Helios Technologies Reports Strong Sequential Growth in the Second Quarter 2023 with Revenue Up 7% and Net Income Up 21%
- Delivered strong sequential top line growth of 7%
- Expanded operating margin 140 basis points sequentially
- Diluted EPS of $0.51 up 21% sequentially
- Increasing global production capacity to meet customer demand
- Updating 2023 outlook to address capacity investments and lower near-term visibility in APAC
- None.
-
Delivered strong sequential top line growth of
7% ; growth excluding acquisitions was6% over 1Q23 - Expanded operating margin 140 basis points sequentially, even while increasing investments to integrate flywheel acquisitions, expand capacity and accelerate strategic growth initiatives
- Demonstrated focus on driving innovation with completed acquisition of i3 Product Development, custom engineering firm expands engineering expertise and further deepens market reach into served markets while adding greater diversification and patented remote service technology
-
Diluted EPS of
$0.51 21% sequentially; Diluted Non-GAAP Cash EPS of$0.81 13% sequentially - Increasing global production capacity via a combination of facility expansion and production efficiencies to meet accelerating customer appetite for new products and diversified end markets
- Updating 2023 outlook to address pull forward of capacity investments in response to building 2024+ customer demand combined with lower near-term visibility in APAC and recent facility impacts
“Over the last three years, we have methodically invested in change, and it is exciting to see the progress we have made,” said Helios’ President and Chief Executive Officer Josef Matosevic. “Our businesses are working cohesively to drive best-in-class product development providing the innovation our customers require for success. Expanding our capabilities enables us to better serve a more diversified global market. Our results in the quarter and year-to-date demonstrate this progress even against headwinds of the macroenvironment.”
“Our revolutionary technology, products and solutions allow the Company to be well-positioned to address the advancing megatrends of increased electrification, reduced emissions footprint, higher energy efficiency, and convenient user interface for applications that range from heavy-duty construction machines to off-road vehicles, cold-plunge baths, and commercial kitchen equipment. To serve this growing demand, we are pulling forward investments in manufacturing and capacity and will be adjusting our near-term expectations to accommodate for the related disruption to operations. Additionally, there is reduced visibility for the remainder of the year resulting from the lackluster economic situation in
Second Quarter 2023 Consolidated Results
| ($ in millions, except per share data) (Unaudited) |
Q2 2023 | Q2 2022 | Change | % Change | ||||||||||
| Net sales | $ |
227.6 |
|
$ |
241.7 |
|
$ |
(14.1 |
) |
(6 |
%) |
|||
| Gross profit | $ |
75.8 |
|
$ |
82.3 |
|
$ |
(6.5 |
) |
(8 |
%) |
|||
| Gross margin |
|
33.3 |
% |
|
34.1 |
% |
|
(80 |
) |
bps | ||||
| Operating income | $ |
29.5 |
|
$ |
43.0 |
|
$ |
(13.5 |
) |
(31 |
%) |
|||
| Operating margin |
|
13.0 |
% |
|
17.8 |
% |
|
(480 |
) |
bps | ||||
| Non-GAAP adjusted operating margin* |
|
18.5 |
% |
|
22.0 |
% |
|
(350 |
) |
bps | ||||
| Net income | $ |
16.8 |
|
$ |
30.0 |
|
$ |
(13.2 |
) |
(44 |
%) |
|||
| Diluted EPS | $ |
0.51 |
|
$ |
0.92 |
|
$ |
(0.41 |
) |
(45 |
%) |
|||
| Non-GAAP cash net income* | $ |
26.8 |
|
$ |
38.3 |
|
$ |
(11.5 |
) |
(30 |
%) |
|||
| Diluted Non-GAAP cash EPS* | $ |
0.81 |
|
$ |
1.18 |
|
$ |
(0.37 |
) |
(31 |
%) |
|||
| Adjusted EBITDA* | $ |
50.1 |
|
$ |
59.0 |
|
$ |
(8.9 |
) |
(15 |
%) |
|||
| Adjusted EBITDA margin* |
|
22.0 |
% |
|
24.4 |
% |
|
(240 |
) |
bps | ||||
* Adjusted numbers are not measures determined in accordance with generally accepted accounting principles in
Sales
-
Continued Positive Sequential Trends: Total revenue up
