Press release

Helios Technologies Reports Sequential Sales Growth and Strong Margins for Third Quarter 2020; Generates $37 million in Cash from Operations

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Helios Technologies, Inc. (Nasdaq: HLIO) (“Helios” or the “Company”), a global industrial technology leader that develops and manufactures solutions for both the hydraulics and electronics markets, today reported financial results for the third quarter and year-to-date period ended September 26, 2020.

Josef Matosevic, the Company’s President and Chief Executive Officer, commented, “We delivered excellent quarterly results with total revenue exceeding our expectations while expanding gross margins, which resulted in better-than-expected consolidated decremental adjusted operating margin of 29%*. Our businesses demonstrated their ability to quickly adjust to rapidly changing market conditions. Our disciplined execution, continued productivity improvements, and ongoing cost containment are what enabled gross margins to expand on lower volumes.”

He continued, “We generated $36.7 million of cash in the quarter which was 44% more than the prior-year period. Our ability to generate cash enabled us to reduce net debt by over $50 million year-to-date and continue to be a consistent dividend payer over the last twenty-four years. This cash generation provides us the financial flexibility to make the acquisition we recently announced and gives us strong confidence in our ability to de-lever the balance sheet post acquisition back to our 2x net debt-to-adjusted EBITDA target. We entered into a definitive agreement on October 9, 2020, to acquire Balboa Water Group for $218.5 million using cash and debt. This is an ideal fit for our Electronics segment and entirely aligns with our Vision 2025 strategy. Balboa has differentiated, proprietary controls technology which we plan to leverage and accelerate the Electronics segment’s ability to innovate and penetrate new and existing end markets.”

*Consolidated decremental adjusted operating margin is defined as the change in adjusted operating income divided by the change in sales.

Third Quarter 2020 Consolidated Results

($ in millions, except per share data)

Q3 2020

Q3 2019

Change

% Change

Net sales

$

122.6

$

138.0

$

(15.4)

(11%)

Gross profit

$

46.9

$

52.1

$

(5.2)

(10%)

Gross margin

 

38.3%

 

37.8%

 

50

bps

Operating income

$

18.3

$

19.1

$

(0.8)

(4%)

Operating margin

 

14.9%

 

13.8%

 

110

bps

Non-GAAP adjusted operating margin

 

19.3%

 

20.4%

 

(110)

bps

Net income

$

13.0

$

12.8

$

0.2

2%

Diluted EPS

$

0.40

$

0.40

$

0%

Non-GAAP cash net income

$

17.0

$

19.5

$

(2.5)

(13%)

Non-GAAP cash EPS

$

0.53

$

0.61

$

(0.08)

(13%)

Adjusted EBITDA

$

28.7

$

32.6

$

(3.9)

(12%)

Adjusted EBITDA margin

 

23.4%

 

23.6%

 

(20)

bps

See the attached tables for additional important disclosures regarding Helios’s use of non-GAAP adjusted operating income, non-GAAP adjusted operating margin, non-GAAP cash net income, non-GAAP cash earnings per share, adjusted EBITDA (earnings before net interest expense, income taxes, depreciation and amortization, and certain non-recurring charges) and adjusted EBITDA margin (adjusted EBITDA as a percentage of sales) as well as reconciliations of GAAP operating income to non-GAAP adjusted operating income and non-GAAP adjusted operating margin and GAAP net income to non-GAAP cash net income, non-GAAP cash earnings per share, adjusted EBITDA and Adjusted EBITDA margin. Helios believes that, when used in conjunction with measures prepared in accordance with GAAP, the non-GAAP measures described above help improve the understanding of its operating performance.

Sales

  • The majority of the change in sales reflects the impact on demand of the macro industrial softness resulting from the COVID-19 pandemic
  • Foreign currency translation impact on sales: $2.0 million

Profits and margins

  • Gross profit and margin drivers: gross profit reflects lower sales volume while gross margin expanded 50 basis points driven by successful management of our fixed cost base and favorable product mix
  • Selling, engineering and administrative (“SEA”) expenses: as a percentage of sales improved 200 basis points reflecting cost containment initiatives which were partially offset by $0.1 million of acquisition costs and $0.6 million of officer transition costs
  • Amortization of intangible assets: $4.6 million, comparable with the prior-year period

Non-operating items

  • Net interest expense: was $2.7 million in the quarter lower by $1.1 million compared to the prior year period due to reduced debt balances
  • Effective tax rate: 20.7% compared with 17.3% in the prior year period

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

  • GAAP net income and earnings per share: $13.0 million up 2% over the prior year period, and $0.40 per share flat with last year, respectively
  • Non-GAAP cash earnings per share: $0.53 compared with $0.61 last year due primarily to lower sales
  • Adjusted EBITDA margin: sequentially was up 80 bps to 23.4% compared with the second quarter 2020 of 22.6%

Year-to-date 2020 Consolidated Results

($ in millions, except per share data)

