Helios Technologies’ Effective Execution of Augmented Strategy Drives 82% Sales Growth and Strong Cash Generation in Third Quarter 2021

Rhea-AI Summary

Helios Technologies, NYSE: HLIO, reported a strong Q3 2021 with net income of $27.8 million, up 114% from last year. Organic sales growth was 30%, driven by high demand across diverse markets. Adjusted EBITDA margin improved to 25.1%, while diluted EPS increased to $0.86. The company experienced supply chain efficiencies despite raw material cost increases. Cash generated was $32.5 million from operations. Helios raised its revenue and Non-GAAP cash EPS outlook for 2021, reflecting robust performance amidst ongoing challenges.

Positive

• Net income rose to $27.8 million, a 114% increase year-over-year.
• Organic sales growth was 30%, indicating strong market demand.
• Diluted EPS increased to $0.86, up 115% from the previous year.
• Adjusted EBITDA margin improved to 25.1%, up 170 basis points.

Negative

• Gross margin declined by 210 basis points to 36.2% due to increased logistics and raw material costs.
• Net interest expense increased to $3.8 million, reflecting higher debt balances.

• Strong organic sales growth of 30% in the quarter driven by high demand, operational flexibility, diversified end markets, and new products
• Executed well against supply chain constraints and material costs; Net income grew to $27.8 million, up 114% over the prior-year period
• Adjusted EBITDA¹ margin expanded 170 basis points over prior-year period to 25.1%
• Diluted EPS of $0.86 up 115% from last year; Non-GAAP Cash EPS of $1.07 up 102%
• Generated $32.5 million of cash from operations and $25.7 million of free cash flow; further reduced net debt to adjusted EBITDA leverage ratio to 2.0x²
• Raising revenue and Non-GAAP Cash EPS expectations for fiscal 2021 and holding margins reflecting strong results year-to-date in continued challenging environment amidst robust demand

SARASOTA, Fla.--(BUSINESS WIRE)-- Helios Technologies, Inc. (NYSE: HLIO) (“Helios” or the “Company”), a global leader in highly engineered motion control and electronic controls technology for diverse end markets, today reported financial results for the third quarter ended October 2, 2021. Results include the acquisitions of BWG Holdings I Corp. (known as “Balboa Water Group” or “Balboa acquisition”), on November 6, 2020, and NEM S.r.l. (“NEM”) on July 9, 2021.

Josef Matosevic, the Company’s President and Chief Executive Officer, commented, “We continue to outperform the market due to excellent execution by the Helios team. Our consistent strong results are driven by our strategic initiatives to protect our business, leverage our manufacturing footprint, advance our innovation pipeline and diversify our markets. We are mitigating the challenges related to material shortages while protecting our margins with our manufacturing strategy. As a result, we have been able to hold our lead times and gain market share because of our ability to deliver. In fact, we furthered our ‘in the region for the region’ approach with the acquisition of assets of Joyonway in October. This is a fast-growing developer of control panels, software, systems and accessories for the health and wellness industry that operates in two locations in China, which are in the hub of electronics and software development for that country.”

He concluded, “Through all of this, we are staying true to our focus as a pure electronics and hydraulics business that delivers high-quality innovative products to our customers. We are evolving and leveraging our businesses to bring more unified system solutions to the market. We have expanded our engineering capacity and are developing additional internal capabilities to ‘make versus buy’ and remain focused on continuing to create value for our customers.”

¹ Adjusted EBITDA is a non-GAAP measure. See comments regarding the use of non-GAAP measures and the reconciliation of GAAP to non-GAAP measures in the tables of this release
² On a pro-forma basis for Balboa Water Group and NEM

Third Quarter 2021 Consolidated Results

($ in millions, except per share data)	Q3 2021			Q3 2020			Change				% Change
Net sales	$	223.2		$	122.6		$	100.6			82%
Gross profit	$	80.9		$	46.9		$	34.0			72%
Gross margin		36.2%			38.3%			(210)		bps
Operating income	$	40.7		$	18.3		$	22.4			122%
Operating margin		18.2%			14.9%			330		bps
Non-GAAP adjusted operating margin		22.5%			19.3%			320		bps
Net income	$	27.8		$	13.0		$	14.8			114%
Diluted EPS	$	0.86		$	0.40		$	0.46			115%
Non-GAAP cash net income	$	34.8		$	17.0		$	17.8			105%
Non-GAAP cash EPS	$	1.07		$	0.53		$	0.54			102%
Adjusted EBITDA	$	55.9		$	28.7		$	27.2			95%
Adjusted EBITDA margin		25.1%			23.4%			170		bps

See the attached tables for additional important disclosures regarding Helios’s use of non-GAAP adjusted operating income, non-GAAP adjusted operating margin, non-GAAP cash net income, non-GAAP cash earnings per share, adjusted EBITDA (earnings before net interest expense, income taxes, depreciation and amortization) and adjusted EBITDA margin (adjusted EBITDA as a percentage of sales) as well as reconciliations of GAAP operating income to non-GAAP adjusted operating income and non-GAAP adjusted operating margin and GAAP net income to non-GAAP cash net income, non-GAAP cash earnings per share, adjusted EBITDA and Adjusted EBITDA margin. Helios believes that, when used in conjunction with measures prepared in accordance with GAAP, the non-GAAP measures described above help improve the understanding of its operating performance.

