Earnings call transcript Q2 2023

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Operator

Greetings, and welcome to the Helios Technologies Second Quarter 2023 Financial Results Conference Call. At this time all participants are in listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions]. It is now my pleasure to introduce your host, Tania Almond, Vice President of Investor Relations and Corporate Communications. begin. may you you, Thank

Tania Almond

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

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

Harbor If you turn to slide two, Safe statement. you our will find

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

on You sec.gov. can or website documents find these at our

which point also are believe we useful measures, discuss out in financial I'll that our non-GAAP during will today's we some evaluating performance. call,

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

five reference Slides tables with now. measures and the Please accompany comparable that today's GAAP of reconciliations four slides. provided non-GAAP have We three, in

the With call that, turn pleasure it's over to Josef. my to

Josef Matosevic

everyone thanks joining and you, us. thank to Tania,

XX%. growth We Thank acquisitions sequential team great translated QX. integrate our to our up Operating increased you, team organic to and basis plate increasing global investing our demand. This in quarter had once XXX capacity margin for X% and to X%, has growing bottom the meet our global the to revenue customer again up with line continued points, Our over while strong including growth expand stepped their delivered. we to performance.

methodically white growth this We to technologies, geographic are markets. next drive years over develop opportunities spaces, in close fruit. the is or expanding transition. new bearing for growth another and and gaps, All we accelerating product three our addressable our fill Currently, on for have we verge acquire work by this the are in phase preparing end of cycle, invested last

offerings customers’ our for building. Our appetite new is rapidly

address indicated We be the want interest. to ready to

pulling capacity forward to investments on project and this change As are starting enable such, new XXXX. step timelines we growth to in take

field of Helios remote and In organization. engineering platform excellence IX’s quarter acquisition with lifeblood we IX the and along solutions. is integration closed innovation of we Our are this our far already the the into of service

As as as start a year. up recurring next revenue result, to early could show in our P&L

Helios solutions solutions. technological creating capitalize improving are continues while well include our and megatrends continuously user These many positioned electrification, more emissions, driving breakthroughs on we reducing energy-efficient with interface. and to

outlook Helios bright. at long-term very Our is

for challenges near-term second some the with faced are of we short-term, half the In XXXX.

but the XX% there. located in have also largest our distributor trending inventory In seeing slower expected. North since are two the with of bit of APAC. than levels a the end slower-than-expected APAC last hydraulics of a About in recovery through goes distributors direction CVT right We America, volume our been year,

combined pressuring These hailstorm, dealt grateful in second disasters I endure and a a most quarter. the colleagues the with with plant is our report all safe which tornado, natural had am Additionally, for macro half. the in our in hydraulics our second is they flooding. July Then Europe, to important. teammates to issues top-line fire are

clear result, than is visibility near-term our less fact in longer-term a As our outlook.

continuing while to conditions very adjusting believe are healthy what prepare be current we XXXX. for We a will to

to retirement. Before wish to the I would I like well her financials, to Tricia review it turn on over

for of Tricia would and the entire cornerstone our of significant her company her On her has like service, the XX been which CFO. I of the contributions. a wish during behalf to company, for the of best our board XX express We gratitude serving her as next Polaris. years chapter Bagan. in and us career building, our tomorrow, baton productive global He businesses into transforming Tricia track off CFO highly Starting has XX-year and of recently profitable to life. a Sean a with new most joins the from proven passes Sean record operations. growing,

Sean to the to family. are We welcome Helios excited

our call over turn now will She back please. closing review Tricia, it comments. hand for I a to to for results to Tricia the financial will then final time. me

