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HELIOS TECHNOLOGIES, INC. (HLIO)·Q1 2024 Earnings Summary

Executive Summary

  • Q1 revenue was $212.0M, up 10% sequentially versus Q4 ($193.4M), with gross margin expanding 310 bps to 31.7% and operating margin expanding 340 bps to 9.6% quarter-over-quarter .
  • EPS of $0.28 and diluted non-GAAP EPS of $0.53 improved sequentially versus Q4 ($0.10 and $0.38, respectively), while adjusted EBITDA margin rose to 18.2% from 16.7% .
  • The company beat its prior Q1 guide of $205–$210M revenue and ~17–18% adjusted EBITDA margin, delivering $212.0M and 18.2% respectively, while affirming its FY2024 outlook (sales $840–$860M; non-GAAP EPS $2.35–$2.75) .
  • Cash from operations was $17.8M (+45% YoY), net debt was reduced for the third straight quarter, and cash ended at $37.3M; management highlighted working capital discipline and debt reduction as capital allocation priorities .

What Went Well and What Went Wrong

What Went Well

  • Sequential improvement: “Gross margin expanded 310 basis points,” and “operating margin expanded 340 basis points,” driven by improved volume and cost discipline .
  • Electronics momentum: Segment sales +6% YoY led by Health & Wellness; CEO emphasized new innovation and diversification (e.g., WaterGuru partnership for automated water sensing/treatment) .
  • Guidance affirmed: “Affirming 2024 outlook” with $840–$860M sales and non-GAAP EPS $2.35–$2.75, underscoring confidence in execution and profitability elevation .

What Went Wrong

  • Year-over-year compression: Net sales -1% YoY; gross margin -160 bps; operating margin -200 bps; diluted EPS down to $0.28 from $0.42 .
  • Higher interest burden: Net interest expense up $2.0M YoY; non-GAAP EPS impact of ~$0.04 per share cited .
  • Regional and mix headwinds: EMEA sales -7% YoY; unfavorable FX ($0.3M); Hydraulics -4% YoY offset by Electronics +6% YoY, with margin pressure from mix and absorption .

Financial Results

MetricQ1 2023Q4 2023Q1 2024
Revenue ($M)$213.2 $193.4 $212.0
Gross Margin %33.3% 28.6% 31.7%
Operating Margin %11.6% 6.2% 9.6%
Adjusted EBITDA ($M)$43.3 $32.3 $38.6
Adjusted EBITDA Margin %20.3% 16.7% 18.2%
GAAP Diluted EPS ($)$0.42 $0.10 $0.28
Diluted Non-GAAP EPS ($)$0.72 $0.38 $0.53

Segment performance:

Segment MetricQ1 2023Q4 2023Q1 2024
Hydraulics Net Sales ($M)$147.7 $133.7 $142.4
Hydraulics Operating Margin %19.0% 15.0% 15.3%
Electronics Net Sales ($M)$65.5 $59.7 $69.6
Electronics Operating Margin %11.5% 1.7% 10.2%

Key operating and balance sheet KPIs:

KPIQ1 2023Q4 2023Q1 2024
Cash from Operations ($M)$12.3 $33.7 $17.8
Capital Expenditures ($M)$9.1 $8.8 $5.5
Cash & Equivalents ($M)$36.3 $32.4 $37.3
Total Debt ($M)—$524.8 $521.3
Net Debt ($M)—$492.4 $484.0
Net Debt / Adjusted EBITDA (x)—3.01x 3.08x
Effective Tax Rate %22.8% 23.3% 23.2%
Inventory ($M)—$215.1 $213.9
Dividends Declared per Share ($)$0.09 $0.09 $0.09 (payable Apr 19, 2024)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Total Net Sales ($M)FY 2024$840–$860 $840–$860 Maintained
Net Income ($M)FY 2024$50–$63 $50–$63 Maintained
Adjusted EBITDA ($M)FY 2024$163–$180 $163–$180 Maintained
Adjusted EBITDA Margin %FY 202419.5%–21.0% 19.5%–21.0% Maintained
Diluted EPS ($)FY 2024$1.50–$1.90 $1.50–$1.90 Maintained
Diluted Non-GAAP EPS ($)FY 2024$2.35–$2.75 $2.35–$2.75 Maintained
Interest Expense ($M)FY 2024$34–$35 $34–$35 Maintained
Effective Tax Rate %FY 202422%–24% 22%–24% Maintained
Depreciation ($M)FY 2024$34–$36 $34–$36 Maintained
Amortization ($M)FY 2024$33–$35 $33–$35 Maintained
Capex (% of Sales)FY 20243%–4% 3%–4% Maintained
Revenue ($M)Q2 2024—$213–$218 (adj. EBITDA margin 19.0%–20.5%) New quarterly guide
Dividend ($/share)Q1 2024—$0.09 (payable Apr 19, 2024) Announced