7% , Electronics segment revenue up15% and Hydraulics segment revenue up3% over first quarter 2023. -
Strong Performance in Various Markets: Year-over-year sales in agriculture, recreational, mining and Aerospace had solid increases reflecting market diversification efforts and acquisitions. On a sequential basis, sales to the health & wellness market were up healthy double digits, recreational sales had a solid increase and agriculture was stable. Sales included
$16.4 million -
By Region: Sales increased across all regions over the first quarter of 2023. On a year-over-year basis, sales in the
Americas and inEurope , theMiddle East andAfrica (“EMEA”) both declined5% , whileAsia Pacific ("APAC”) declined10% . -
Other Impacts: Foreign currency translation adjustment on sales was nominal in the quarter at
$0.3 million $14.2 million
Profits and margins
-
Gross profit and margin drivers: Gross profit improved sequentially on higher sales but was down
$6.5 million -
Selling, engineering and administrative (“SEA”) expenses: SEA sequentially were down slightly, but up
$5.5 million 17% compared with the second quarter of 2022. The year-over-year increase was primarily related to incremental SEA from acquisitions and significant investments in integration, growth, and new product development. -
Amortization of intangible assets:
$8.3 million 22% compared with the prior-year period reflecting the Company’s flywheel acquisitions. Compared with the first quarter of 2023, amortization of intangible assets was up$0.2 million
Non-operating items
-
Net interest expense: up
$1.6 million $4.0 million -
Effective tax rate:
22.9% compared with22.5% in the prior-year period reflecting mix in income in various tax jurisdictions.
Net income, earnings per share (“EPS”), non-GAAP cash earnings per share and adjusted EBITDA
-
Net income and diluted earnings per share:
$16.8 million $0.51 21% sequentially. -
Diluted Non-GAAP cash earnings per share:
$0.81 $1.18 $0.09 $0.09 13% -
Adjusted EBITDA margin:
22.0% increased 170 basis points sequentially over the first quarter 2023; Compared with the year ago period, adjusted EBITDA margin declined 240 basis points driven by the items discussed previously in this report.
Hydraulics Segment Review
(Refer to sales by geographic region and segment data in accompanying tables)
| ($ in millions) (Unaudited) |
|||||||||||||||
| Hydraulics | For the Three Months Ended | ||||||||||||||
| Q2 2023 | Q2 2022 | Change | % Change | ||||||||||||
| Net Sales | |||||||||||||||
$ |
60.6 |
|
$ |
49.9 |
|
$ |
10.7 |
|
21 |
% |
|||||
| EMEA |
|
51.3 |
|
|
49.0 |
|
|
2.3 |
|
5 |
% |
||||
| APAC |
|
40.5 |
|
|
43.9 |
|
|
(3.4 |
) |
(8 |
%) |
||||
| Total Segment Sales | $ |
152.4 |
|
$ |
142.8 |
|
$ |
9.6 |
|
7 |
% |
||||
| Gross Profit | $ |
49.7 |
|
$ |
49.5 |
|
$ |
0.2 |
|
0 |
% |
||||
| Gross Margin |
|
32.6 |
% |
|
34.7 |
% |
|
(210 |
) |
bps | |||||
| SEA Expenses | $ |
22.7 |
|
$ |
18.4 |
|
$ |
4.3 |
|
23 |
% |
||||
| Operating Income | $ |
27.0 |
|
$ |
31.1 |
|
$ |
(4.1 |
) |
(13 |
%) |
||||
| Operating Margin |
|
17.7 |
% |
|
21.8 |
% |
|
(410 |
) |
bps | |||||
Second Quarter Hydraulics Segment Review
-
Sales: increased
3% sequentially and7% over the year-ago period to$152.4 million $15.2 million Americas and EMEA, with a large contribution from the agriculture market, which offset softness in the APAC region. FX had a$0.2 million $9.7 million -
Gross profit and margin drivers: gross profit improved over the year-ago period driven by price, efficiency, acquisition mix partially offset by rising material costs. Gross margin reflects rising material costs, as well as the different margin profile of our recent acquisitions. Restructuring costs included in cost of sales increased by
$1.3 million $1.9 million - Operating income and operating margin: reflect integration costs related to acquisitions and investments in operational changes and new product development.