Tricia Fulton

and I Josef our hello, through XX, second consolidated On you, Slides XXXX quarter six review will everyone. results. Thank

points $XX continued up also net sequential expanded and up XXX%. income and flow sequentially cash to We with solid improvements deliver income up and X%. revenue million basis operating with Profitability XX%, was respectively. free EBITDA improved Adjusted or XXX XX%

able floor the to we results in quarter Health deliver mining significantly to Encouragingly, quarter By Wellness more the increased & year. and a last quarter Australian XX% our recovery drive and were We continuing in investments we over year-over-year. even than began grew off build hit these the first market, as fourth in future. the both sequentially

sequentially. were quarter over market the sequentially. the the growth. - quarter Mobile for There mixed modestly being top period saw within single-digit had construction market double-digit Helios, sequential sales high Agriculture, and specialty with growth vehicles a with improved and growth performers annual and a end in results Recreational large year-ago robust solid the

quarter-to-quarter can we As from variability markets. you imagine, might within have our

was and over year, ‘XX and, the Electronics XX% XX% quarter. revenue Compared APAC Electronics in X% was growth & revenue quarter. both across we decreased segment regions up EMEA million by up the conditions. was macroeconomic saw revenue FX the exclude Hydraulics had sequentially, last you in led was reflecting up Americas EMEA unfavorable last increased nominal which all and year’s APAC with Geographically, strong X%. Overall, Health Year-over-year, over by X% by driven Hydraulics at at XX%, segment the QX, impact on while X% in if second and of X% growth the Our with in Wellness, we by each $X.X X%. Americas growth

gross first profit and quarter. X% Sequentially, was over margin unchanged grew the gross

on were improved we a the material year-over-year would basis As of pricing gross by volumes on gross profit labor offset lower lower increases, expect, impacted our and efficiency of benefits The acquisitions net profit. primarily volume. cost direct

slightly, $X.X down were sequentially of compared the expenses XX% SEA second XXXX. up million, or with but quarter Our

incremental growth product we As have we are the and plans SEA to acquisitions, integration, year-over-year increases. which discussed, heavily in driving and our new related investing development are growth,

Adjusted and XX% EBITDA over sequentially the mentioned, XX% level. increased margin points XXX I As basis EBITDA quarter of Adjusted was up first

top margins Even as tier as an company. investments, make technology deliver industrial we growth EBITDA we

effective in the mix Our various the in jurisdictions. on of was rate quarter XX.X% second up tax based earnings year from slightly prior the

of $X.XX the from end, $XX.X period. that from past the in compared cash nine the million overall impacts quarter EPS down impact visual key the I’ve as non-GAAP and higher estimate metrics well year. Diluted XX at delayed interest year-ago in with reflects provide Slides expenses sales discussed as quarters. $X.XX supply last trends quarter million sequentially in $XX.X from million a and on $XX.X chain constraints for up several We

segment over Acquisitions million, segment. On grew rising compared to QX, material Sales XX. price, quarter costs by as rising X% added prior basis profile XXX XX, modestly XX%, primarily Slide or the margin highlights increases Gross margin acquisitions by due by offset SEA The growth Sequentially, points investments. increased period. costs. Gross $X.X material this were million. with acquisitions, find X% XX, efficiency, well this for as of year-over-year. year acquisitions. quarter over $XX.X grew increased decreased profit and you driven will and our Hydraulics by QX, the second partially driven expenses

XX% had related to Please sales Electronics the so more million not this turn Annually, across in impact. our and to all wellness review market. for much as $XX.X the demand we is declined of as growth in foreign regions does by an usually segment decreased softness primarily the This XX concentrated have health to segment. Slide currency segment. U.S., Sequentially, XX% mentioned, in of Electronics a

Excluding health grew and wellness, electronics

by and over recreational, last year driven X% mobile, markets. agriculture

margin XX% points. level. market. to profit Gross in QX, lower gross costs. XX sequentially margin $XX Year-over-year, gross mix wellness and points QX grew increased XXX expenses XX over increased due gross health favorable XXX material profit slowdown the and and X% Electronics’ of basis The million the over the reflects sequentially sales expanded basis SEA

and We from operations. in upper flow. expected Please expansion XX the Cash end in adjusted for cash generation with $XX.X were $XX.X liquidity. million, million was range cash and the of a X% support our had cash to cash us review growth to equivalents strong at turn sufficient $XX.X of quarter, million our of Slide our of quarter the providing plans. sales for CapEx

a rate of on with Adjusted XXXX. free $XX.X was XXX% conversion flow year with a the compared XX% full cash twelve-month for million trailing basis