2020

2019

Change

% Change

Net sales

$

371.4

$

428.7

$

(57.3)

(13%)

Gross profit

$

143.5

$

164.9

$

(21.4)

(13%)

Gross margin

 

38.6%

 

38.5%

 

10

bps

Operating income

$

25.0

$

71.3

$

(46.3)

(65%)

Operating margin

 

6.7%

 

16.6%

 

(990)

bps

Non-GAAP adjusted operating margin

 

19.7%

 

20.8%

 

(110)

bps

Net income

$

8.7

$

46.5

$

(37.8)

(81%)

Diluted EPS

$

0.27

$

1.45

$

(1.18)

(81%)

Non-GAAP cash net income

$

52.7

$

60.6

$

(7.9)

(13%)

Non-GAAP cash EPS

$

1.64

$

1.89

$

(0.25)

(13%)

Adjusted EBITDA

$

86.1

$

102.0

$

(15.9)

(16%)

Adjusted EBITDA margin

 

23.2%

 

23.8%

 

(60)

bps

See the attached tables for additional important disclosures regarding Helios’s use of non-GAAP adjusted operating income, non-GAAP adjusted operating margin, non-GAAP cash net income, non-GAAP cash earnings per share, adjusted EBITDA (earnings before net interest expense, income taxes, depreciation and amortization, and certain non-recurring charges) and adjusted EBITDA margin (adjusted EBITDA as a percentage of sales) as well as reconciliations of GAAP operating income to non-GAAP adjusted operating income and non-GAAP adjusted operating margin and GAAP net income to non-GAAP cash net income, non-GAAP cash earnings per share, adjusted EBITDA and Adjusted EBITDA margin. Helios believes that, when used in conjunction with measures prepared in accordance with GAAP, the non-GAAP measures described above help improve the understanding of its operating performance.

Sales

  • The majority of the change in sales reflects the impact on demand of the macro industrial softness resulting from the COVID-19 pandemic
  • Foreign currency translation impact on sales: ($1.8) million

Profits and margins

  • Gross profit and margin drivers: gross margin improved 10 basis points on lower volume from production efficiencies and favorable product mix
  • SEA expenses: improved $2.2 million primarily due to cost management efforts, even after $2.4 million in officer transition costs and $0.2 million in incremental acquisition and financing-related expenses
  • Amortization of intangible assets: $13.3 million compared with $13.5 million in prior year
  • Goodwill impairment charge: $31.9 million, related to Faster’s change in market outlook resulting from the COVID-19 pandemic

Non-operating items

  • Net interest expense: $3.7 million improvement to $8.6 million from reduction of approximately $50 million in net debt
  • Effective tax rate: 16.9%, excludes non-taxable goodwill impairment charge, down from 20.5% in prior year, included certain one-time benefits in the second quarter 2020 that reduced the year-to-date effective tax rate

Earnings per share, non-GAAP cash earnings per share and adjusted EBITDA

  • GAAP Earnings per share: included a $31.9 million charge for goodwill impairment, reflects impact of reduced sales volume, partially offset by cost management efforts, lower interest and one-time tax benefit
  • Non-GAAP cash earnings per share: change is similar to the GAAP earnings per share explanation above, adjusted for amortization, goodwill impairment charge and other unusual items
  • Adjusted EBITDA margin: 60 basis point change reflects lower sales volume somewhat offset by effective cost management efforts and production efficiencies

Hydraulics Segment Review

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

($ in millions, except per share data)
Hydraulics

Q3 2020

Q3 2019

Change

% Change

Net Sales

Americas

$

27.7

$

43.3

$

(15.6)

(36%)

EMEA

$

32.1

$

31.9

$

0.2

1%

APAC

$

38.4

$

34.9

$

3.5

10%

Total Segment Sales

$

98.2

$

110.1

$

(11.9)

(11%)

Gross Profit

$

35.5

$

39.1

$

(3.6)

(9%)

Gross Margin

 

36.1%

 

35.5%

 

60

bps

SEA Expenses

$

16.6

$

21.2

$

(4.6)

(22%)

Operating Income

$

18.9

$

17.9

$

1.0

6%

Operating Margin

 

19.2%

 

16.3%

 

290

bps

Third Quarter Hydraulics Segment Review

  • Higher sales in the Europe, Middle East, Africa (“EMEA”) and Asia/Pacific (“APAC”) regions were driven by demand from the construction and agricultural end markets; foreign currency exchange rates had a $1.9 million impact on sales
  • Gross margin improved 60 basis points due to favorable change in sales mix, the effectiveness of the factory consolidation of the CVT facility in Florida and savings from cost containment efforts such as over-time management, decreased usage of temporary labor and inventory and supplies costs management
  • Operating margin improved 290 basis points driven by some one-time expenses in the year-ago period related to restructuring and disposal of an intangible asset, as well as effective cost management efforts and production efficiencies in the current quarter