Sales

• Sales reflected strong demand across all markets, in particular agriculture, construction equipment, recreation and health & wellness. Results included $63.8 million in sales from acquisitions. (See the table in this release that provides acquired revenue by segment by quarter). In addition, the Company experienced strong organic sales growth of $36.9 million, 30.1%, compared with the prior-year period.
• Strength in demand across all regions as markets recovered from the impacts of the COVID-19 pandemic.
• Foreign currency translation adjustment on sales: $1.1 million favorable.

Profits and margins

• Gross profit and margin drivers: gross profit benefitted from increased volume during the quarter. Gross margin declined by 210 basis points compared with the prior-year period, as manufacturing labor efficiencies and improved leverage of our fixed cost base on the higher sales were offset by increases in logistics and raw material costs. In addition, the business model of the Balboa acquisition has lower gross margins but higher operating margins.
• Selling, engineering and administrative (“SEA”) expenses: as a percentage of sales, improved 490 basis points to 14.7% compared with the 2020 third quarter, reflecting both the business model of the Balboa acquisition and continued cost management initiatives.
• Amortization of intangible assets: $7.4 million was up from $4.6 million in the prior year reflecting the Company’s acquisitions.

Non-operating items

• Net interest expense: $3.8 million in the quarter, up $1.1 million compared with the prior-year period due to higher debt balances.
• Effective tax rate: 25.5% compared with 20.7% in the prior-year period due to a reduction in available tax incentives and increased earnings in higher tax jurisdictions such as Italy, Germany, and Australia.

Net income, earnings per share, non-GAAP cash earnings per share and adjusted EBITDA

• GAAP net income and earnings per share: $27.8 million and $0.86 per share.
• Non-GAAP cash earnings per share: $1.07 compared with $0.53 last year due to strong demand, operational efficiencies, and better-than-expected performance of the Balboa acquisition.
• Adjusted EBITDA margin: improved 170 basis points to 25.1% compared with the prior-year period due to higher volume and operational efficiencies.

Year-to-date 2021 Consolidated Results

($ in millions, except per share data)	2021			2020			Change				% Change
Net sales	$	651.5		$	371.4		$	280.1			75%
Gross profit	$	238.5		$	143.5		$	95.0			66%
Gross margin		36.6%			38.6%			(200)		bps
Operating income	$	117.4		$	25.0		$	92.4			370%
Operating margin		18.0%			6.7%			1130		bps
Non-GAAP adjusted operating margin		22.8%			19.7%			310		bps
Net income	$	81.0		$	8.7		$	72.3			NM
Diluted EPS	$	2.51		$	0.27		$	2.24			NM
Non-GAAP cash net income	$	105.1		$	52.7		$	52.4			99%
Non-GAAP cash EPS	$	3.26		$	1.64		$	1.62			99%
Adjusted EBITDA	$	164.7		$	86.1		$	78.6			91%
Adjusted EBITDA margin		25.3%			23.2%			210		bps
NM = Not meaningful

See the attached tables for additional important disclosures regarding Helios’s use of non-GAAP adjusted operating income, non-GAAP adjusted operating margin, non-GAAP cash net income, non-GAAP cash earnings per share, adjusted EBITDA (earnings before net interest expense, income taxes, depreciation and amortization) and adjusted EBITDA margin (adjusted EBITDA as a percentage of sales) as well as reconciliations of GAAP operating income to non-GAAP adjusted operating income and non-GAAP adjusted operating margin and GAAP net income to non-GAAP cash net income, non-GAAP cash earnings per share, adjusted EBITDA and Adjusted EBITDA margin. Helios believes that, when used in conjunction with measures prepared in accordance with GAAP, the non-GAAP measures described above help improve the understanding of its operating performance.

Sales

• Sales growth reflected strong demand across all regions and markets, in particular agriculture, construction equipment, recreation, and health & wellness. Results included $180.2 million in sales related to acquisitions. (See the table in this release that provides acquired revenue by segment by quarter). In addition, the Company experienced significant organic growth, $99.9 million, 26.9%, compared with the 2020 period.
• Foreign currency translation adjustment on sales: $13.8 million favorable.