You the million. at the financial that on end have was of a our Total liquidity solid to balance Slide and can flexibility sheet we for see strategy XX growth. quarter $XXX execute

debt was X.Xx EBITDA Our the adjusted ending to net leverage quarter. ratio

on As we strategy. have a our our leverage of as we acquisition ratio managing well-established execute track record

target two our our quickly below generation. de-lever our increased times been to leverage for on ratio we to able based we As back of level acquisitions, recent target or above cash have

have to the express role journey. people outlook a and with back years. as want gratitude the my been to and privilege of it you great every brilliant their hand for of had each talented I career rewarding with for like in on has to closing me I comments, being member Before I through many over this for the call what Helios, of work this would for to on and all exceptionally thank well present to past a and I Josef me. and honor review so also

power Importantly in the to and capabilities the strategy have execute them. of on of of Helios, team I our the confidence great the future

Josef. XX slides I as to to back hand reference XX Please it

Josef Matosevic

then much, over you first and service Again, appreciate so Sun truly Tricia. Thank to Hydraulics your years. many Helios we to dedicated

mentioned moderating half near-term factors visibility. the the outlook for our second have We reduced given of the are year, I that

now range first $XXX to We the the to the in half. million, second $XXX implying be of will similar revenue half expect

the We expect more the weighting quarter in versus third. fourth

expansion, over of result we capacity a $XX million. the are investing As accelerated

our a healthy investment adjusted and mid-twenties short-term to to on adjusted macro climb are $XXX and revenue EBITDA XX% our but we the We margin beyond build to to momentum get EBITDA targets million and intend to in moderating one-time still factors these With the this to slope. the for year time, XX%. we are over to $XXX and downshifting growth our absorb gears expectations, next

Helios. clearly coming great lot There things are together a at of

executing system. the We are against our pillars business of

while protect ability demonstrates and to future. the business second our our quarter The margins investing for

regional new our and globally, of As act Centers our leverage think expanding through efficiently we Excellence. we footprint

markets to We are and grow end share. new wallet solutions innovations through diversifying our our and revenue

demonstrates our fostering While to talent team tenacity shared a develop organization. and continuously their learning our diverse by purpose, dedication customer-centric our we and

on driving have sights shareholder We value the our far set future. into

As for I that, future With let's said our very is bright. Q&A, open please. the lines earlier,

Operator

you. Thank

questions]. will [Operator session. be conducting Thank question-and-answer you. now We a

from Securities. question. with Our first Moore question comes line Chris Please proceed CJs your of with

Chris Moore

guys. talk for making? maybe could you and you Hey, the Josef. you're bit far, year good that beyond start a of what's expect with hoping ‘XX about morning, It into Josef what investments Thanks with the so questions. this of have couple you more taking a year? What seen little the for transpiring rest maybe, kind just

Josef Matosevic

two maybe Chris. break into morning, down let Good parts. Certainly, me this

addressing going So, into and the been part then the of state the the over the switching we just headwinds to and XXXX beyond. and current exciting first XXXX seen has seeing part are more and

the good panning this is that we visibility. exactly we year on entered be And when what out pretty OEM usually expected. side, have So, to we

the on is very On our Hydraulic distributor business. CVT side, heavily Sun weighted which

pretty In North levels, saw down we but inventory to America, started this come elevated nicely.

recovery month-over-month really that into taking up distributors And a reorder ramping China, there will inventories QX, into down coming in good then conversations that So, our into Asia, of sentiment was the be the somewhat in a will continuing QX, pattern of sort showed we a QX. back to substantial pretty in the and shape specifically normal. with are and trends had

obviously So, clearly, forecast. this in this baked we we the And this. on own eye

customer stable, specifically us on China into revenue, that orders strong has out that's of gotten out Asia, our CVT tempering since pan anticipated XX%, following of by off So, marine the hydraulic QX, having at not coming tempering falling QX. and Asia, very the and kind our the plateauing demand now been and into slightly, off QX beyond goes into off wellness, very and of we didn't recovery feedback, in levels of bubble in strong the off business clip, health Going short, in of sense but we QX in saw but