Electronics Segment Review

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

($ in millions, except per share data)
Electronics

Q3 2020

Q3 2019

Change

% Change

Net Sales

Americas

$

21.4

$

24.1

$

(2.7)

(11%)

EMEA

$

1.5

$

2.1

$

(0.6)

(29%)

APAC

$

1.5

$

1.8

$

(0.3)

(17%)

Total Segment Sales

$

24.4

$

28.0

$

(3.6)

(13%)

Gross Profit

$

11.4

$

13.0

$

(1.6)

(12%)

Gross Margin

 

46.8%

 

46.4%

 

40

bps

SEA Expenses

$

6.7

$

7.0

$

(0.3)

(4%)

Operating Income

$

4.7

$

6.0

$

(1.3)

(22%)

Operating Margin

 

19.2%

 

21.4%

 

(220)

bps

Third Quarter Electronics Segment Review

  • Sales recovered in the third quarter compared with the trailing second quarter although year-over-year still reflects demand impacts from the pandemic as well as the intentional shift in customer base which involved removing certain contractual obligations enabling broader market penetration
  • Third quarter 2020 gross margin improved 40 basis points due to favorable sales mix and cost management efforts during the quarter. Cost containment measures helped to offset the impact of decremental leverage on lower volume resulting in operating income of $4.7 million

Balance Sheet and Cash Flow Review

  • Total debt improved to $260.4 million at September 26, 2020, from $300.4 million at December 28, 2019
  • Cash and cash equivalents at September 26, 2020 were $32.4 million, up $10.3 million from the end of 2019
  • Net debt-to-adjusted EBITDA reached the Companies target 2.0x at September 26, 2020. At the end of the quarter, the Company had $231.3 million available on its revolving line of credit
  • Net cash provided by operations was $77.0 million and $50.9 million year to date in 2020 and 2019, respectively. The Company generated $36.7 million of cash from operations in the current quarter up from $25.5 million in the prior-year period
  • Capital expenditures were $7.2 million year to date. Capital expenditure levels reflect the focus on cash preservation in light of the impact of COVID-19 on economic conditions. Given the current environment, capital expenditures in 2020 are focused on higher priority and critical projects

Balboa Water Group Acquisition

On October 12, 2020, the Company announced it had signed a definitive agreement on October 9, 2020 to acquire BWG Holdings I Corp. (operating as Balboa Water Group) for $218.5 million from investment funds affiliated with AEA Investors LP (the “Acquisition”). Helios plans to fund the Acquisition through a combination of cash and existing and new credit facilities. Helios expects to close the transaction in the fourth quarter of 2020, subject to customary closing conditions and regulatory approvals.

2020 Outlook

As of November 2, 2020, the Company expects revenue to range from $485 to $495 million for the full year 2020, which incorporates expectations of typical seasonality in the fourth quarter for the Electronics segment combined with recovering order levels for the Hydraulics segment. The Company also expects Adjusted EBITDA margin to be approximately 22% for the full year 2020. The outlook does not include any contribution from the Acquisition.

Mr. Matosevic concluded, “The value of the diversity of our end markets, which will be further enhanced with the addition of Balboa, was demonstrated in our results this quarter. As we look farther out, we believe the successful execution of our strategy to grow through end market and geographic diversification, leading market share in niche applications and expanding product offerings will enable us to achieve our Vision 2025 goals. In fact, the Helios team is excited about the opportunities in front of us as we work to accelerate our achievements and create a stronger, scalable and more dynamic business.”

Webcast

The Company will host a conference call and webcast today at 9:00 a.m. Eastern Time to review its financial and operating results and discuss its corporate strategies and outlook. A question-and-answer session will follow. The conference call can be accessed by calling (201) 689-8573. The audio webcast will be available at www.heliostechnologies.com.

A telephonic replay will be available from 12:00 p.m. ET on the day of the call through Tuesday, November 9, 2020. To listen to the archived call, dial (412) 317-6671 and enter conference ID number 13711361. The webcast replay will be available in the investor relations section of the Company’s website at www.heliostechnologies.com, where a transcript will also be posted once available.

About Helios Technologies

Helios Technologies is a global industrial technology leader that develops and manufactures hydraulic and electronic control solutions for diverse markets. The Company operates in two business segments, Hydraulics and Electronics. The Hydraulics segment markets and sells products globally under the brands of Sun Hydraulics in relation to cartridge valve technology, Custom Fluidpower with regard to hydraulic system design and Faster in connection with quick release coupling solutions. Global Electronics brands include Enovation Controls and Murphy for fully-tailored solutions with a broad range of rugged and reliable instruments such as displays, controls and instrumentation products. Helios Technologies and information about its associated companies is available online at www.heliostechnologies.com.