Profits and margins

• Gross profit and margin drivers: gross profit benefitted from increased volume during the period. Gross margin declined by 200 basis points compared with the prior-year period, as manufacturing labor efficiencies and improved leverage of our fixed cost base on the higher sales were offset by increases in logistics and raw material costs. In addition, the business model of the Balboa acquisition has lower gross margins but higher operating margins.
• Selling, engineering and administrative (“SEA”) expenses: 14.7% as a percentage of sales, improved 500 basis points compared with the prior-year period, reflecting both the lower SEA expenses relative to sales for the Balboa acquisition and continued cost containment initiatives.
• Amortization of intangible assets: increased $12.0 million to $25.3 million from the prior year reflecting the Balboa acquisition.
• Goodwill impairment charge: last year’s first quarter included a $31.9 million impairment charge resulting from weakened market outlook primarily due to the COVID-19 pandemic.

Non-operating items

• Net interest expense: $4.4 million increase to $13.0 million compared with the prior-year period reflecting higher debt balances.
• Effective tax rate: 22.0% compared with 16.9% in the prior year, excludes non-taxable goodwill impairment charge, included certain one-time benefits in the second quarter of 2020 that reduced the effective tax rate for the period.

Net income, earnings per share, non-GAAP cash earnings per share and adjusted EBITDA

• GAAP net income and earnings per share: $81.0 million and $2.51 per share.
• Non-GAAP cash earnings per share: $3.26 compared with $1.64 in the prior-year period driven by strong demand, operational efficiencies and strong performance of the Balboa acquisition.
• Adjusted EBITDA margin: 25.3%, up 210 basis points compared with the prior-year period due to higher volume and operational efficiencies.

Hydraulics Segment Review

(Refer to sales by geographic region and segment data in accompanying tables)

($ in millions)
Hydraulics	Three Months Ended
	Q3 2021			Q3 2020			Change				% Change
Net Sales
Americas	$	45.2		$	27.7		$	17.5			63%
EMEA		44.8			32.1			12.7			40%
APAC		43.4			38.4			5.0			13%
Total Segment Sales	$	133.4		$	98.2		$	35.2			36%
Gross Profit	$	50.2		$	35.5		$	14.7			41%
Gross Margin		37.6%			36.1%			150		bps
SEA Expenses	$	18.4		$	16.6		$	1.8			11%
Operating Income	$	31.8		$	18.9		$	12.9			68%
Operating Margin		23.8%			19.2%			460		bps

Third Quarter Hydraulics Segment Review

• Higher sales in all regions were driven by demand from U.S. and European agriculture and construction equipment markets, as well as mobile and industrial equipment markets; foreign currency exchange rates had a $1.0 million favorable adjustment on sales.
• Gross margin of 37.6%, up 150 basis points, was driven by improved leverage on higher volume, production labor efficiencies and a favorable sales mix.
• Operating margin of 23.8% improved 460 basis points, reflecting disciplined cost management efforts.

Electronics Segment Review

(Refer to sales by geographic region and segment data in accompanying tables)

($ in millions)
Electronics	Three Months Ended
	Q3 2021			Q3 2020			Change				% Change
Net Sales
Americas	$	64.2		$	21.4		$	42.8			200%
EMEA		11.1			1.5			9.6			640%
APAC		14.5			1.5			13.0			867%
Total Segment Sales	$	89.8		$	24.4		$	65.4			268%
Gross Profit	$	31.3		$	11.4		$	19.9			175%
Gross Margin		34.9%			46.8%			(1190)		bps
SEA Expenses	$	12.9		$	6.7		$	6.2			93%
Operating Income	$	18.4		$	4.7		$	13.7			291%
Operating Margin		20.5%			19.2%			130		bps

Third Quarter Electronics Segment Review

• Higher sales included $59.0 million related to the acquisition of Balboa. Strong demand from health and wellness and recreational markets drove sales, partially offset by supply chain constraints.
• Gross margin reflects the different business model of the Balboa acquisition, which has lower gross margins that are offset by a lower SEA expense structure. Additionally, raw material, freight and logistics costs increased as a result of materials shortages and efforts to meet customer requirements on a timely basis.
• Operating margin of 20.5% demonstrates the business model of the Balboa acquisition, which has an inherently lower operating expense structure and higher volume than the organic business. SEA expenses increased due to the incremental expenses from the acquisition.

Balance Sheet and Cash Flow Review

• Total debt at quarter-end was $471.2 million compared with $462.4 million at January 2, 2021.
• Cash and cash equivalents at October 2, 2021 were $47.7 million, up $22.5 million from the end of 2020.
• Inventory increased $37.8 million from the end of 2020 as the Company continues to purchase parts ahead of material shortages.
• Pro-forma net debt-to-adjusted EBITDA improved to 2.0x at the end of the third quarter 2021 compared with 3.0x (pro-forma for Balboa and NEM) at the end of 2020, further demonstrating the Company’s ability to rapidly de-lever the balance sheet following an acquisition. At the end of the third quarter 2021, the Company had $120.9 million available on its revolving lines of credit.
• Net cash provided by operations was $32.5 million in the third quarter 2021 compared with $36.7 million in the prior-year period.
• Capital expenditures were $6.7 million in the quarter. The Company expects to spend between $25 to $27 million in capital investments in 2021.