So, conservative to or in of on bit half, this China by the really be recover will that's just the kind all not little second what a visibility if forecast not knowing this having recover us in, enough drove not more year. and year

naturally of XX% of you when add higher those still inventories, China, going distributor volume factors So into that's what intent kind between expected. three than slightly

line. days flavor few current the on lost adding state, little mother manufacturing, in to we And a kicking by of We in more then, unfortunate loss. situation nature To add bit top where the a our more lose following we leverage days a literally story. have very Europe, XX production of to and

in of pullback off So, drove line. top all that's in terms what our

year beyond. of, saying we have couple a current and We've of to a some of half Chris, years, customers. going kind XXXX I methodically with So, been question your first for into state, and a worked now of the summarize, hope

Some, one, to to much to portfolio. stronger feet see our place lines and and operations current us. running very to market main RFP but decisions to to over appetite the before year the able adding stage that capacity make the end. business. part and new through And, an the went obviously, accelerated, reason of more it's that was customer, our needs certain investment And us, are And they as strategic in so square and is customer our RFQ also XXX,XXX stage initial to customer new the the absorb incoming to of be review equipment the before still got the we hit want new we that can why we ground as processes importantly,

for year-to-date because dollars And in the additional thing invested play It's journey. the million that into up corner. over truly There have that last Helios are for half. gearing right year And has shareholders. right the and the is feel thing finally been we the a for our we is and we $XX that for around

question, of kind to a that's Chris. So the answers two

Chris Moore

Got additional what ’XX? And half of it. is this do what's you see And helpful. stage? timing very the Or that at on first capacity the

Josef Matosevic

them adding by plans indicate. we down revised completed territories, location, between of significant we feet and expansion feet. going is in plans feet on Yeah, Phase phases. It’s indicate Obviously, square of will in additional to America, there's There is XX,XXX coming our them in our different add Currently that we lot XXXX, into North Europe, in face at broken will an two QX XX,XXX square in geographic around XXXX. XXX,XXX different the we're one, when another Chris. be a festival square CVT. XX days, another

brand-new feet from to time. XXX,XXX standing feet another adding over And fast, go So, square square we'll Mexico, we a door one up feet. XXX,XXX our to are then next in current facility XX,XXX square

potential into coming. is comfortable, extrapolate feel demand future we you orders, this never if would wouldn't So, had the capacity, we

in be should we is question your complete QX. to with answer the ‘XX. So, phase one

Chris Moore

Got will appreciate I leave you. that. Thank I there. it it.

Josef Matosevic

Chris. for you, Thank

Operator

comes of KeyBanc. proceed Jeffrey with line Please from question. the your with next question Hammond Our

Jeffrey Hammond

Hi, good morning, everyone.

Tricia Fulton

Good morning, Jeff.

Jeffrey Hammond

luck Best you, to Tricia. of

Tricia Fulton

Thank you.

Jeffrey Hammond

to costs. So, wanted accelerated understand sure I make I these

be at XQ. clear and go So, it two they entail want and that know to were expansion? to just, And think I all one-time And let's just kind he accelerated verify what away in said to XQ. do are these, in what look pulling year? costs terms half the and forward one XX I in of second of, what's, these want million next million

Josef Matosevic

Yeah, just certainly.

we we instructions, have addressable work waited. And turning with manufacturing visual of meaning, have million. many much on accelerated have was items. for And cause costs, to around up we lot ordered aspects expediting where of extra what customers, where Those ergonomic sales of when in So, the frayed, times, extra we could in cause based lead than have certain type the is terms much, contract we the material our dollars. a equipment equipment, longer drives work cases, date, people those costs, aids we agreement $XX as year

the to So, one-time paid. that we to with and certainly expect is in. get once will forward. we a had better margins going yes, those is back your accelerated costs. fully Jeff, to pay that to premium And But answer fully, be equipment pay the question

