Executive Summary

Q4 2024 revenue was $179.5M, down 7% year-over-year and down 7.7% sequentially from Q3; gross margin expanded 150 bps to 30.1% and operating margin improved 120 bps to 7.4% versus Q4 2023, reflecting lower material costs and overhead reductions despite softer volume .
GAAP diluted EPS was $0.14 (+40% y/y, aided by an insurance recovery), while non-GAAP diluted EPS was $0.33 (-13% y/y); EPS was ~$0.04 below internal expectations due to a higher effective tax rate and FX impacts .
Cash from operations reached $35.7M (+6% y/y); total debt fell to $449.5M (sixth consecutive quarterly reduction), leverage improved to 2.6x net debt/TTM adjusted EBITDA; inventory declined to $190.1M and capex was $7.4M (4.1% of sales) .
Management initiated cautious FY2025 guidance (sales $775–$825M; adj. EBITDA $140–$165M; non-GAAP EPS $2.00–$2.40) and announced a new $100M multi-year share repurchase program, adding a capital return catalyst alongside margin self-help and working capital execution .

What Went Well and What Went Wrong

What Went Well

Electronics segment margin expansion: gross margin +730 bps y/y to 30.9% and operating margin to 9.0%, driven by operational improvements, lower material costs, and leveraging lower-cost manufacturing in Mexico; health & wellness demand supported flat segment sales .
Strong cash generation and de-leveraging: Q4 operating cash flow $35.7M; net debt/adjusted EBITDA improved to 2.6x; total debt down 14% y/y to $449.5M, reflecting disciplined working capital management (inventory down 12% y/y) .
Strategic capital allocation: introduction of a $100M share repurchase program complements 27+ years of consecutive dividends; management emphasized “in the region, for the region” flexibility amid tariff uncertainty .

What Went Wrong

Hydraulics volume pressure: segment sales -10% y/y (Americas -14%, EMEA -16%), gross margin -110 bps, operating margin -120 bps, primarily from ongoing agriculture and mobile end-market weakness, compounded by hurricane-related production disruptions (18 cumulative shifts lost in Sarasota) .
Non-GAAP earnings compression: Q4 non-GAAP diluted EPS fell to $0.33 from $0.38 y/y; adjusted EBITDA margin ticked down 30 bps sequentially from Q3 (17.4% vs. 20.9% prior quarter) as volume deleverage outweighed cost actions .
Geographic softness: Americas -8% y/y and EMEA -16% y/y in Q4; APAC growth (+3%) was insufficient to offset declines elsewhere, demonstrating the macro/tariff sensitivity and channel inventory overhang, particularly in hydraulics .

Financial Results

Metric	Q4 2023	Q3 2024	Q4 2024
Revenue ($USD Millions)	$193.4	$194.5	$179.5
Gross Margin %	28.6%	31.1%	30.1%
Operating Margin %	6.2%	11.4%	7.4%
Adjusted EBITDA Margin %	16.7%	20.9%	17.4%
GAAP Diluted EPS ($)	$0.10	$0.34	$0.14
Non-GAAP Diluted EPS ($)	$0.38	$0.59	$0.33

Segment breakdown:

Segment Metric	Q4 2023	Q3 2024	Q4 2024
Hydraulics Net Sales ($M)	$133.7	$129.4	$119.7
Hydraulics Gross Margin %	30.8%	31.6%	29.7%
Hydraulics Operating Margin %	15.0%	18.7%	13.8%
Electronics Net Sales ($M)	$59.7	$65.1	$59.8
Electronics Gross Margin %	23.6%	30.1%	30.9%
Electronics Operating Margin %	1.7%	10.4%	9.0%

Key KPIs:

KPI	Q4 2023	Q3 2024	Q4 2024
Cash from Operations ($M)	N/A	$34.8	$35.7
Total Debt ($M)	$524.8	$483.4	$449.5
Net Debt / Adjusted EBITDA (x)	3.0x	2.8x	2.6x
Cash & Equivalents ($M)	$32.4	$46.7	$44.1
Inventory ($M)	$215.1	$199.2	$190.1
Capital Expenditures ($M)	N/A	$6.0	$7.4
Dividend per share ($)	$0.09	$0.09	$0.09 (paid Jan 20, 2025)

Non-GAAP reconciliation note: Q4 adjusted items included amortization ($8.4M), restructuring ($0.9M), officer transition ($0.5M), change in fair value of contingent consideration ($0.4M), other (-$2.4M), and related tax effects (-$1.7M), resulting in non-GAAP net income of $10.9M ($0.33 per diluted share) .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Total Net Sales	FY2025	N/A	$775–$825M	Initiated
Net Income	FY2025	N/A	$46–$53M	Initiated
Adjusted EBITDA	FY2025	N/A	$140–$165M	Initiated
Adjusted EBITDA Margin	FY2025	N/A	18.0%–20.0%	Initiated
Interest Expense	FY2025	N/A	$27–$29M	Initiated
Effective Tax Rate	FY2025	N/A	22%–24%	Initiated
Depreciation	FY2025	N/A	$32–$33M	Initiated
Amortization	FY2025	N/A	$33–$34M	Initiated
Capex (% sales)	FY2025	N/A	3.25%–3.75%	Initiated
Diluted EPS (GAAP)	FY2025	N/A	$1.19–$1.59	Initiated
Diluted EPS (Non-GAAP)	FY2025	N/A	$2.00–$2.40	Initiated
Sales	Q1 2025	N/A	$185–$190M	Initiated
Adjusted EBITDA Margin	Q1 2025	N/A	16%–17%	Initiated
FY2024 Total Net Sales	FY2024	$825–$840M (Q2 update)	$800–$805M (Q3 update)	Lowered
Dividend	Ongoing	$0.09/share	$0.09/share (Mar 14, 2025 declaration)	Maintained
Share Repurchase	Multi-year	N/A	$100M authorization	New Program