2021 Outlook

The following provides the Company’s expectations for 2021. This assumes constant currency, using quarter end rates, and that markets served are not further impacted by the global pandemic.

	Previous 2021 Guidance provided on 8/9/21	Updated 2021 Guidance	% Change at Mid-Point from Previous Guidance
Consolidated revenue	$800 - $830 million	$840 - $860 million	4%
Adjusted EBITDA	$188 - $203 million	$197 - $211 million	4%
Adjusted EBITDA margin	23.5% - 24.5%	23.5% - 24.5%	unchanged
Interest expense	$16 - $18 million	$16 - $17 million	-3%
Effective tax rate	22% - 24%	22% - 24%	unchanged
Depreciation	$22 - $23 million	$21 - $22 million	-4%
Amortization	$32 - $33 million	$32 - $33 million	unchanged
Capital expenditures % total revenue	~4% of sales	~3% of sales	-100 bps
Non-GAAP Cash EPS	$3.60 -$3.80	$3.75 -$4.10	6%

Webcast

The Company will host a conference call and webcast today at 9:00 a.m. Eastern Time to review its financial and operating results and discuss its corporate strategies and outlook. A question-and-answer session will follow. The conference call can be accessed by calling (201) 689-8573. The audio webcast will be available at www.heliostechnologies.com.

A telephonic replay will be available from approximately 12:00 p.m. ET on the day of the call through Monday, November 15, 2021. To listen to the archived call, dial (412) 317-6671 and enter conference ID number 13723737. The webcast replay will be available in the investor relations section of the Company’s website at www.heliostechnologies.com, where a transcript will also be posted once available.

About Helios Technologies

Helios Technologies is a global leader in highly engineered motion control and electronic controls technology for diverse end markets, including construction, material handling, agriculture, energy, recreational vehicles, marine, health and wellness. Helios sells its products to customers in over 90 countries around the world. Its strategy for growth is to be the leading provider in niche markets, with premier products and solutions through innovative product development and acquisition. The Company has paid a cash dividend to its shareholders every quarter since becoming a public company in 1997. For more information please visit: www.heliostechnologies.com.

FORWARD-LOOKING INFORMATION

This news release contains “forward‐looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934. Forward-looking statements involve risks and uncertainties, and actual results may differ materially from those expressed or implied by such statements. They include statements regarding current expectations, estimates, forecasts, projections, our beliefs, and assumptions made by Helios Technologies, Inc. (“Helios” or the “Company”), its directors or its officers about the Company and the industry in which it operates, and assumptions made by management, and include among other items, (i) the Company’s strategies regarding growth, including its intention to develop new products and make acquisitions; (ii) the effectiveness of creating the Center of Engineering Excellence; (iii) the Company’s financing plans; (iv) trends affecting the Company’s financial condition or results of operations; (v) the Company’s ability to continue to control costs and to meet its liquidity and other financing needs; (vi) the declaration and payment of dividends; and (vii) the Company’s ability to respond to changes in customer demand domestically and internationally, including as a result of standardization. In addition, we may make other written or oral statements, which constitute forward-looking statements, from time to time. Words such as “may,” “expects,” “projects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates,” variations of such words, and similar expressions are intended to identify such forward-looking statements. Similarly, statements that describe our future plans, objectives or goals also are forward-looking statements. These statements are not guaranteeing future performance and are subject to a number of risks and uncertainties. Our actual results may differ materially from what is expressed or forecasted in such forward-looking statements, and undue reliance should not be placed on such statements. All forward-looking statements are made as of the date hereof, and we undertake no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.

Factors that could cause the actual results to differ materially from what is expressed or forecasted in such forward-looking statements include, but are not limited to, (i) conditions in the capital markets, including the interest rate environment and the availability of capital; (ii) our failure to realize the benefits expected from the Balboa acquisition, our failure to promptly and effectively integrate the Balboa acquisition and the ability of Helios to retain and hire key personnel, and maintain relationships with suppliers (iii) risks related to health epidemics, pandemics and similar outbreaks and similar outbreaks, including, without limitation, the current COVID-19 pandemic, which may among other things, adversely affect our supply chain, material costs, and work force and may have material adverse effects on our business, financial position, results of operations and/or cash flows; (iv) changes in the competitive marketplace that could affect the Company’s revenue and/or cost bases, such as increased competition, lack of qualified engineering, marketing, management or other personnel, and increased labor and raw materials costs; and (v) new product introductions, product sales mix and the geographic mix of sales nationally and internationally. Further information relating to factors that could cause actual results to differ from those anticipated is included but not limited to information under the heading Item 1. “Business” and Item 1A. “Risk Factors” in the Company’s Form 10-K for the year ended January 2, 2021.

This news release will discuss some historical non-GAAP financial measures, which the Company believes are useful in evaluating its performance. The determination of the amounts that are excluded from these non-GAAP measures is a matter of management judgment and depends upon, among other factors, the nature of the underlying expense or income recognized in a given period. You should not consider the inclusion of this additional information in isolation or as a substitute for results prepared in accordance with GAAP.