Jeffrey Hammond

$XX in and it's million so $XX half? half first million Okay, second

Josef Matosevic

when $XX own first we Not that. a in forecasting anticipated $XX the second orders, here had couple will be booths half it the the million Jeff. from in that's here, sure were million We books. markets. closely going exactly obviously strong the a, in to of And Because we watch we international half. very

and but much four a of ship additional still $X How we area margins, protect the will Right? do spend $X this in does to six, in careful. to one-time the be So, want half to million we dollars second bit be clearly sound? in little there to the

Tricia Fulton

on Yeah. guidance our on the that, a And, still of the have have in we range line. top of that the reflects pretty we some uncertainty big the top line

at lower can So, lose we understand bit we levels, little a of revenue that leverage. the

into baked that we've So, as well. the assumption

Jeffrey Hammond

Okay, talking of forward, pulling you're and $XX been you've cost. million about obviously, this, then,

So, you of opportunity. mentioned the remarks change, I think prepared in step kind

the and frame around, capacity to So,’ of want forward all pull you the, just opportunity all I and the, expansions. better ‘XX, the the the kind

Josef Matosevic

Jeff. Yeah,

And been and a be two this final here package, us source. as they've And we'll a north feedback working of outsource the to And and Thursday. very strong package. we in product submit prototypes an And complimentary. has next decided very now, the been integrated of is elements to with viewed systems integrated about a talking different are customers half of many product what that So, customer had that for have one our now. year for

feet closely change are that we business, along through standpoint, happen. in now pretty feel And dollars, so pretty size that more XX,XXX the XXXX, foodservice that step commercial you're on in or monetary that a From about look, start say, to to starting good will add you XXXX. feel comfortable side, far customer when a together have globally, and square is very occur is nice where the XXXX. to going worked To we this talking we

Jeffrey Hammond

I'll thanks. Okay, get queue. in back

Josef Matosevic

Jeff. Thanks,

Operator

Our next proceed from Dobre with line Baird. with question. of a comes your Mick question Please

Mick Dobre

Trish, your for Thank you. appreciated really XX with XX, an to last the best Working morning. always all years, I've you, you And insight. and good help the

luck. So, good

Tricia Fulton

pleasure. It's Thank a you. been I appreciate that.

Mick Dobre

a I are there we what's where like I'm or take of can about square going are guess facility in start. I capacity. that Maybe can to the a to we lot numbers flying a double XX,XXX-foot view feet. on would bit There XXX,XXX with going little XXX,XXX on of from Faster, confused around Mexico sort here. XX,XXX square adding feet

outlined increase where versus company's does in ability we you are are undergoing have for capacity you mean scaling business year currently And what support essentially, to? Or, were the revenue? or what us a And percentage to footage square what maybe ago? you exactly for your that your up

Josef Matosevic

Yeah, second heard I if Mick. didn't here. we technical part? part get had I question. good morning, the your don't apologize I know the I of a But issue first

Mick Dobre

between and Yeah, so a I can lot Because around there's that were of the numbers I'm here. like understand changes floating repeat on. been Faster the and to kind double capacity so question. trying of in

rate you you this adding and about annual able your you to up talk can revenue Are to be are support? what you existing business this will capacity are capacity? sort maybe what to scaling of percentage your existing what So, capacity run relative can of

Josef Matosevic

Okay, in are manifolds. going so of excellence walker Indiana, initial for in our center now a example, becoming of terms here for we an

our for of regional are play Everywhere from going capacity based And structure are of strategy region. of XX% center of percentage make an on to pretty region increase. volume excellence to entire XX% much the capacity. coming is We also to we adding

need are volume related with we new the we So, and as that, with for the associated at opportunity come the how we much and per extract incoming years the to next talking in integrated overall look about, business the square step when change, three foot. we package our

the globally. what drove That's investment

there on, manifolds, that sound so purchasing has in So, customer different be couplings, the working of innovation and integrated package controls. wire one Vesper particular absorbing with sizes cartridge we're will or many harnesses words an valves,

product. business data, the every to assigned square piece volume So, manufacture capacity needed came and has with we a the footage that to hours and the up of the

Mick Dobre

going capacity So, what is up, XX% XX%

Josef Matosevic

It's around XX%. Globally.