FORWARD-LOOKING INFORMATION

This news release contains “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934. Forward-looking statements involve risks and uncertainties, and actual results may differ materially from those expressed or implied by such statements. They include statements regarding current expectations, estimates, forecasts, projections, our beliefs, and assumptions made by Helios Technologies, Inc. (“Helios” or the “Company”), its directors or its officers about the Company and the industry in which it operates, and assumptions made by management, and include among other items, (i) the Company’s strategies regarding growth, including its intention to develop new products and make acquisitions; (ii) the timing of completion of the Acquisition and the expected benefits and synergies from the Acquisition; (iii) the Company’s financing plans; (iv) trends affecting the Company’s financial condition or results of operations; (v) the Company’s ability to continue to control costs and to meet its liquidity and other financing needs; (vi) the declaration and payment of dividends; and (vii) the Company’s ability to respond to changes in customer demand domestically and internationally, including as a result of standardization. In addition, we may make other written or oral statements, which constitute forward-looking statements, from time to time. Words such as “may,” “expects,” “projects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates,” variations of such words, and similar expressions are intended to identify such forward-looking statements. Similarly, statements that describe our future plans, objectives or goals also are forward-looking statements. These statements are not guaranteeing future performance and are subject to a number of risks and uncertainties. Our actual results may differ materially from what is expressed or forecasted in such forward-looking statements, and undue reliance should not be placed on such statements. All forward-looking statements are made as of the date hereof, and we undertake no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.

Factors that could cause the actual results to differ materially from what is expressed or forecasted in such forward-looking statements include, but are not limited to, (i) conditions in the capital markets, including the interest rate environment and the availability of capital; (ii) the risk that the Acquisition will not be consummated in a timely manner or at all, our failure to realize the benefits expected from the Acquisition, our failure to promptly and effectively integrate the Acquisition and the ability of Helios to retain and hire key personnel, and maintain relationships with suppliers; (iii) changes in the competitive marketplace that could affect the Company’s revenue and/or cost bases, such as increased competition, lack of qualified engineering, marketing, management or other personnel, and increased labor and raw materials costs; and (iv) new product introductions, product sales mix and the geographic mix of sales nationally and internationally. Further information relating to factors that could cause actual results to differ from those anticipated is included but not limited to information under the heading Item 1. “Business” and Item 1A. “Risk Factors” in the Company’s Form 10-K for the year ended December 28, 2019 and Part II, Item IA, “Risk Factors” in the Company’s Form 10-Q for the quarter ended March 28, 2020 and other filings with the Securities and Exchange Commission.

This news release will discuss some historical non-GAAP financial measures, which the Company believes are useful in evaluating its performance. The determination of the amounts that are excluded from these non-GAAP measures is a matter of management judgment and depends upon, among other factors, the nature of the underlying expense or income recognized in a given period. You should not consider the inclusion of this additional information in isolation or as a substitute for results prepared in accordance with GAAP.

This news release also presents forward-looking statements regarding non-GAAP Adjusted EBITDA margin. The Company is unable to present a quantitative reconciliation of these forward-looking non-GAAP financial measures to their most directly comparable forward-looking GAAP financial measures because such information is not available, and management cannot reliably predict the necessary components of such GAAP measures without unreasonable effort or expense. In addition, the Company believes that such reconciliations would imply a degree of precision that would be confusing or misleading to investors. The unavailable information could have a significant impact on the Company’s full 2020 financial results. These non-GAAP financial measures are preliminary estimates and are subject to risks and uncertainties, including, among others, changes in connection with quarter-end and year-end adjustments. Any variation between the Company’s actual results and preliminary financial data set forth above may be material.

Financial Tables Follow:

HELIOS TECHNOLOGIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)

 

Three Months Ended

 

Nine Months Ended

September 26,

 

September 28,

 

 

 

September 26,

 

September 28,

 

 

2020

 

2019

 

% Change

 

2020

 

2019

 

% Change

 
Net sales

$

122,645

 

$

138,045

 

(11)%

 

$

371,422

 

$

428,738

 

(13)%

Cost of sales

 

75,702

 

 

85,926

 

(12)%

 

 

227,910

 

 

263,884

 

(14)%

Gross profit

 

46,943

 

 

52,119

 

(10)%

 

 

143,512

 

 

164,854

 

(13)%

Gross margin

 

38.3%

 

 

37.8%

 

 

 

 

38.6%

 

 

38.5%

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, engineering and administrative expenses

 

24,042

 

 

24,066

 

(0)%

 

 

73,306

 

 

75,531

 

(3)%

Restructuring Charges

 

 

 

1,724

 

NM

 

 

 

 

1,724

 

NM

Amortization of intangible assets

 

4,558

 

 

4,478

 

2%

 

 

13,323

 

 

13,544

 

(2)%

Goodwill impairment

 

 

 

 

NM

 

 

31,871

 

 

 

NM

Loss on disposal of intangible asset

 

 

 

2,713

 

NM

 

 

 

 

2,713

 

NM

Operating income

 

18,343

 

 

19,138

 

