Matosevic

Yeah.

the us much relatively the half, at as look remained entire on U.S. clearly, higher Ag of our visibility, gives So second strong. comfort, across we construction pretty level portfolio. improved markets

to a shift We and up job protecting good get you go. system, whenever have and chain. issues. execution is the is they should holds the we opens has Really, once that's done FX a why given You it's works anticipated know, know, is, X, and China, once the into in a better FX any better or work then half, really Chris, the supply the second much We markets. taken punch. pretty our team into margin, that we that the the true for case, global - steps strategy protect to any China X supply It reason of X, That out - it. stage last chain are have really proactively us don't great to fundamental that on and itself to

sold of could million impacted north - have say. mostly dollars the wouldn't have China, look of additional was if challenges, year-over-year That's at just it. X wanted I have on investors chain. understand that pretty X, make and a FX our sure China, that a to supply between X, much we punch comparison, going to Balboa $XX we [ph] so chain hardly if we have supply We you really because

Chris Howe

And back helpful. I'll in promise. then more the one hop ask and That's I Okay. queue, I'll

driven one guidance. guidance? the of segments in segment As do we you headwind on maybe better, continuous sales, that the rhythm about Electronics It's you end composition towards the think guidance? in full although for guidance this towards we kind lower Or the anticipate that look the example, at out shake towards the less of of by of comment a being of deferral little can bit an see but segment, you do doing FX a little segments how range,

Josef Matosevic

I think balanced, pretty it's Tricia, right…

Chris Howe

Okay…

Josef Matosevic

approach maintain clearly, want we this Chris. challenged, wrong any now, very that and if improve, just more story. know X, about. send take proactive X then to things right to talking be see little can communicating a bit stewards as messages. effectively visibility. will far better not wanted things we good as Its deteriorate, further If I've punch obviously, And of been position, a and is be the the guys to But Its you here we we in just business a X,

Chris Howe

for Thanks Okay. taking my Appreciate it. questions.

Josef Matosevic

Thank you, Chris.

Tricia Fulton

Chris. Thanks,

Operator

you. Thank

question. Our next of proceed with Robert question your from W. comes Mig the line Please Dobre Baird. with

Unidentified Analyst

morning. Baskian everyone. Mig on for Good this morning, [ph] This Joger is

Tricia Fulton

Morning, Joe.

Josef Matosevic

Morning, Joe.

Unidentified Analyst

I Hey, It need you through second the half? cost And more good this you right? that in to persisted price some quarter. the first know I seemed put will pricing pricing Am headwinds through morning. reading like push in quarter.

Tricia Fulton

supply did through cost also margin. the at that We covered strong we being to rime margins why costs the on QX. the in end to some we've piece the regard EBITDA - not on able you at what of last leverage but a the put And chain neutral, a quarter, were recovered come the of but price little the full quarter businesses the each we're margins that to the That's bit lower were with of by year, still and of cost in it, gross little line. from see SEA pricing a the costs, full certainly mostly and time it, the in we're than price of at they still was pricing bottom to bit rising with the we materials margin really cover the really rolling certainly cost material not perspective, able for out. depending are looking how And on but

Unidentified Analyst

Have commodities of down? rolled Or your a asking a I to started on a over costs that? there started in see way. of you bit Have is your lag down? come see quarter? little lot to the another you know Maybe costs come

Josef Matosevic

segment, down the degree we that Joe, Hydraulics it in normal? call slight has A it but to improvement, No. come the

Unidentified Analyst

to on chain, I actually were And you improve. said delayed called from can then gives which you what how that magnitude, in guess, and what supply the million you – improved improve second improve sort the and of of guess sort visibility going Okay. it in to fourth you the $XX to $XX to the sales, continue quarter? quarter, it's I and continue expect million third much - out if first quarter, the was of of it order

Josef Matosevic

Yeah.