Earnings Call Themes & Trends

TopicQ3 2023 (Nov)Q4 2023 (Feb)Q1 2024 (May)Trend
AI/tech, subsystem solutionsBuilding integrated system solutions; software platforms (Signet) and commercial food service software traction Emphasis on capacity/COE to enable system solutions; recurring software opportunities in 2024+ WaterGuru partnership; subsystem wins; commercial food service entry; mobile app/automation concepts Expanding scope and customer validation
Supply chain & operationsQ3 demand shifts; backlog and delayed sales; inventory/distributor dynamics COE expansions; cost control; sequential inventory management actions Cost discipline; inventory reduction; further operating leverage anticipated Improving execution, productivity
Macro/regionalEMEA weakness; APAC mixed; OEM pushouts; broad end-market softness Americas +4% YoY; EMEA -10%; APAC -5%; health & wellness turning EMEA still soft; APAC showing “green shoots”; Americas modest growth QoQ Gradual stabilization, APAC leading
Health & WellnessDown YoY in Q3; trough Q4 expected Up YoY in Q4; momentum building from trough Strong order fulfillment at Balboa; sequential strength; margin incrementals Recovery underway
Mobile/ag/industrialSwift declines in Q3; ag Europe weak Hydraulics modestly improved; ag visibility mixed Mobile off bottom in APAC; ag Europe pressured; expectation for similar Hydraulics topline per quarter Mixed; APAC improvement vs EMEA ag headwinds
R&D & COE executionInvestments in COE; Tijuana plant ramp; wire harnessing COE fully operational NA; Italy expansions continuing; disciplined OpEx COE ramp driving leverage; electronics gross margin rebound Driving margin/throughput gains

Management Commentary

  • “The Helios team delivered a solid start to the year… improved volume, financial discipline, and actions taken in the second half of 2023… drove measurable gross and operating margin expansion sequentially.” — Josef Matosevic, CEO .
  • “Sales came in at $212 million, above our expectations due to stronger demand and order fulfillment at our Balboa business.” — Sean Bagan, CFO .
  • “We are partnering with WaterGuru… bringing to market an industry-leading water sensing and automated treating solution… for spa, plunge pool and cold plunge.” — Josef Matosevic, CEO .
  • “We are affirming our outlook for 2024… sales $840M to $860M… adjusted EBITDA margin 19.5% to 21%… diluted non-GAAP EPS $2.35 to $2.75.” — Sean Bagan, CFO .

Q&A Highlights

  • Commercial food service push: Three wins in hand; not baked into 2024 guidance; broader common control platform strategy with AI-driven monitoring and automation across kitchen equipment .
  • Seasonality vs cycle: Health & Wellness recovery across regions; mobile stabilizing, APAC/EMEA improving; Europe ag contracting; China mixed .
  • Working capital: Targeting long-term ~100–110 day cash conversion cycle; entering Q2 around ~135 days; focus on inventory reduction .
  • Electronics gross margin rebound: +900 bps QoQ driven by Balboa volume and cost actions, Tijuana COE ramp; sustainability supported by operational efficiencies .
  • Hydraulics margins: Expect margin improvement despite steady topline, aided by pricing actions timing, COE consolidation, and disciplined costs .

Estimates Context

  • S&P Global consensus EPS and revenue estimates for Q1 2024 were unavailable due to a daily request limit, so a vs-consensus comparison cannot be provided at this time. Values would typically be retrieved from S&P Global; consensus unavailable in this instance.

Key Takeaways for Investors

  • Sequential operating leverage is materializing: margin expansion across gross/operating/EBITDA driven by Balboa recovery and COE execution; Q1 beat internal guidance, a positive near-term sentiment driver .
  • Electronics mix shift is supportive: Health & Wellness strength offsets marine softness; margin uplift from Tijuana ramp should continue near term .
  • Hydraulics steady topline, improving margins: Pricing flow-through and COE consolidation to lift profitability even with EMEA ag headwinds .
  • Cash discipline and deleveraging: OCF +45% YoY; third consecutive net debt reduction; liquidity ample as cash rises to $37.3M .
  • FY24 guide affirmed: Despite macro caution, the company maintained full-year targets—an anchor for expectations and potential estimate stability among covering analysts .
  • System/subsystem pipeline: WaterGuru and commercial food service wins suggest growing recurring/software elements; timing remains customer-dependent but strategy validated by engagements .
  • Near-term trading: Positive reaction likely to hinge on continued sequential margin gains and Q2 delivery versus fresh quarterly guide ($213–$218M; 19–20.5% margins) .