(4)%

 

 

25,012

 

 

71,342

 

(65)%

Operating margin

 

14.9%

 

 

13.8%

 

 

 

 

6.7%

 

 

16.6%

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

2,730

 

 

3,790

 

(28)%

 

 

8,572

 

 

12,223

 

(30)%

Foreign currency transaction (gain) loss, net

 

(727)

 

 

30

 

NM

 

 

(319)

 

 

92

 

NM

Miscellaneous income, net

 

(9)

 

 

(72)

 

(88)%

 

 

(85)

 

 

(122)

 

(30)%

Change in fair value of contingent consideration

 

(13)

 

 

(72)

 

(82)%

 

 

(47)

 

 

703

 

NM

Income before income taxes

 

16,362

 

 

15,462

 

6%

 

 

16,891

 

 

58,446

 

(71)%

Income tax provision

 

3,380

 

 

2,671

 

27%

 

 

8,224

 

 

11,986

 

(31)%

Net income

$

12,982

 

$

12,791

 

1%

 

$

8,667

 

$

46,460

 

(81)%

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted net income per common share

$

0.40

 

$

0.40

 

-%

 

$

0.27

 

$

1.45

 

(81)%

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted weighted average shares outstanding

 

32,095

 

 

32,027

 

 

 

 

32,079

 

 

32,006

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends declared per share

$

0.09

 

$

0.09

 

 

 

$

0.27

 

$

0.27

 

 

 
NM = Not meaningful

 

HELIOS TECHNOLOGIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)

 
 

September 26,

December 28,

 

2020

2019

 

(Unaudited)

Assets  
Current assets:  
Cash and cash equivalents  

$

32,444

 

$

22,123

 

Restricted cash  

 

38

 

 

39

 

Accounts receivable, net of allowance for doubtful accounts  
of $1,459 and $1,131  

 

71,585

 

 

66,677

 

Inventories, net  

 

77,641

 

 

85,195

 

Income taxes receivable  

 

5,553

 

 

3,196

 

Other current assets  

 

16,729

 

 

15,359

 

Total current assets  

 

203,990

 

 

192,589

 

Property, plant and equipment, net  

 

139,318

 

 

145,854

 

Deferred income taxes  

 

6,843

 

 

5,803

 

Goodwill  

 

354,744

 

 

377,569

 

Other intangible assets, net  

 

289,667

 

 

294,651

 

Other assets  

 

4,603

 

 

5,285

 

Total assets  

$

999,165

 

$

1,021,751

 

Liabilities and shareholders’ equity  
Current liabilities:  
Accounts payable  

$

31,347

 

$

29,730

 

Accrued compensation and benefits  

 

18,473

 

 

16,898

 

Other accrued expenses and current liabilities  

 

13,222

 

 

13,549

 

Current portion of contingent consideration  

 

 

 

828

 

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

 

11,808

 

 

7,623

 

Dividends payable  

 

2,890

 

 

2,884

 

Income taxes payable  

 

8,676

 

 

4,941

 

Total current liabilities  

 

86,416

 

 

76,453

 

Revolving lines of credit  

 

168,398

 

 

208,708

 

Long-term non-revolving debt, net  

 

80,149

 

 

84,062

 

Deferred income taxes  

 

49,434

 

 

49,290

 

Other noncurrent liabilities  

 

26,952

 

 

25,602

 

Total liabilities  

 

411,349

 

 

444,115

 

Commitments and contingencies  

 

 

 

 

Shareholders’ equity:  
Preferred stock, par value $0.001, 2,000 shares authorized,  
no shares issued or outstanding  

 

 

 

 

Common stock, par value $0.001, 100,000 shares authorized,  
32,096 and 32,047 shares issued and outstanding  

 

32

 

 

32

 

Capital in excess of par value  

 

369,510

 

 

365,310

 

Retained earnings  

 

267,660

 

 

267,658

 

Accumulated other comprehensive loss  

 

(49,386

)

 

(55,364

)

Total shareholders’ equity  

 

587,816

 

 

577,636

 

Total liabilities and shareholders’ equity  

$

999,165

 

$

1,021,751

 

   

HELIOS TECHNOLOGIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 
 

Nine Months Ended

 

September 26,

September 28,

 

2020

2019

Cash flows from operating activities:  
Net income  

$

8,667

 

$

46,460

 

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

 

25,805

 

 

26,006

 

(Gain) loss on disposal of assets  

 

(32

)

 

2,793

 

Goodwill impairment  

 

31,871

 

 

 

Stock-based compensation expense  

 

3,830

 

 

4,058

 

Amortization of debt issuance costs  

 

537

 

 

545

 

Benefit for deferred income taxes  

 

(2,937

)

 

(1,381

)

Change in fair value of contingent consideration  

 

(47

)

 

630

 

Forward contract losses (gains), net  

 

2,513

 

 

(3,973

)

Net investment hedge loss  

 