This news release also presents forward-looking statements regarding non-GAAP Adjusted EBITDA margin. The Company is unable to present a quantitative reconciliation of these forward-looking non-GAAP financial measures to their most directly comparable forward-looking GAAP financial measures because such information is not available, and management cannot reliably predict the necessary components of such GAAP measures without unreasonable effort or expense. In addition, the Company believes that such reconciliations would imply a degree of precision that would be confusing or misleading to investors. The unavailable information could have a significant impact on the Company’s 2021 financial results. These non-GAAP financial measures are preliminary estimates and are subject to risks and uncertainties, including, among others, changes in connection with quarter-end and year-end adjustments. Any variation between the Company’s actual results and preliminary financial data set forth above may be material.

Financial Tables Follow:

HELIOS TECHNOLOGIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
	Three Months Ended											Nine Months Ended
	October 2, 2021				September 26, 2020							October 2, 2021				September 26, 2020
									% Change											% Change
Net sales	$	223,241			$	122,645			82	%		$	651,499			$	371,422			75	%
Cost of sales		142,299				75,702			88	%			413,036				227,910			81	%
Gross profit		80,942				46,943			72	%			238,463				143,512			66	%
Gross margin		36.2	%			38.3	%						36.6	%			38.6	%
Selling, engineering and administrative expenses		32,786				24,042			36	%			95,757				73,306			31	%
Amortization of intangible assets		7,407				4,558			63	%			25,285				13,323			90	%
Goodwill impairment		-				-			NM				-				31,871			NM
Operating income		40,749				18,343			122	%			117,421				25,012			370	%
Operating margin		18.2	%			14.9	%						18.0	%			6.7	%
Interest expense, net		3,813				2,730			40	%			12,965				8,572			51	%
Foreign currency transaction gain (loss), net		304				(727	)		(142	)%			1,271				(319	)		(498	)%
Other non-operating income, net		(616	)			(22	)		NM				(727	)			(132	)		451	%
Income before income taxes		37,248				16,362			128	%			103,912				16,891			NM
Income tax provision		9,488				3,380			181	%			22,870				8,224			178	%
Net income	$	27,760			$	12,982			114	%		$	81,042			$	8,667			NM
Basic and diluted net income per common share	$	0.86			$	0.40			115	%		$	2.51			$	0.27			NM
Basic and diluted weighted average shares outstanding		32,385				32,095							32,272				32,079
Dividends declared per share	$	0.09			$	0.09						$	0.27			$	0.27
NM = Not meaningful

HELIOS TECHNOLOGIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
	October 2, 2021				January 2,
					2021
Assets	(Unaudited)
Current assets:
Cash and cash equivalents	$	47,687			$	25,216
Restricted cash		41				41
Accounts receivable, net of allowance for credit losses of $1,333 and $1,493		136,812				97,623
Inventories, net		148,186				110,372
Income taxes receivable		3,892				1,103
Other current assets		20,130				19,664
Total current assets		356,748				254,019
Property, plant and equipment, net		165,778				163,177
Deferred income taxes		3,537				6,645
Goodwill		463,034				443,533
Other intangible assets, net		416,913				419,375
Other assets		11,982				10,230
Total assets	$	1,417,992			$	1,296,979
Liabilities and shareholders’ equity
Current liabilities:
Accounts payable	$	73,927			$	59,477
Accrued compensation and benefits		26,370				22,985
Other accrued expenses and current liabilities		28,586				24,941
Current portion of long-term non-revolving debt, net		15,368				16,229
Dividends payable		2,916				2,891
Income taxes payable		10,733				1,489
Total current liabilities		157,900				128,012
Revolving line of credit		276,326				255,909
Long-term non-revolving debt, net		178,534				189,932
Deferred income taxes		78,026				78,864
Other noncurrent liabilities		38,760				36,472
Total liabilities		729,546				689,189
Commitments and contingencies		-				-
Shareholders’ equity:
Preferred stock, par value $0.001, 2,000 shares authorized, no shares issued or outstanding		-				-
Common stock, par value $0.001, 100,000 shares authorized, 32,400 and 32,121 issued and outstanding		32				32
Capital in excess of par value		391,461				371,778
Retained earnings		342,643				270,320
Accumulated other comprehensive loss		(45,690	)			(34,340	)
Total shareholders’ equity		688,446				607,790
Total liabilities and shareholders’ equity	$	1,417,992			$	1,296,979