Earnings Call Themes & Trends

Topic	Previous Mentions (Q2 2024 & Q3 2024)	Current Period (Q4 2024)	Trend
Go-to-market, sales culture	Integrated operating model; cost actions; system solutions pipeline; SG&A discipline	Pivot to customer-centric, sales-oriented culture; re-energize sales engine; cross-selling focus	Strengthening focus
Tariffs & supply chain	Macro headwinds; in-region manufacturing offsets	Monitoring fluid tariff environment; flexibility to move lines back to Tulsa; “in the region, for the region” strategy reiterated	Risk monitoring rising, flexible posture
Health & Wellness (Balboa)	Growth in H1; sequential strength; product launches	Demand offset declines elsewhere; segment margins expanded materially	Continued strength
Hydraulics/agriculture	Ongoing weakness; NFPA data declines; hurricane impacts	Segment sales -10% y/y, margin compression; weather-fire insurance recovery aided GAAP	Still weak, managing cost
Cash/working capital/debt	CFO $33.8M; debt down; leverage ~3.0x	CFO $35.7M; debt down; leverage 2.6x; inventory down 12% y/y	Improving
Technology/software (Cygnus Reach)	Highlighted as differentiator; early interest	Alto-Shaam case study; remote diagnostics value; commercial kitchen entry validated	Expanding applications
Regional trends	APAC growth; EMEA/Americas softness	APAC +3%; Americas -8%; EMEA -16% y/y in Q4	APAC improving; EMEA/Americas soft
R&D & product launches	Valve and display introductions; pipeline building	New PowerView displays; MasterCraft win; continued cadence	Ongoing launches

Management Commentary

“We are pivoting the organization to drive a customer centric, sales-oriented culture... re-energize our sales engine to capture greater market share while increasing diversification” — Sean Bagan, President, CEO & CFO .
“We are also enhancing our capital allocation strategy with the addition of a share repurchase program... aimed at delivering long-term shareholder value creation” — Sean Bagan .
“We expect first quarter sales in the range of $185 million to $190 million... adjusted EBITDA margin 16% to 17%” — Sean Bagan .
“Electronics gross margin expanded 730 bps... leveraging lower cost manufacturing in Mexico” — Jeremy Evans, VP Corporate Controller .

Q&A Highlights

Sales-driven culture and cross-selling: Management emphasized broad-based go-to-market changes across Hydraulics and Electronics to deepen wallet share and reduce customer churn .
Alto-Shaam/Cygnus Reach: Commercial foodservice software partnership seen as disruptive; first hardware win expected to ship in 2025, creating a new adjacency beyond core markets .
Free cash flow outlook: Record 2024 cash generation driven by inventory reductions; 2025 FCF expected “close to” 2024 depending on top-line trajectory and capex discipline (3.25%–3.75% of sales) .
Seasonality and cadence: Back half expected stronger than first half on lower comps and improving indicators (NFPA/PMI), with Q3 as the turning point to positive y/y sales; Q1 margins impacted by incentive comp accruals .
Tariff scenarios and footprint: Electronics lines can shift between Tijuana and Tulsa if needed; “in the region, for the region” strategy provides agility; price dynamics and potential supply chain shifts discussed .

Estimates Context

S&P Global consensus estimates for Q4 2024 (EPS, revenue, EBITDA) were unavailable at the time of analysis; we will update comparisons when accessible. Values retrieved from S&P Global.*

Metric	Q4 2024 Consensus	Actual
Revenue ($M)	Unavailable*	$179.5
Primary EPS ($)	Unavailable*	$0.14 (GAAP); $0.33 (Non-GAAP)
EBITDA/Adj. EBITDA ($M)	Unavailable*	Adj. EBITDA $31.2

Drivers vs internal expectations: Q4 EPS was ~$0.04 below internal guidance due to higher effective tax rate and FX; otherwise margin expansion and cost controls tracked to plan .

Key Takeaways for Investors

Margin resilience amid volume pressure: Gross and operating margins expanded y/y on cost actions and lower materials, with Electronics demonstrating structural margin improvement via Mexico footprint .
Hydraulics still in trough: Agriculture/mobile weakness and hurricane disruptions weighed on volume; watch NFPA/PMI trajectories and distributor inventory normalization for timing of inflection (management flags Q3 2025 as pivot) .
Cash discipline is a differentiator: Inventory and working capital execution continue to drive deleveraging (2.6x), positioning for buybacks and selective M&A without sacrificing innovation .
2025 setup: Cautious guide with back-half weighting; Q1 margins temporarily lower due to incentive accruals. Upside levers include system wins, APAC strength, and recovery in rec/marine and ag as rates ease .
New capital return program: $100M repurchase authorization adds support to the equity story, especially if end-market recoveries lag; signals confidence in cash flow durability .
Execution focus: Go-to-market overhaul and cross-segment synergy (electro-hydraulic systems and software) should enhance share of wallet and accelerate product launch monetization .
Monitor tariff outcomes: Flexibility to realign manufacturing mitigates risk; potential price dynamics could impact consumer demand in health & wellness and OEM behaviors; track management actions .

*Values retrieved from S&P Global.

HELIOS TECHNOLOGIES, INC. (HLIO)·Q4 2024 Earnings Summary