164

 

 

 

Other, net  

 

1,202

 

 

1,304

 

(Increase) decrease in operating assets:  
Accounts receivable  

 

(4,685

)

 

(6,533

)

Inventories  

 

7,776

 

 

(6,674

)

Income taxes receivable  

 

(2,874

)

 

(1,598

)

Other current assets  

 

(1,382

)

 

(3,448

)

Other assets  

 

2,613

 

 

1,259

 

Increase (decrease) in operating liabilities:  
Accounts payable  

 

1,387

 

 

(5,046

)

Accrued expenses and other liabilities  

 

955

 

 

6,249

 

Income taxes payable  

 

3,548

 

 

3,363

 

Other noncurrent liabilities  

 

(1,884

)

 

(2,386

)

Contingent consideration payment in excess of acquisition date fair value  

 

 

 

(10,731

)

Net cash provided by operating activities  

 

77,027

 

 

50,897

 

Cash flows from investing activities:  
Capital expenditures  

 

(7,155

)

 

(19,584

)

Proceeds from dispositions of equipment  

 

103

 

 

124

 

Cash settlement of forward contracts  

 

(1,742

)

 

2,256

 

Software development costs  

 

(227

)

 

 

Net cash used in investing activities  

 

(9,021

)

 

(17,204

)

Cash flows from financing activities:  
Borrowings on revolving credit facilities  

 

11,000

 

 

107,814

 

Repayment of borrowings on revolving credit facilities  

 

(55,609

)

 

(135,750

)

Borrowings on long-term non-revolving debt  

 

5,812

 

 

 

Repayment of borrowings on long-term non-revolving debt  

 

(5,905

)

 

(4,188

)

Proceeds from stock issued  

 

1,027

 

 

1,252

 

Dividends to shareholders  

 

(8,660

)

 

(8,641

)

Payment of contingent consideration liability  

 

(830

)

 

(7,064

)

Other financing activities  

 

(1,107

)

 

(1,370

)

Net cash used in financing activities  

 

(54,272

)

 

(47,947

)

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

 

(3,414

)

 

4,482

 

Net increase (decrease) in cash, cash equivalents and restricted cash  

 

10,320

 

 

(9,772

)

Cash, cash equivalents and restricted cash, beginning of period  

 

22,162

 

 

23,515

 

Cash, cash equivalents and restricted cash, end of period  

$

32,482

 

$

13,743

 

 

HELIOS TECHNOLOGIES

SEGMENT DATA

(In thousands)

(Unaudited)

 
 

Three Months Ended

 

Nine Months Ended

 

September 26,

 

September 28,

 

September 26,

 

September 28,

 

2020

 

2019

 

2020

 

2019

   
Sales:  
Hydraulics  

$

98,206

$

110,089

$

304,113

$

340,262

Electronics  

 

24,439

 

27,956

 

67,309

 

88,476

Consolidated  

$

122,645

$

138,045

$

371,422

$

428,738

   
Gross profit and margin:  
Hydraulics  

$

35,547

$

39,112

$

112,695

$

124,153

 

 

36.2%

 

35.5%

 

37.1%

 

36.5%

Electronics  

 

11,396

 

13,007

 

30,817

 

40,701

 

 

46.8%

 

46.4%

 

45.7%

 

46.0%

Consolidated  

$

46,943

$

52,119

$

143,512

$

164,854

 

 

38.3%

 

37.8%

 

38.6%

 

38.5%

   
Operating income and margin:  
Hydraulics  

$

18,942

$

17,867

$

62,413

$

65,752

 

 

19.2%

 

16.3%

 

20.5%

 

19.3%

Electronics  

 

4,683

 

5,977

 

10,400

 

18,977

 

 

19.2%

 

21.4%

 

15.5%

 

21.5%

Corporate and other  

 

(5,282)

 

(4,706)

 

(47,801)

 

(13,387)

Consolidated  

$

18,343

$

19,138

$

25,012

$

71,342

 

 

14.9%

 

13.8%

 

6.7%

 

16.6%

 

HELIOS TECHNOLOGIES

ADDITIONAL INFORMATION

(Unaudited)

 

2020 Sales by Geographic Region and Segment
($ in millions)
 

Q1

 

% Change

y/y

 

Q2

 

% Change

y/y

 

Q3

 

% Change

y/y

 

YTD 2020

 

% Change

y/y

Americas:                

 

Hydraulics  

$

37.3

 

(10%)

 

$

34.2

 

(17%)

 

$

27.7

 

(36%)

 

$

99.4

 

(21%)

Electronics  

 

21.6

 

(17%)

 

 

13.4

 

(50%)

 

 

21.4

 

(11%)

 

 

56.4

 

(26%)

Consol. Americas  

 

58.9

 

(13%)

 

 

47.6

 

(30%)

 

 

49.1

 

(27%)

 

 

155.8

 

(23%)

% of total  

 