HELIOS TECHNOLOGIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
	Nine Months Ended
	October 2, 2021				September 26, 2020
Cash flows from operating activities:
Net income	$	81,042			$	8,667
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		41,131				25,805
Goodwill Impairment		-				31,871
Stock-based compensation expense		6,233				3,830
Amortization of debt issuance costs		374				537
Provision (benefit) for deferred income taxes		2,230				(2,937	)
Forward contract (gains) / losses, net		(3,401	)			2,513
Other, net		(135	)			1,287
(Increase) decrease in operating assets:
Accounts receivable		(36,634	)			(4,685	)
Inventories		(35,759	)			7,776
Income taxes receivable		(1,893	)			(2,874	)
Other current assets		(288	)			(1,382	)
Other assets		3,989				2,613
Increase (decrease) in operating liabilities:
Accounts payable		11,945				1,387
Accrued expenses and other liabilities		8,079				955
Income taxes payable		9,599				3,548
Other noncurrent liabilities		(4,527	)			(1,884	)
Net cash provided by operating activities		81,985				77,027
Cash flows from investing activities:
Acquisition of a business, net of cash acquired		(48,481	)			-
Amounts paid for net assets acquired		(2,400	)			-
Capital expenditures		(17,054	)			(7,155	)
Proceeds from dispositions of equipment		82				103
Cash settlement of forward contracts		1,433				(1,742	)
Software development costs		(1,785	)			(227	)
Net cash used in investing activities		(68,205	)			(9,021	)
Cash flows from financing activities:
Borrowings on revolving credit facilities		71,198				11,000
Repayment of borrowings on revolving credit facilities		(44,500	)			(55,609	)
Borrowings on long-term non-revolving debt		-				5,812
Repayment of borrowings on long-term non-revolving debt		(12,178	)			(5,905	)
Proceeds from stock issued		1,353				1,027
Dividends to shareholders		(8,694	)			(8,660	)
Other financing activities		(2,851	)			(1,937	)
Net cash provided by (used in) financing activities		4,328				(54,272	)
Effect of exchange rate changes on cash, cash equivalents and restricted cash		4,363				(3,414	)
Net increase in cash, cash equivalents and restricted cash		22,471				10,320
Cash, cash equivalents and restricted cash, beginning of period		25,257				22,162
Cash, cash equivalents and restricted cash, end of period	$	47,728			$	32,482

HELIOS TECHNOLOGIES
SEGMENT DATA
(In thousands)
(Unaudited)
	Three Months Ended								Nine Months Ended
	October 2, 2021				September 26, 2020				October 2, 2021				September 26, 2020
Sales:
Hydraulics	$	133,404			$	98,206			$	385,549			$	304,113
Electronics		89,837				24,439				265,950				67,309
Consolidated	$	223,241			$	122,645			$	651,499			$	371,422
Gross profit and margin:
Hydraulics	$	50,223			$	35,547			$	146,548			$	112,695
		37.6	%			36.1	%			38.0	%			37.1	%
Electronics		31,277				11,396				92,473				30,817
		34.9	%			46.8	%			34.8	%			45.7	%
Corporate and other		(558	)			-				(558	)			-
Consolidated	$	80,942			$	46,943			$	238,463			$	143,512
		36.2	%			38.3	%			36.6	%			38.6	%
Operating income (loss) and margin:
Hydraulics	$	31,799			$	18,942			$	92,200			$	62,413
		23.8	%			19.2	%			23.9	%			20.5	%
Electronics		18,445				4,683				56,324				10,400
		20.5	%			19.2	%			21.2	%			15.5	%
Corporate and other		(9,495	)			(5,282	)			(31,103	)			(47,801	)
Consolidated	$	40,749			$	18,343			$	117,421			$	25,012
		18.2	%			14.9	%			18.0	%			6.7	%

ORGANIC AND ACQUIRED REVENUE
(In thousands)
(Unaudited)
	Three Months Ended												Full Year Ended			Three Months Ended									Nine Months Ended
	March 28,			June 27,			September 26,			January 2,			January 2,			April 3,			July 3,			October 2,			October 2,
	2020			2020			2020			2021			2021			2021			2021			2021			2021
Hydraulics
Organic	$	103,818		$	102,089		$	98,206		$	103,079		$	407,192		$	119,106		$	133,039		$	128,672		$	380,817
Acquisition		-			-			-			-			-			-			-			4,732			4,732
Total	$	103,818		$	102,089		$	98,206		$	103,079		$	407,192		$	119,106		$	133,039		$	133,404		$	385,549
Electronics
Organic	$	25,665		$	17,205		$	24,439		$	22,481		$	89,790		$	29,459		$	30,191		$	30,808		$	90,459
Acquisition		-			-			-			26,058			26,058			56,279			60,183			59,029			175,491
Total	$	25,665		$	17,205		$	24,439		$	48,539		$	115,848		$	85,738		$	90,374		$	89,837		$	265,950
Consolidated
Organic	$	129,483		$	119,294		$	122,645		$	125,560		$	496,982		$	148,565		$	163,230		$	159,480		$	471,276
Acquisition		-			-			-			26,058			26,058			56,279			60,183			63,761			180,223
Total	$	129,483		$	119,294		$	122,645		$	151,618		$	523,040		$	204,844		$	223,413		$	223,241		$	651,499