Electronics Segment Review
(Refer to sales by geographic region and segment data in accompanying tables)
| ($ in millions) (Unaudited) |
|||||||||||||||
| Electronics | For the Three Months Ended | ||||||||||||||
| Q2 2023 | Q2 2022 | Change | % Change | ||||||||||||
| Net Sales | |||||||||||||||
$ |
63.2 |
|
$ |
80.2 |
|
$ |
(17.0 |
) |
(21 |
%) |
|||||
| EMEA |
|
7.0 |
|
|
12.3 |
|
|
(5.3 |
) |
(43 |
%) |
||||
| APAC |
|
5.0 |
|
|
6.4 |
|
|
(1.4 |
) |
(22 |
%) |
||||
| Total Segment Sales | $ |
75.2 |
|
$ |
98.9 |
|
$ |
(23.7 |
) |
(24 |
%) |
||||
| Gross Profit | $ |
26.1 |
|
$ |
32.8 |
|
$ |
(6.7 |
) |
(20 |
%) |
||||
| Gross Margin |
|
34.7 |
% |
|
33.2 |
% |
|
150 |
|
bps | |||||
| SEA Expenses | $ |
14.1 |
|
$ |
12.5 |
|
$ |
1.6 |
|
13 |
% |
||||
| Operating Income | $ |
12.0 |
|
$ |
20.3 |
|
$ |
(8.3 |
) |
(41 |
%) |
||||
| Operating Margin |
|
16.0 |
% |
|
20.5 |
% |
|
(450 |
) |
bps | |||||
Second Quarter Electronics Segment Review
-
Sales: increased
15% sequentially while improvements in the recreational, mobile and agriculture markets did not fully offset the year-over-year comparison for the health & wellness market. Weakness over the year-ago period was across all regions. Foreign currency exchange rates had a nominal$0.1 million $4.4 million -
Gross profit and margin drivers: gross profit grew
24% sequentially while gross margin expanded 260 basis points over 1Q23 as material costs started to return to more normal levels. Compared with the year-ago period, the lower gross profit reflects decreased sales volume, while gross margin increased 150 basis points to34.7% , driven primarily by favorable material costs, mix of business and cost control. -
Operating income and operating margin: operating income grew
60% sequentially while operating margin expanded 450 basis points over 1Q23. Compared with the year-ago period declines were the result of lower gross profit and higher SEA expenses related to investments in expansion, new product development and other growth initiatives.
Balance Sheet and Cash Flow Review
-
Total debt: at quarter-end was
$549.1 million $525.8 million -
Cash and cash equivalents: as of July 1, 2023 were
$37.5 million $1.2 million 3% from the end of the first quarter of 2023. -
Inventory: increased
$3.3 million $205.7 million -
Pro-forma net debt-to-adjusted EBITDA: increased to 2.7x at the end of the second quarter of 2023 (pro-forma for Daman Products, Schultes Precision Manufacturing and i3 Product Development.) At the end of second quarter 2023, the Company had
$183.4 million -
Net cash provided by operations: was
$26.1 million $29.5 million -
Capital expenditures: were
$10.5 million 4.6% of sales reflecting accelerated investments in capacity expansion. This compares with$7.9 million 3.3% of sales, in the year-ago period. - Dividends: Paid 106th sequential quarterly cash dividend on July 20, 2023.