Tricia Fulton

footage with this the we more footage is square how getting pure can the all a additional additional we're plants XX% top line. the XX% of have the but of better space. really From perspective, with that the think out out utilize laying we I way square space. opportunity and And Hopefully the

Mick Dobre

your here in appreciate concerned? revenues goals support? What terms more? to what far in or Are of total what is And $X.X billion able will talking that. this? or as I your As be business terms guests exactly we the of $X.X, are

Josef Matosevic

about this assumptions to an million, I'm - from Asia, in guidance opening forecasting previous so. but particular, the a we learn talking in the I $XXX bit will We're in additional around to addition going here previous our my little to come question current comments would knew I say it's session, have made

Mick Dobre

going Understood, under-absorption you're are that the element in the is full XXXX. we going margins there starts capacity, to which to revenues until pressure reach, now from the the kind a into least to thinking should to future, in is be then this an rate be of revenue materialize that really standpoint, at like infer cost we coming capacity adding

Josef Matosevic

has capacity At was same start do SGA, trend, we're we the folks. And, people Well, good you I also we made. and striction, to finished, that speak, manufacturing need think, pulling we minimize don't our of laid because those to is, the the that have guys in significant as really other risk. cutting we we time, really going offsets have that understand SGA that people, out, piece levers all want strategy as to what a are the well

coming little feel that think in we on now at look risk inventories, based little when XX million. pattern. And dropped bit new they when we down of recovery our the guidance traditionally, re-order uptake you with are to here. can XX And, a $XX maintain And, bit the And distribution around are a you they in of million, I offering see revised down, So, have strong that. a they Asia.

we the hold we investments and those margins. comes just feel, absorb little So, can on back a if volume bit, that

Tricia Fulton

about to And level it. we recognize Mick this that the step these goes take comments time when investment, investments. the in bit is system step level to quarters and really back Josef big opportunities This new in about diversified opportunities, But we market and made in that few a last of absorb little talks it'll they could come chunks.

we be fulfill the capacity to to available have So, on take within those to and those to demand be to able need orders able markets. that

Mick Dobre

I to the want a question about see, guidance. ask

my revenue reduced if $XX electronics. curious to hydraulics your to understand in math right, you midpoint outlook at has million I'm relative is how So, changed the

what pieces moving And cut million. EBITDA so, the on that million. EBITDA, And are by $XX you then to $XX about

of to revenue investments? right here, So, the with else question the are Jeff's contributing associated this that's the EBITDA these that different from about lower can way asking I'm I here? and is a investments is cut. in And there it, we all to I other $XX something than volume, million kind Or guess of understand coming of guess maybe infer it remainder I

there, I’d revenue So, appreciate and both a lot that. EBITDA?

Tricia Fulton

was a lot thought about year. whole the on, if in we side, XXX difference can the don't on we of still we Mick and then it see where you add going were to at our really So, specific guidance it’s just I'll mid-point, think be the for pretty electronic start I

the side. On our in are side, the constraints still more high cider, we're innovation up really down the forecasting, coming hydraulic the single-digits on

little business about, it inventory Sun Schultes, a in from related and the companies the already segments. are of Daman well which talked as both the as we've a estimates, that slowdown We're to in original hydraulic acquisition for seeing in bit our

from of what's seeing guidance side. coming in you're hydraulic driving in change the So, the the really that's majority is what

the more you If going at to certainly, little curtail were in thought of EBITDA, the we expect that originally a but investments to now. have we continue bit the back we year, half look they the

to the at that EBITDA a the forward. adjust as cost going levels, basis leverage, So, we're go that's, possibly taking recognize we into But losing revenue also the bit. to we're lower have we

at at to but revenue end XXXX so take that potential if need And range, a system the on and to is this we're we well we're short-term certainly lower least that into the basis cutting additional we make have seeing recognizing on of that diversified that from setup the profitability, sale investments markets.