HELIOS TECHNOLOGIES
ADDITIONAL INFORMATION
(Unaudited)
2021 Sales by Geographic Region and Segment
($ in millions)
	Q1		% Change y/y	Q2		% Change y/y	Q3		% Change y/y	YTD 2021		% Change y/y
Americas:
Hydraulics	$	34.3	(8%)	$	41.7	22%	$	45.2	63%	$	121.2	22%
Electronics		65.0	201%		64.1	378%		64.2	200%		193.3	243%
Consol. Americas		99.3	69%		105.8	122%		109.4	123%		314.5	102%
% of total		48%			47%			49%			48%
EMEA:
Hydraulics	$	43.3	29%	$	46.6	49%	$	44.8	40%	$	134.7	39%
Electronics		9.3	272%		11.0	479%		11.1	640%		31.5	434%
Consol. EMEA		52.6	46%		57.6	74%		55.9	66%		166.2	62%
% of total		26%			26%			25%			26%
APAC:
Hydraulics	$	41.5	26%	$	44.7	22%	$	43.4	13%	$	129.6	20%
Electronics		11.4	613%		15.3	705%		14.5	867%		41.2	724%
Consol. APAC		52.9	53%		60.0	55%		57.9	45%		170.8	51%
% of total		26%			27%			26%			26%
Total	$	204.8	58%	$	223.4	87%	$	223.2	82%	$	651.5	75%

2020 Sales by Geographic Region and Segment
($ in millions)
	Q1		% Change y/y	Q2		% Change y/y	Q3		% Change y/y	Q4		% Change y/y	YTD 2020		% Change y/y
Americas:
Hydraulics	$	37.3	(10%)	$	34.2	(17%)	$	27.7	(36%)	$	31.3	(14%)	$	130.5	(20%)
Electronics		21.6	(17%)		13.4	(50%)		21.4	(11%)		37.5	92%		93.9	(2%)
Consol. Americas		58.9	(13%)		47.6	(30%)		49.1	(27%)		68.8	24%		224.4	(13%)
% of total		45%			40%			40%			45%			43%
EMEA:
Hydraulics	$	33.5	(20%)	$	31.2	(15%)	$	32.1	1%	$	34.4	11%	$	131.2	(7%)
Electronics		2.5	0%		1.9	6%		1.5	(29%)		4.9	145%		10.8	29%
Consol. EMEA		36.0	(19%)		33.1	(14%)		33.6	(1%)		39.3	19%		142.0	(5%)
% of total		28%			28%			27%			26%			27%
APAC:
Hydraulics	$	33.0	(0%)	$	36.7	3%	$	38.4	10%	$	37.4	6%	$	145.5	5%
Electronics		1.6	(11%)		1.9	12%		1.5	(17%)		6.1	221%		11.1	54%
Consol. APAC		34.6	(1%)		38.6	3%		39.9	9%		43.5	17%		156.6	7%
% of total		27%			32%			33%			29%			30%
Total	$	129.5	(12%)	$	119.3	(17%)	$	122.6	(11%)	$	151.6	20%	$	523.0	(6%)

HELIOS TECHNOLOGIES
Non-GAAP Adjusted Operating Income RECONCILIATION
(In thousands)
(Unaudited)
	Three Months Ended								Nine Months Ended
	October 2, 2021				September 26, 2020				October 2, 2021				September 26, 2020
GAAP operating income	$	40,749			$	18,343			$	117,421			$	25,012
Acquisition-related amortization of intangible assets		7,407				4,558				25,285				13,323
Acquisition and financing-related expenses		654				101				2,901				176
Restructuring charges		55				64				472				361
CEO and officer transition costs		-				622				569				2,431
Goodwill impairment		-				-				-				31,871
Inventory step-up amortization		558				-				558				-
Acquisition integration costs		845				-				1,729				-
Other		(99	)			-				(99	)			-
Non-GAAP adjusted operating income	$	50,169			$	23,688			$	148,836			$	73,174
GAAP operating margin		18.2	%			14.9	%			18.0	%			6.7	%
Non-GAAP adjusted operating margin		22.5	%			19.3	%			22.8	%			19.7	%

Adjusted EBITDA RECONCILIATION
(In thousands)
(Unaudited)
	Three Months Ended								Nine Months Ended								Twelve Months Ended
	October 2, 2021				September 26, 2020				October 2, 2021				September 26, 2020				October 2, 2021
Net income	$	27,760			$	12,982			$	81,042			$	8,667			$	86,592
Interest expense, net		3,813				2,730				12,965				8,572				17,678
Income tax provision		9,488				3,380				22,870				8,224				24,475
Depreciation and amortization		12,989				8,784				41,131				25,805				55,021
EBITDA		54,050				27,876				158,008				51,268				183,766
Acquisition and financing-related expenses		654				101				2,901				176				9,989
Restructuring charges		55				64				472				361				473
CEO and officer transition costs		-				622				569				2,431				730
Goodwill impairment		-				-				-				31,871				-
Inventory step-up amortization		558				-				558				-				2,432
Acquisition integration costs		845				-				1,729				-				1,985
Other		(216	)			(13	)			481				(47	)			482
Adjusted EBITDA	$	55,946			$	28,650			$	164,718			$	86,060			$	199,857
Adjusted EBITDA margin		25.1	%			23.4	%			25.3	%			23.2	%			24.9	%
Balboa Water Group & NEM pre-acquisition adjusted EBITDA																		7,502
TTM Pro forma adjusted EBITDA																	$	207,359