Hydraulics the our and order on So very our distributors. . pattern with a CVT in particular, we consistent visibility segment, have with Faster,

consistent and were another we to now stabilize but a besides a couple the we starting bit. don't want of Ukraine to is our couple see last little - of and quarters we're within We little or is have a additional the just months outs, slight it that's see it to if change one-offs. direct much So Faster have visibility to a have comfort push some stay Russia those of one distribution We a there get going been wait situation, just traditionally OEM company. starting to channel bit that three and more due

is very story On order hasn't by pattern fluctuated and much it's here. and and the good, much innovation, China Electronic Europe. side, consistent pretty impacted It strong with board a above all side,

So that's is, grays Joe. to say, zone so where the

Unidentified Analyst

Got it.

pass my line. Okay. questions. Thanks taking I'll the for

Tricia Fulton

Thank you.

Josef Matosevic

Thank you.

Operator

Jones question of next your with [Operator Thank question. from Please proceed Nathan Our with the Stifel. you. Instructions] line comes

Nathan Jones

morning, Good everyone.

Josef Matosevic

Hey, Nathan.

Nathan Jones

there. neutral quarter you price relative back - Tricia, to cost exited the I price you were to question you on wanted said the to materials. go cost

neutral those price all not when you're you're including of that labor, cost sources all of saying freight, things? inflation, you like kinds of are So

Tricia Fulton

as the margin. supply in would or freight, efficiencies not that the have. cycle have comment overhead gross labor disruption of still but because get production of labor included that the We chain My issues we view and the some

labor get on. That's of full that the leverage the level. would to margin was gross out getting not we're I what we So to and overhead our commenting

Nathan Jones

Okay.

gross second quarters? the Maybe some last at And is that. margin from seen comment should through. the increasing that you inflation over that the quarters. progression on we've how the over of margins roll on we half gross So starting think pressures you to be looking year I that couple few last of mean just next can

Tricia Fulton

Gross the where costs there. because levels we're electronics and so buys are is broker around on going high that Yes. the to now continue side probably do at margin right the still seeing we having we're to are

come which are high, is start have. according but projections down, some We the though, that least still we stabilization at encouraging. expected of to Steel are seeing that, prices to to

time, will over that gross to the we margins of of the will the have So but over get we some couple same challenges. next still back had we quarters,

Nathan Jones

Thanks. Okay. the CapEx number. one And on

in I strategy, this with has I would X% to you're think low full or and the think the a amount said come ahead. of fair to probably X% do below manufacturing be operating to you at end guidance to the of going range. of going steam seems

you're comment any whether from getting longer it's constraints. whether this on done So supply chain more or taking just cheaply

just spent why money is that getting this year? So not

Tricia Fulton

moving we things different the Yeah. we than We're cases, that we actually around facilities - realizing we're and manufacturing, in did. to some as operations the actually had we're more to optimize thought capacity

to make have investments right we away. don't So those

So some the of benefits. that's

facilities is the on that some in of we've it in pointed as and Josef at. looking the just that of at looking have where lead machines those we also And made well. the as we're capacity out, we're times acquisitions seeing the Some delay

don't So be some the have the this to capacity have made investments available. because of year we

Nathan Jones

questions. for Thanks Great. my taking

Tricia Fulton

Thank you.

Josef Matosevic

you. Thank

Operator

Thank you.

our the I'd question-and-answer for reached to session. call Ms. the remarks. We back have to Almond like over end turn closing of any

Tania Almond

great and today. operator. your forward interest Thank day appreciate We thank all and everyone, free out Helios on us healthy. November. third you, to to stay any updating results Thank Please in you reach Great. quarter in of feel me for follow-up if you. look Have questions. joining our have you directly a And to

Operator

teleconference. This you. today's concludes Thank

day. your this you for a time. your You wonderful and have Thank may lines at disconnect participation,

Helios (HLIO) 14 Aug 222022 Q2 Earnings call transcript