Updated 2023 Outlook:
The following provides the Company’s expectations for 2023 as of August 7, 2023. This assumes constant currency, using quarter end rates, and that markets served are not further impacted by the global pandemic or the geo-political environment.
| 2020 Actual | Previous 2023 Outlook |
Updated 2023 Outlook |
Implied 3-Year
|
|||||
| Consolidated revenue |
|
|||||||
| Net income |
|
|||||||
| Adjusted EBITDA |
|
|||||||
| Adjusted EBITDA margin |
|
|
||||||
| Interest expense |
|
|||||||
| Effective tax rate |
|
|
||||||
| Depreciation |
|
|||||||
| Amortization |
|
|||||||
| Capital expenditures % total revenue |
|
|
||||||
| Diluted EPS |
|
|
||||||
| Diluted Non-GAAP Cash EPS |
|
|
Adjusted EBITDA, Adjusted EBITDA margin and Diluted Non-GAAP Cash EPS represent non-GAAP financial measures. The Company has presented the comparable GAAP figures in the table above. For 2023 Outlook, Adjusted EBITDA excludes an estimated
Webcast
The Company will host a conference call and webcast tomorrow, August 8, 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 1:00 p.m. ET on the day of the call through Tuesday, August 15, 2023. To listen to the archived call, dial (412) 317-6671 and enter conference ID number 13739447. 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 and 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 and follow us on LinkedIn.
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 Centers of 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) supply chain disruption and the potential inability to procure goods; (ii) conditions in the capital markets, including the interest rate environment and the availability of capital; (iii) inflation (including hyperinflation) or recession; (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; (v) risks related to health epidemics, pandemics and similar outbreaks, including, without limitation, the current COVID-19 pandemic, particularly in
This news release will discuss some historical non-GAAP financial measures, which Helios believes that providing these specific non-GAAP figures are important for investors and other readers of Helios financial statements, as they are used as analytical indicators by Helios management to better understand operating 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. Please carefully review the Non-GAAP reconciliations to the most directly comparable GAAP measures and the related additional information provided throughout. Because these metrics are non-GAAP measures and are thus susceptible to varying calculations, these figures, as presented, may not be directly comparable to other similarly titled measures used by other companies.
This news release also presents forward-looking statements regarding non-GAAP measures. 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 2023 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 millions, except per share data) (Unaudited) |
|||||||||||||||||||||
| For the Three Months Ended | For the Six Months Ended | ||||||||||||||||||||
| July 1, 2023 | July 2, 2022 | % Change | July 1, 2023 | July 2, 2022 | % Change | ||||||||||||||||
| Net sales | $ |
227.6 |
|
$ |
241.7 |
|
(6 |
)% |
$ |
440.8 |
|
$ |
482.2 |
|
(9 |