45%

 

 

 

 

40%

 

 

 

 

40%

 

 

 

 

42%

 

 

EMEA:    

 

   

 

   

 

   

 

Hydraulics  

 

33.5

 

(20%)

 

 

31.2

 

(15%)

 

 

32.1

 

1%

 

 

96.7

 

(12%)

Electronics  

 

2.5

 

0%

 

 

1.9

 

6%

 

 

1.5

 

(29%)

 

 

5.9

 

(8%)

Consol. EMEA  

 

36.0

 

(19%)

 

 

33.1

 

(14%)

 

 

33.6

 

(1%)

 

 

102.6

 

(12%)

% of total  

 

28%

 

 

 

 

28%

 

 

 

 

27%

 

 

 

 

28%

 

 

APAC:    

 

   

 

   

 

   

 

Hydraulics  

$

33.0

 

(0%)

 

$

36.7

 

3%

 

$

38.4

 

10%

 

$

108.0

 

4%

Electronics  

 

1.6

 

(11%)

 

 

1.9

 

12%

 

 

1.5

 

(17%)

 

 

5.0

 

(6%)

Consol. APAC  

 

34.6

 

(1%)

 

 

38.6

 

3%

 

 

39.9

 

9%

 

 

113.0

 

4%

% of total  

 

27%

 

 

 

 

32%

 

 

 

 

33%

 

 

 

 

30%

 

 

Total  

$

129.5

 

(12%)

 

$

119.3

 

(17%)

 

$

122.6

 

(11%)

 

$

371.4

 

(13%)

               

 

2019 Sales by Geographic Region and Segment

($ in millions)

 

Q1

 

% Change

y/y

 

Q2

 

% Change

y/y

 

Q3

 

% Change

y/y

 

YTD 2019

 

% Change

y/y

Americas:                

 

Hydraulics  

$

41.6

 

58%

 

$

41.2

 

4%

 

$

43.3

 

13%

 

$

126.1

 

21%

Electronics  

 

26.1

 

(13%)

 

 

26.6

 

(5%)

 

 

24.0

 

(12%)

 

 

76.7

 

(10%)

Consol. Americas  

 

67.7

 

20%

 

 

67.8

 

0%

 

 

67.3

 

2%

 

 

202.8

 

7%

% of total  

 

46%

 

 

 

 

47%

 

 

 

 

49%

 

 

 

 

47%

 

 

EMEA:    

 

   

 

   

 

   

 

Hydraulics  

 

41.8

 

113%

 

 

36.8

 

(9%)

 

 

31.9

 

(8%)

 

 

110.5

 

17%

Electronics  

 

2.5

 

(7%)

 

 

1.8

 

(33%)

 

 

2.1

 

(22%)

 

 

6.4

 

(21%)

Consol. EMEA  

 

44.3

 

99%

 

 

38.6

 

(11%)

 

 

34.0

 

(9%)

 

 

116.9

 

14%

% of total  

 

30%

 

 

 

 

27%

 

 

 

 

25%

 

 

 

 

27%

 

 

APAC:    

 

   

 

   

 

   

 

Hydraulics  

 

33.1

 

99%

 

 

35.7

 

53%

 

 

34.9

 

12%

 

 

103.7

 

46%

Electronics  

 

1.8

 

(5%)

 

 

1.7

 

(15%)

 

 

1.8

 

13%

 

 

5.3

 

(4%)

Consol. APAC  

 

34.9

 

89%

 

 

37.4

 

47%

 

 

36.7

 

12%

 

 

109.0

 

42%

% of total  

 

24%

 

 

 

 

26%

 

 

 

 

26%

 

 

 

 

26%

 

 

Total  

$

146.9

 

51%

 

$

143.8

 

6%

 

$

138.0

 

2%

 

$

428.7

 

16%

 

HELIOS TECHNOLOGIES

Non-GAAP Adjusted Operating Income RECONCILIATION

(In thousands)

(Unaudited)

 
 

Three Months Ended

 

 

 

Nine Months Ended

 

September 26,

 

 

 

September 28,

 

 

 

September 26,

 

 

 

September 28,

 

2020

 

 

 

2019

 

 

 

2020

 

 

 

2019

GAAP operating income  

$

18,343

   

$

19,138

   

$

25,012

   

$

71,342

Acquisition-related amortization of intangible assets  

 

4,558

   

 

4,458

   

 

13,323

   

 

13,403

Acquisition and financing-related expenses  

 

101

   

 

   

 

176

   

 

11

Restructuring charges  

 

64

   

 

1,724

   

 

361

   

 

1,724

CEO and officer transition costs  

 

622

   

 

   

 

2,431

   

 

Loss on disposal of intangible asset  

 

   

 

2,713

   

 

   

 

2,713

Goodwill impairment  

 

   

 

   

 

31,871

   

 

Other  

 

   

 

127

   

 

   

 