Mick Dobre

question. sounds like Okay, headwind understand saying I its of you're destocking. my about now, course. And the destocking wrong to final that. me the you're channel to in if correctly, Please best you, that that business, you seems correct runs level It primary the if America's be to inventory we're I'm me suggest

How are trending? think in revenues then month thank changed, what good And it, in for to Pacific? we Are the things were improve you things be the where you've QX? observed has And As in you. we're the of, mean, also back or July, bad that'll in that Americas at Asia sequentially looking to I have in the in half either August, relative QX? relative to

Josef Matosevic

Yeah.

Mick channel the inventory, been points of the in terms right the three last trending in direction over have So, data months.

dropped to XX off XX down So, it million. started at million

Now it's the in XXs.

So, that will there if could you we data in assumption in would and pull improvement around, on be comment the backend? an point an put it,

trend as year feedback goes basis. baking first and in learning the from the continuous but from Yes, half certainly no gotten in as with they the have the last our we learning in art versus we long are, are actual direction, could risk here just right

look we in this Asia we the first are been the But as In same half. it’s, how the improvements any have yet. that orders now right seen There pretty much mean at -- trending hasn't to system looking going - short-term near-term, And this we then we're will and market will with And to work the out eventually itself leverage back of get coming down. that the get a are turn. usually inventories I impact

Mick Dobre

Okay, thank you.

Josef Matosevic

Thank you, Mick.

Operator

Our next question. Nathan Stifel. question Jones proceed with line your comes Please with of from

Nathan Jones

Good morning, everyone.

Tricia Fulton

Good Nathan. morning,

Josef Matosevic

Nathan. morning, Good

Nathan Jones

at into large any in out you about margins. to could gross profile and looking profile? anticipating you the a case here Maybe And back the be? these, here. colleague better awarded get see with question those will Hopefully up you're ramp Are margin give might I'll margin Typically, be ask that half how accretive next awards they come creative on products at? guys to year? to contract the us Is that new

Josef Matosevic

Good Yeah. Nathan. morning,

know Sorry have the chain quite it And in. answer your of maintained supply The were disruption. offering. considering lot the the time. And where exactly cases longer was, business to some didn't we pricing his period question of spend for of we probably in is, for way time a price and a honestly on the how quoted the is to

So, yes, time, At we to value brought margin question to profile. iX offering. acquisition a the healthy it you our will the have, answer significant same saw your as be is the

With larger. extrapolate our has they a kind the that's and And well, nicely. of XXXX, patented, And profiles journey protected. two, And Obviously, journey over rate part to iX years pretty of adoption margin actually will the our system into something. that as improve components the will in next contribute will patent service started. further three that's as starting much

revenue past, said for arm a have we offering. our to the recurring we in create want As

Nathan Jones

growth? up ramp those your any us quickly? these I contracts, new of obviously in on on do step of about up contracts, the XXX follow for something these talking change kind year can give word numbers. And remarks two? to in over they you've Or or color a mean, you we're expectation layering I new talked the Are function a used go very period Just how quarters? zero awards more about Maybe potential prepared significant here. from mean, next over the you for that fairly

Josef Matosevic

look our at really about? customer those of larger drive largest that of one look, that. one our so customer X%. of starting offering, in so customer. wins wins, be XXXX. will look customers than our wins base, really certainly are one as that forward targeting, we In when X% With again, we customer That once currently, no those to we journey, you one Nathan, And talking the to step-up Yeah, are to

Nathan Jones

in at where you would of Are ramp up of up? that to, production being from would quickly ramp kind that? be Or customers? it a Does value or about customer, year those And I'm Is is, the a the go? to up does something up? this contracts ramp expecting new first the are or how ramp second the How you expecting it new year? go, to that going would to main you've XX% least of couple they than talked it that contract question XX% in or more something contract

Josef Matosevic

Nathan we with not data, and ahead. to we expectation, need little -- To million exactly but go this can going with, time XX because this faster are our to capacity XXXX. capacity pulling we to We this right be to more in factual question, commit Yeah, so want our to our finish is the that towards we can it's bit absorb a as vital able actually is got answer customers we why start now.