)% |
|||||
| Cost of sales |
|
151.8 |
|
|
159.4 |
|
(5 |
)% |
|
294.0 |
|
|
316.3 |
|
(7 |
)% |
|||||
| Gross profit |
|
75.8 |
|
|
82.3 |
|
(8 |
)% |
|
146.8 |
|
|
166.0 |
|
(12 |
)% |
|||||
| Gross margin |
|
33.3 |
% |
|
34.1 |
% |
|
33.3 |
% |
|
34.4 |
% |
|||||||||
| Selling, engineering and administrative expenses |
|
38.0 |
|
|
32.5 |
|
17 |
% |
|
76.1 |
|
|
66.3 |
|
15 |
% |
|||||
| Amortization of intangible assets |
|
8.3 |
|
|
6.8 |
|
22 |
% |
|
16.4 |
|
|
13.8 |
|
19 |
% |
|||||
| Operating income |
|
29.5 |
|
|
43.0 |
|
(31 |
)% |
|
54.3 |
|
|
85.9 |
|
(37 |
)% |
|||||
| Operating margin |
|
13.0 |
% |
|
17.8 |
% |
|
12.3 |
% |
|
17.8 |
% |
|||||||||
| Interest expense, net |
|
7.8 |
|
|
3.8 |
|
105 |
% |
|
14.0 |
|
|
7.6 |
|
84 |
% |
|||||
| Foreign currency transaction loss (gain), net |
|
0.1 |
|
|
(0.2 |
) |
(150 |
)% |
|
0.5 |
|
|
(1.1 |
) |
(145 |
)% |
|||||
| Other non-operating (income) expense, net |
|
(0.2 |
) |
|
0.6 |
|
(133 |
)% |
|
- |
|
|
1.3 |
|
(100 |
)% |
|||||
| Income before income taxes |
|
21.8 |
|
|
38.8 |
|
(44 |
)% |
|
39.8 |
|
|
78.0 |
|
(49 |
)% |
|||||
| Income tax provision |
|
5.0 |
|
|
8.7 |
|
(43 |
)% |
|
9.2 |
|
|
17.5 |
|
(47 |
)% |
|||||
| Net income | $ |
16.8 |
|
$ |
30.0 |
|
(44 |
)% |
$ |
30.6 |
|
$ |
60.5 |
|
(49 |
)% |
|||||
| Net income per share: | |||||||||||||||||||||
| Basic | $ |
0.51 |
|
$ |
0.92 |
|
(45 |
)% |
$ |
0.94 |
|
$ |
1.86 |
|
(49 |
)% |
|||||
| Diluted | $ |
0.51 |
|
$ |
0.92 |
|
(45 |
)% |
$ |
0.93 |
|
$ |
1.86 |
|
(50 |
)% |
|||||
| Weighted average shares outstanding: | |||||||||||||||||||||
| Basic |
|
32.8 |
|
|
32.5 |
|
|
32.7 |
|
|
32.5 |
|
|||||||||
| Diluted |
|
32.9 |
|
|
32.5 |
|
|
32.8 |
|
|
32.6 |
|
|||||||||
| Dividends declared per share | $ |
0.09 |
|
$ |
0.09 |
|
$ |
0.18 |
|
$ |
0.18 |
|
|||||||||
HELIOS TECHNOLOGIES CONSOLIDATED BALANCE SHEETS (In millions, except per share data) |
|||||||
| July 1, 2023 | December 31, 2022 | ||||||
| (Unaudited) | |||||||
| Assets | |||||||
| Current assets: | |||||||
| Cash and cash equivalents | $ |
37.5 |
|
$ |
43.7 |
|
|
| Accounts receivable, net of allowance for | |||||||
| credit losses of |
|
140.1 |
|
|
125.1 |
|
|
| Inventories, net |
|
205.7 |
|
|
191.6 |
|
|
| Income taxes receivable |
|
7.3 |
|
|
10.2 |
|
|
| Other current assets |
|
22.4 |
|
|
17.9 |
|
|
| Total current assets |
|
413.0 |
|
|
388.5 |
|
|
| Property, plant and equipment, net |
|
217.9 |
|
|
175.7 |
|
|
| Deferred income taxes |
|
2.1 |
|
|
1.6 |
|
|
| Goodwill |
|
510.0 |
|
|
468.5 |
|
|
| Other intangible assets, net |
|
441.8 |
|
|
405.6 |
|
|
| Other assets |
|
25.9 |
|
|
23.8 |
|
|
| Total assets | $ |
1,610.7 |
|
$ |
1,463.7 |
|
|
| Liabilities and shareholders’ equity | |||||||
| Current liabilities: | |||||||
| Accounts payable | $ |
71.6 |
|
$ |
73.7 |
|
|
| Accrued compensation and benefits |
|
21.8 |
|
|
21.1 |
|
|
| Other accrued expenses and current liabilities |
|
22.7 |
|
|
32.0 |
|
|
| Current portion of long-term non-revolving debt, net |
|
20.5 |
|
|
19.0 |
|
|
| Dividends payable |
|
3.0 |
|
|
2.9 |
|
|
| Income taxes payable |
|
6.4 |
|
|
3.6 |
|
|
| Total current liabilities |
|
146.0 |
|
|
152.3 |
|
|
| Revolving lines of credit |
|
218.9 |
|
|
261.3 |
|
