Helios Technologies Q2 Earnings Call Highlights

Key Points

• Strong Q2 performance: Sales rose 9% to $232 million, while adjusted EPS increased 49% to $0.88. Gross margin expanded to 34.6%, and record operating cash flow reached $42 million.
• Growth across both segments: Hydraulics pro forma sales grew 14%, while Electronics sales climbed 19%, supported by strength in Asia-Pacific, recreational markets and select industrial applications.
• Full-year outlook raised: Helios now expects 2026 sales of $880 million to $900 million and adjusted EPS of $3.05 to $3.25. The company also highlighted a developing data-center thermal-management opportunity, though related revenue is excluded from current guidance.

Helios Technologies NYSE: HLIO reported second-quarter 2026 sales growth, margin expansion and record second-quarter operating cash flow, prompting the company to raise its full-year outlook.

Second-quarter sales totaled $232 million, up 9% from $212 million a year earlier. On a pro forma basis, excluding the effects of the CFP divestiture and foreign exchange, sales rose 16% year over year. President and Chief Executive Officer Sean Bagan said results marked the company’s fourth consecutive quarter of double-digit pro forma sales and adjusted earnings growth.

“The CORE Strategy is working,” Bagan said, referring to the company’s strategic plan introduced at its investor day five months earlier. He said Helios has completed its stabilization plan and has shifted its focus toward sustained growth, supported by a stronger balance sheet.

Profitability Improves as Sales Rise

Gross profit increased 19% to $80 million in the quarter, while gross margin expanded 280 basis points to 34.6%. Helios said the improvement reflected higher volume, favorable mix, operational initiatives, portfolio and footprint actions, and approximately $1 million in net IEEPA tariff refunds.

Operating income rose 48% to $33 million, and operating margin increased 370 basis points to 14%. Adjusted operating margin was 17.8%, up 280 basis points. Adjusted EBITDA increased 25% to $49 million, with adjusted EBITDA margin rising 260 basis points to 21.2%.

Diluted earnings per share were $0.66, up 94% from the prior-year period. Adjusted diluted EPS was $0.88, a 49% increase that exceeded the high end of Helios’ previous outlook by $0.05 per share.

Chief Financial Officer Jeremy Evans said operating expenses increased by $2.2 million, primarily due to employee benefit costs and an isolated bad-debt expense. Excluding those items, he said expenses were essentially flat year over year while the company increased research-and-development spending.

Both Segments Report Growth

Hydraulics segment sales were $146 million. Sales increased 14% on a pro forma basis after normalizing for foreign exchange and the CFP divestiture. Helios reported growth in the Americas and Europe, the Middle East and Africa, while Asia-Pacific sales increased by significant double digits on a pro forma basis.

Construction activity was a key contributor to mobile-market growth, while agriculture also increased. Industrial end-market sales were relatively flat year over year. Hydraulics gross margin expanded 160 basis points to 34.6%, and segment operating income increased 16% to $29 million. Segment operating margin rose 200 basis points to 19.7%.

Electronics sales increased 19% to $86 million, with growth across all regions and particularly strong results in Asia-Pacific. Enovation Controls recorded a second-quarter sales record, supported by recreational-market demand and continued strength from a large original equipment manufacturer customer, the company said.

Electronics also reported growth in health and wellness, mobile and industrial applications, though core markets and marine remained soft. Gross profit in the segment rose 41%, while gross margin expanded 530 basis points to 34.6%. Segment operating income nearly doubled to $11 million and operating margin increased 490 basis points to 13.1%.

Bagan said Helios expects to continue outgrowing underlying end markets through commercial wins, product launches and deeper customer relationships. He cited opportunities in health and wellness, including new Balboa products expected to enter the market over the next six to nine months, as well as growth in China and broader Asia-Pacific markets.

Cash Flow, Footprint Actions and Capital Allocation

Helios generated a second-quarter record of $42 million in operating cash flow and $31 million in free cash flow. Capital expenditures totaled $11 million, or 4.9% of sales, reflecting increased strategic organic investment. The company said its cash conversion cycle improved by 11 days from the comparable period a year earlier.

During the quarter, Helios closed a Faster facility in Canada and further consolidated Faster’s North American operations. Bagan said the company is moving certain activities into a Maumee, Ohio, location while freeing capacity at its Mishawaka, Indiana, operation, where Daman manifold assemblies have experienced growth. The company expects the actions to produce efficiency and cost benefits beginning in the second half of 2026.

Capital spending is expected to support manufacturing capacity for data-center thermal-management couplings, low-cost engineering and manufacturing operations in Mexico, India and China, and automation and productivity projects. Evans said the company’s updated CapEx outlook is 4% to 4.5% of sales.

Helios ended the quarter with net debt of $264 million, its lowest level since the third quarter of 2020. Its trailing 12-month net debt-to-adjusted EBITDA ratio declined to 1.4 times from 2.6 times a year earlier, below the company’s 1.5 to 2.5 times target operating range.

The company paid a quarterly dividend of $0.12 per share and repurchased about 79,000 shares for $6 million during the quarter. Helios had $76 million remaining under its repurchase authorization and said year-to-date shareholder returns through dividends and buybacks totaled $18 million, up 40% from the first half of 2025.

Outlook Raised; Data-Center Opportunity Remains in Development

Helios raised its 2026 sales outlook to a range of $880 million to $900 million, compared with $839 million reported in 2025 and $792 million on a pro forma basis excluding CFP sales. At the midpoint, the guidance implies 12% growth from 2025 and would represent the highest annual sales in company history, according to management.

• Hydraulics sales are projected at $555 million to $565 million, representing approximately 13% pro forma growth at the midpoint.
• Electronics sales are expected at $325 million to $335 million, or 11% growth at the midpoint.
• Adjusted EBITDA margin is forecast at 20.2% to 21%.
• Adjusted diluted EPS is forecast at $3.05 to $3.25, representing 23% growth at the midpoint.

For the third quarter, Helios expects sales of $215 million to $222 million, adjusted EBITDA margin of 19.8% to 20.6%, and adjusted diluted EPS of $0.70 to $0.77.

Management said it is seeing strong order trends and commercial-win activity, but remains mindful of tougher comparisons in the second half, along with energy and fuel prices, tariffs, inflation and geopolitical tensions.

Helios is also preparing to enter the data-center thermal-management market through Faster couplings. The company has completed qualifications required to meet industry standards, is building inventory and has product samples with approximately a dozen prospective customers. Management said it has not included data-center revenue in its 2026 guidance, though it would be disappointed if orders did not emerge in the second half.

Evans said Helios expects modest data-center sales in 2027 followed by a gradual ramp, subject to customer qualification processes. Bagan said the company generally expects to sell to equipment integrators building cooling racks, while its products must also be validated by hyperscale data-center operators.

About Helios Technologies (NYSE:HLIO)

Helios Technologies, Inc develops and manufactures engineered motion control and electronic control products for a wide range of industrial and mobile equipment applications. The company's Hydraulics segment designs and produces hydraulic cartridge valves, manifold systems, pumps and motors, filtration solutions and off-highway joysticks. Its Electronic Controls segment offers programmable electronic control units, wireless telematics, human-machine interfaces and software to optimize performance, efficiency and safety for equipment OEMs and end users.

Through its global network of manufacturing facilities, service centers and technology centers, Helios Technologies serves markets in agriculture, construction, material handling, mining, municipal and recreational vehicles, as well as industrial automation and infrastructure equipment.

This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to contact@marketbeat.com.

Continue following MarketBeat

Add MarketBeat as your preferred source on Google to see our latest stories in your feed.

Add As Preferred Source