Once question. to able So, it if we where answer you wouldn't to our to be. to the little get time to more be closer just bit that needs mind -- a capacity us allow

Nathan Jones

And just one. last one

Tricia Fulton

too, of would Nathan, P&L, little will going to day time, we into just all question over there it's not on period so your in I a color about how expect comes face, add the it like it comes just was that typically one. a

build customer layer, as And talking about you that you multiple multi-year the once it door, for effect, a So, start in will we're door, period. function add that over, to will in you the in potentially level that get customers get having signed that step ‘XX. it

Nathan Jones

are talking year. the of able to to having And be should have us Is end before to customers to things make for if These should move right? on you customer should or you you're announce that be, that the the XXXX? decisions about strategic

Josef Matosevic

have Yeah, to the and of to one for September customer sorry, of September should say, I particular XXXX start has this in change by production beyond. years customer this XXXX year, a over -- decision make one actually through

Nathan Jones

just sure, Great. Well, announcements the and for in wishes near I my look the term add best forward to some for hearing future. and,

Tricia Fulton

Thank appreciate you, I Nathan. it.

Josef Matosevic

Nathan. you, Thank

Operator

[Operator Instructions].

Please comes your next question. with Kansas line City Our Capital. Jon proceed question from of Braatz with

Jon Braatz

do with And everyone. wish I And your was luck you. you enjoyed morning, congratulations. to I Trish, the It -- in Good of want retirement. best working

Tricia Fulton

appreciate much, Jon. I Thank you it. very

Jon Braatz

that little pace is fire and year? change Just the impacting Faster And the how bit. The second operation the tornado. half want to a at the of the

Josef Matosevic

offset CVT faster actually their not still Asia, in seen headwinds our we of elevated specific planned the within with have some were to in and with product particular levels running manufacture segment But America. as some the we more to be terms to stay help we've inventory place some The of originally We get in North the business China, and we expectations and second in in now. intact fast, half will chain. should to to for supply able hydraulic integrated back are up

So, certainly expectations do side. on passivity, Faster had they the not but met were the that that all we able to

So, second to half. impact no the

Jon Braatz

Okay.

of then secondly, the think one of questions one And to the I in accelerated the response investments. questions -- about Okay. early

Of investment heard describe this. use additional but phase some there term heavy I think additional additional investments, phase To is an following of a there course, you I decisions? program Is two? investments? the one. there these Are investment there's always

Josef Matosevic

through with all comment feet. and hydraulics integrate was also There's around and based feet, And the our a science two, Faster. a XX,XXX-XX,XXX will phase that then two is square to offering it's team working square this there customers. phase that data about generated and one that be and Jon will product phase adding on sales a add Faster that to with So, demand related piece in upcoming been XXX,XXX around have driven system phase one we organically

Jon Braatz

you a to of a and more the months get and Are thinking? is on one completed so be and what investments there return new so investment? After going to elevated than the programs began maybe that kind will Okay, of you -- we Six on. Would what your we because profitability then year-ago. this were ago, are that going final -- question. is sense investment and all,

Josef Matosevic

new excellence, our investments believe investing as team truly Yes, technology. statement, a capacity here, bold supply we mean, equipment, products new but the hasn't and we creating in creating to manufacturing investing into breakthrough this center expansion all have prior horizon investing original you the Jon, couple structure, know certainly. a chain, changed. is I Look, the in I made of in that when and

XX% EBITDA XX% company horizon is a have been Our margin not gross changing. and company, a

Jon Braatz

it's Okay, so okay.

very you much. Thank right. All Okay.

Tricia Fulton

you. Thank

Josef Matosevic

Thank you, Jon.

Operator

Almond you Mrs. time. would further questions floor I no this at over there to closing now are for like the to back turn comments.

Tania Almond

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

Operator

tele-conference. gentlemen, and today's this does Ladies conclude

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

Helios (HLIO) 8 Aug 232023 Q2 Earnings call transcript