127

Non-GAAP adjusted operating income  

$

23,688

   

$

28,160

   

$

73,174

   

$

89,320

GAAP operating margin  

 

14.9%

   

 

13.8%

   

 

6.7%

   

 

16.6%

Non-GAAP Adjusted operating margin  

 

19.3%

   

 

20.4%

   

 

19.7%

   

 

20.8%

 

Adjusted EBITDA RECONCILIATION

(In thousands)

(Unaudited)

 
 

Three Months Ended

 

Nine Months Ended

 

Twelve Months Ended

 

September 26,

 

September 28,

 

September 26,

 

September 28,

 

September 26,

 

2020

 

2019

 

2020

 

2019

 

2020

Net income  

$

12,982

$

12,791

$

8,667

$

46,460

$

22,476

Interest expense, net  

 

2,730

 

3,790

 

8,572

 

12,223

 

11,736

Income tax provision  

 

3,380

 

2,671

 

8,224

 

11,986

 

11,276

Depreciation and amortization  

 

8,784

 

8,811

 

25,805

 

26,006

 

35,014

EBITDA  

 

27,876

 

28,063

 

51,268

 

96,675

 

80,502

Acquisition and financing-related expenses  

 

101

 

 

176

 

11

 

175

Restructuring charges  

 

64

 

1,724

 

361

 

1,724

 

362

CEO and officer transition costs  

 

622

 

 

2,431

 

 

2,431

Goodwill impairment  

 

 

 

31,871

 

 

31,871

Loss on disposal of intangible asset  

 

 

2,713

 

 

2,713

 

Other  

 

 

127

 

 

127

 

Change in fair value of contingent consideration  

 

(13)

 

(72)

 

(47)

 

703

 

(98)

Adjusted EBITDA  

$

28,650

$

32,555

$

86,060

$

101,953

$

115,243

Adjusted EBITDA margin  

 

23.4%

 

23.6%

 

23.2%

 

23.8%

 

23.2%

 

HELIOS TECHNOLOGIES

Non-GAAP Cash Net Income RECONCILIATION

(In thousands)

(Unaudited)

 
 

Three Months Ended

 

 

Nine Months Ended

 

September 26,

 

September 28,

 

 

September 26,

 

September 28,

 

2020

 

2019

 

 

2020

 

2019

Net income  

$

12,982

$

12,791

$

8,667

$

46,460

Amortization of intangible assets  

 

4,558

 

4,478

 

13,323

 

13,544

Acquisition and financing-related expenses  

 

101

 

 

176

 

11

Restructuring charges  

 

64

 

1,724

 

361

 

1,724

CEO and officer transition costs  

 

622

 

 

2,431

 

Goodwill impairment  

 

 

 

31,871

 

Change in fair value of contingent consideration  

 

(13)

 

(72)

 

(47)

 

703

Loss on disposal of intangible asset  

 

 

2,713

 

 

2,713

Other  

 

 

127

 

 

127

Tax effect of above  

 

(1,333)

 

(2,243)

 

(4,061)

 

(4,706)

Non-GAAP cash net income  

$

16,981

$

19,518

$

52,721

$

60,576

Non-GAAP cash net income per diluted share  

$

0.53

$

0.61

$

1.64

$

1.89

   

Net Debt-to-Adjusted EBITDA RECONCILIATION

(In thousands)

(Unaudited)

 

As of

September 26,

2020

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

$

11,808

Revolving lines of credit

 

168,398

Long-term non-revolving debt, net

 

80,149

Total debt

 

260,355

Less: Cash and cash equivalents

 

32,444

Net debt

$

227,911

 
Adjusted EBITDA, TTM ended September 26, 2020

$

115,243

Ratio of net debt to TTM adjusted EBITDA

 

2.0

Non-GAAP Financial Measures:

Adjusted operating income, adjusted operating margin, EBITDA, adjusted EBITDA, adjusted EBITDA margin, net debt-to-adjusted EBITDA, cash net income and cash net income per diluted share are not measures determined in accordance with generally accepted accounting principles in the United States, commonly known as GAAP. Nevertheless, Helios believes that providing non-GAAP information such as adjusted operating income, adjusted operating margin, EBITDA, adjusted EBITDA, adjusted EBITDA margin, net debt-to-adjusted EBITDA, cash net income and cash net income per diluted share are important for investors and other readers of Helios’s financial statements, as they are used as analytical indicators by Helios’s management to better understand operating performance. Because adjusted operating income, adjusted operating margin, adjusted EBITDA, adjusted EBITDA margin, net debt-to-adjusted EBITDA, cash net income and cash net income per diluted share are non-GAAP measures and are thus susceptible to varying calculations, adjusted operating income, adjusted operating margin, EBITDA, adjusted EBITDA, adjusted EBITDA margin, net debt-to-adjusted EBITDA, cash net income and cash net income per diluted share, as presented, may not be directly comparable to other similarly titled measures used by other companies.