Helios Technologies Inc ((HLIO)) has held its Q2 earnings call. Read on for the main highlights of the call.
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Helios Technologies Inc. Earnings Call: A Balanced Sentiment Amid Achievements and Challenges
The recent earnings call for Helios Technologies Inc. painted a mixed picture, reflecting both achievements and challenges. The company reported notable successes in cash flow, debt reduction, and strategic actions such as share repurchase and divestiture. However, these positive developments were tempered by declining sales and earnings, tariff impacts, and struggles within specific segments. While the outlook for the second half of 2025 appears promising, these factors contribute to a balanced sentiment overall.
Surpassing Internal Expectations
Helios Technologies exceeded its internal expectations in the second quarter, achieving sales of $212 million. This success was largely driven by stronger-than-expected performance in the Hydraulics segment and favorable foreign exchange benefits.
Strong Cash Flow and Debt Reduction
The company generated near-record cash from operations, totaling $37 million, and reduced its debt by $67 million from the previous year. This improvement has enhanced the net debt to adjusted EBITDA leverage ratio to 2.6x.
Share Repurchase and Divestiture
Helios initiated a share repurchase program, buying back 200,000 shares at an average price of $32. Additionally, the company announced the sale of Custom Fluidpower for AUD 83 million, a move expected to improve margin rates within the Hydraulics segment.
New Product Launches
The company accelerated its cycle times to market with new products, which did not cannibalize existing sales. This strategy provided incremental revenue opportunities.
Positive Outlook for Second Half of 2025
Helios anticipates year-over-year growth for every month in the remainder of 2025. Sales projections for Q3 2025 are expected to be between $208 million and $215 million.
Sales and Earnings Decline
Despite some successes, Helios faced a 3% decrease in consolidated year-over-year sales, resulting in a decline in both sales and earnings compared to the prior year.
Impact of Tariffs and Product Mix
The company’s adjusted EBITDA margin of 18.6% was negatively affected by an unfavorable product mix and tariff impacts, with an estimated $8 million direct tariff cost impact expected for the second half of 2025.
Decline in Electronics Segment
Sales in the Electronics segment were down 4% year-over-year, with significant impacts from declines in most end markets, particularly the recreational market.
Higher Costs in Electronics
The Electronics segment experienced a decline in gross margin by 530 basis points due to higher freight and duties costs, including a $2.4 million expense related to a product import classification change.
Forward-Looking Guidance
Looking ahead, Helios Technologies projects third-quarter sales between $208 million and $215 million, with adjusted EBITDA margins expected to be between 19.5% and 20.5%. The company anticipates continued growth and improvements in operational efficiency, aiming for a net debt to adjusted EBITDA leverage ratio below 2x.
In summary, the Helios Technologies earnings call highlighted a company navigating a complex landscape of achievements and challenges. While successes in cash flow, debt reduction, and strategic initiatives were notable, the company must address declining sales and segment-specific issues. The outlook for the remainder of 2025 remains optimistic, with expectations of growth and operational improvements.