HELIOS TECHNOLOGIES
Non-GAAP Cash Net Income RECONCILIATION
(In thousands)
(Unaudited)
	Three Months Ended								Nine Months Ended
	October 2, 2021				September 26, 2020				October 2, 2021				September 26, 2020
Net income	$	27,760			$	12,982			$	81,042			$	8,667
Amortization of intangible assets		7,487				4,558				25,431				13,323
Acquisition and financing-related expenses		654				101				2,901				176
Restructuring charges		55				64				472				361
CEO and officer transition costs		-				622				569				2,431
Goodwill impairment		-				-				-				31,871
Inventory Amortization Step-up		558				-				558				-
Acquisition integration costs		845				-				1,729				-
Other		(216	)			(13	)			481				(47	)
Tax effect of above		(2,347	)			(1,333	)			(8,035	)			(4,061	)
Non-GAAP cash net income	$	34,796			$	16,981			$	105,148			$	52,721
Non-GAAP cash net income per diluted share	$	1.07			$	0.53			$	3.26			$	1.64

Net Debt-to-Adjusted EBITDA RECONCILIATION
(In thousands)
(Unaudited)
		As of
		October 2, 2021
Current portion of long-term non-revolving debt, net		$	15,368
Revolving lines of credit			277,347
Long-term non-revolving debt, net			178,534
Total debt			471,249
Less: Cash and cash equivalents			47,687
Net debt		$	423,562
TTM Pro forma adjusted EBITDA*		$	207,359
Ratio of net debt to TTM pro forma adjusted EBITDA			2.04
*On a pro-forma basis for Balboa Water Group and NEM

Non-GAAP Financial Measures and Non-GAAP Forward-looking Financial Measures:

Adjusted operating income, adjusted operating margin, EBITDA, adjusted EBITDA, adjusted EBITDA margin, net debt-to-adjusted EBITDA, cash net income and cash net income per diluted share are not measures determined in accordance with generally accepted accounting principles in the United States, commonly known as GAAP. Nevertheless, Helios believes that providing non-GAAP information such as adjusted operating income, adjusted operating margin, EBITDA, adjusted EBITDA, adjusted EBITDA margin, net debt-to-adjusted EBITDA, cash net income and cash net income per diluted share are important for investors and other readers of Helios’s financial statements, as they are used as analytical indicators by Helios’s management to better understand operating performance. Because adjusted operating income, adjusted operating margin, adjusted EBITDA, adjusted EBITDA margin, net debt-to-adjusted EBITDA, cash net income and cash net income per diluted share are non-GAAP measures and are thus susceptible to varying calculations, adjusted operating income, adjusted operating margin, EBITDA, adjusted EBITDA, adjusted EBITDA margin, net debt-to-adjusted EBITDA, cash net income and cash net income per diluted share, as presented, may not be directly comparable with other similarly titled measures used by other companies.

The Company does not provide a reconciliation of forward-looking non-GAAP financial measures, such as adjusted EBITDA, adjusted EBITDA margin and cash net income and cash net income per diluted share disclosed above in our 2021 Outlook, to their comparable GAAP financial measures because it could not do so without unreasonable effort due to the unavailability of the information needed to calculate reconciling items and due to the variability, complexity and limited visibility of the adjusting items that would be excluded from the non-GAAP financial measures in future periods. When planning, forecasting and analyzing future periods, the Company does so primarily on a non-GAAP basis without preparing a GAAP analysis.

View source version on businesswire.com: https://www.businesswire.com/news/home/20211108005356/en/

Tania Almond

Vice President, Investor Relations, Corporate Communication and Risk Management

(941) 362-1333

tania.almond@HLIO.com

Deborah Pawlowski

Kei Advisors LLC

(716) 843-3908

dpawlowski@keiadvisors.com

Source: Helios Technologies, Inc.

FAQ

What were Helios Technologies' financial results for Q3 2021?

Helios reported a net income of $27.8 million and a diluted EPS of $0.86 for Q3 2021.

How much did Helios Technologies' organic sales grow in Q3 2021?

Organic sales grew by 30% in Q3 2021.

What is the adjusted EBITDA margin for Helios Technologies in Q3 2021?

The adjusted EBITDA margin for Q3 2021 is 25.1%.

What is the updated revenue outlook for Helios Technologies in 2021?

Helios raised its revenue outlook for 2021 to between $840 million and $860 million.

How much cash did Helios Technologies generate from operations in Q3 2021?

Helios generated $32.5 million in cash from operations in Q3 2021.