Helios Technologies Q3 Earnings Call Highlights

Key Points

• Record Q3 sales reached $230 million, up 4% year over year and 13% pro forma; adjusted EPS rose 11% to $0.80. Growth in both hydraulics and electronics helped offset cost and supply-chain pressures.
• Helios raised its 2026 sales outlook to $895 million–$902 million, implying 13% pro forma growth at the midpoint, while narrowing its adjusted EBITDA margin and adjusted EPS outlooks. It also generated record quarterly operating cash flow of $40 million and reduced net leverage to 1.4 times.
• Helios secured its first order for data center thermal-management products, opening a potential market it estimates at roughly $1 billion. The order is not expected to contribute meaningfully to near-term revenue.

Helios Technologies NYSE: HLIO reported record third-quarter sales and raised its 2026 revenue outlook, as growth in both its hydraulics and electronics businesses helped offset inflation and supply-chain pressures.

The company posted sales of $230 million for the quarter, up 4% from a year earlier. Sales rose 13% after adjusting for the CFP divestiture, the Radio Sound acquisition and foreign currency impacts. Chief Financial Officer Jeremy Evans said revenue exceeded the high end of the company’s August outlook by $8 million.

Chief Executive Officer Sean Bagan said the results marked Helios’ fifth consecutive quarter of double-digit pro forma sales and adjusted earnings-per-share growth. He cautioned, however, that this year’s growth rate should not be taken as the company’s expected annual pace going forward.

Sales Growth Outpaced Margin Gains

Third-quarter gross profit rose 4% to $76 million, while gross margin expanded 10 basis points to 33.2%. Operating income increased to $28 million from $1 million a year earlier, when results included a $26 million goodwill impairment charge.

Adjusted EBITDA rose 3% to $47 million, though the adjusted EBITDA margin slipped to 20.3% from 20.5%. Evans attributed the margin pressure to factors including higher research and development spending, inflation, incentive compensation and employee benefit costs.

Diluted earnings per share rose 71% to $0.53. Adjusted diluted earnings per share increased 11% to $0.80, exceeding the high end of Helios’ outlook by $0.03.

Some of the quarter’s revenue came from customers ordering ahead of announced price increases. Evans estimated that $4 million to $5 million of orders moved from the fourth quarter into the third. Radio Sound contributed approximately $400,000 in sales, while foreign currency translation added close to $1 million.

Cash from operations increased 59% to a third-quarter record of $40 million, and free cash flow was $32 million. Helios ended the quarter with $328 million in debt and $73 million in cash. Net debt to trailing 12-month adjusted EBITDA declined to 1.4 times from 2.4 times a year earlier.

Hydraulics and Electronics Both Grow

Hydraulics sales rose 1% to $143 million, or 15% on a pro forma basis. Bagan attributed most of the growth to share gains and new business, while noting modest improvement in the broader market. Demand from construction, industrial and smaller agricultural equipment helped offset continued weakness in large agricultural equipment.

Hydraulics gross margin fell 20 basis points to 32.3%, reflecting higher freight and utility costs and expenses associated with the consolidation of Faster’s North American operations. Segment operating margin improved 10 basis points to 17.3%.

Electronics sales increased 10% to $87 million, supported by a record third quarter at Enovation Controls. Bagan said marine sales grew year over year for the first time in seven quarters, while the health and wellness market also grew at a double-digit rate.

Electronics gross margin expanded 40 basis points to 34.7%. Segment operating income was $12 million, roughly flat with the prior year after excluding the earlier goodwill impairment, as Helios increased research and development spending.

Full-Year Outlook and Cost Pressures

Helios now expects 2026 sales of $895 million to $902 million, above its previous annual record of $885 million. Evans said the acquisition contributed to the increase at the top end of the range. At the midpoint, the outlook implies 13% pro forma growth.

The company tightened its full-year adjusted EBITDA margin outlook to 20.2% to 20.4% and its adjusted diluted earnings-per-share range to $3.08 to $3.15. For the fourth quarter, Helios forecast:

• Sales of $205 million to $212 million.
• Adjusted EBITDA margin of 18.5% to 19.5%.
• Adjusted diluted earnings per share of $0.60 to $0.67.

Evans said fourth-quarter comparisons will be affected by an extra shipping week in the prior-year period, which he estimated provided a revenue benefit approaching $10 million. He also noted the orders pulled into the third quarter and acquisition integration costs. Helios expects the benefits of recent pricing actions to show more fully in 2027, with Radio Sound cost synergies beginning to appear in early 2027.

Evans said cost pressures include metals, electronic components, freight and utilities. He said Helios believes its price increases cover the inflation it has experienced, but that contractual and other pricing arrangements mean the benefits will take time to flow through results.

Data Center Order Opens New Market

After the quarter ended, Helios’ Faster business secured its first order for data center thermal management products. Bagan said the order would not contribute meaningfully to near-term revenue but represented a milestone in entering a new market.

Bagan said more than 30 potential customers are evaluating or testing products, and Helios is working with hyperscalers on product qualification. Evans estimated the addressable coupling market at roughly $1 billion, including new data center construction and replacements in existing facilities.

Helios also acquired selected Radio Sound assets for $1.7 million and established a multiyear relationship with Indian Motorcycle. Evans said the transaction adds audio capabilities, while the company remains open to larger acquisitions that offer complementary capabilities and attractive returns.

Helios did not provide specific 2027 guidance. Bagan reiterated the company’s target of at least 5% organic compound annual growth through 2030, while acknowledging that comparisons will become tougher after this year’s double-digit pro forma growth.

About Helios Technologies (NYSE:HLIO)

Helios Technologies, Inc develops and manufactures industrial technology products for the hydraulics and electronics markets. Its offerings include hydraulic cartridge valves, manifolds and electro-hydraulic controls, as well as electronic control systems, displays, instrumentation and related connectivity solutions used in mobile equipment, industrial machinery and other specialized applications.

The company serves original equipment manufacturers and other industrial customers through a portfolio that has included the Sun Hydraulics and Enovation Controls brands.

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