|
| Long-term non-revolving debt, net |
|
309.7 |
|
|
164.2 |
|
|
| Deferred income taxes |
|
62.0 |
|
|
61.0 |
|
|
| Other noncurrent liabilities |
|
26.6 |
|
|
30.0 |
|
|
| Total liabilities |
|
763.2 |
|
|
668.8 |
|
|
| Commitments and contingencies |
|
- |
|
|
- |
|
|
| Shareholders’ equity: | |||||||
| Preferred stock, par value |
|||||||
| no shares issued or outstanding |
|
- |
|
|
- |
|
|
| Common stock, par value |
|||||||
| 33.0 and 32.6 shares issued and outstanding |
|
- |
|
|
- |
|
|
| Capital in excess of par value |
|
428.4 |
|
|
404.3 |
|
|
| Retained earnings |
|
474.7 |
|
|
450.0 |
|
|
| Accumulated other comprehensive loss |
|
(55.6 |
) |
|
(59.4 |
) |
|
| Total shareholders’ equity |
|
847.5 |
|
|
794.9 |
|
|
| Total liabilities and shareholders’ equity | $ |
1,610.7 |
|
$ |
1,463.7 |
|
|
HELIOS TECHNOLOGIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In millions) (Unaudited) |
|||||||
| For the Six Months Ended | |||||||
| July 1, 2023 | July 2, 2022 | ||||||
| Cash flows from operating activities: | |||||||
| Net income | $ |
30.6 |
|
$ |
60.5 |
|
|
| Adjustments to reconcile net income to | |||||||
| net cash provided by operating activities: | |||||||
| Depreciation and amortization |
|
31.3 |
|
|
25.0 |
|
|
| Stock-based compensation expense |
|
6.5 |
|
|
4.4 |
|
|
| Amortization of debt issuance costs |
|
0.3 |
|
|
0.2 |
|
|
| Benefit for deferred income taxes |
|
(2.1 |
) |
|
(1.7 |
) |
|
| Forward contract losses (gains), net |
|
0.4 |
|
|
(4.2 |
) |
|
| Other, net |
|
0.4 |
|
|
1.3 |
|
|
| (Increase) decrease in, net of acquisitions: | |||||||
| Accounts receivable |
|
(8.5 |
) |
|
(20.0 |
) |
|
| Inventories |
|
(9.6 |
) |
|
(17.9 |
) |
|
| Income taxes receivable |
|
3.3 |
|
|
- |
|
|
| Other current assets |
|
(4.9 |
) |
|
1.7 |
|
|
| Other assets |
|
3.1 |
|
|
8.2 |
|
|
| Increase (decrease) in, net of acquisitions: | |||||||
| Accounts payable |
|
(3.5 |
) |
|
(6.4 |
) |
|
| Accrued expenses and other liabilities |
|
(5.6 |
) |
|
(2.6 |
) |
|
| Income taxes payable |
|
2.7 |
|
|
3.1 |
|
|
| Other noncurrent liabilities |
|
(3.3 |
) |
|
(7.4 |
) |
|
| Contingent consideration payments in excess acquisition date fair value |
|
(2.7 |
) |
|
- |
|
|
| Net cash provided by operating activities |
|
38.4 |
|
|
44.2 |
|
|
| Cash flows from investing activities: | |||||||
| Business acquisitions, net of cash acquired |
|
(114.8 |
) |
|
1.3 |
|
|
| Capital expenditures |
|
(19.6 |
) |
|
(13.5 |
) |
|
| Proceeds from dispositions of property, plant and equipment |
|
0.2 |
|
|
1.9 |
|
|
| Cash settlement of forward contracts |
|
0.4 |
|
|
2.6 |
|
|
| Software development costs |
|
(2.0 |
) |
|
(1.5 |
) |
|
| Net cash used in investing activities |
|
(135.8 |
) |
|
(9.2 |
) |
|
| Cash flows from financing activities: | |||||||
| Borrowings on revolving credit facilities |
|
142.7 |
|
|
39.2 |
|
|
| Repayment of borrowings on revolving credit facilities |
|
(188.6 |
) |
|
(47.6 |
) |
|
| Borrowings on long-term non-revolving debt |
|
160.0 |
|
|
- |
|
|
| Repayment of borrowings on long-term non-revolving debt |
|
(12.3 |
) |
|
(8.5 |
) |
|
| Proceeds from stock issued |
|
1.0 |
|
|
1.2 |
|
|
| Dividends to shareholders |
|
(5.9 |
) |
|
(5.8 |
) |
|
| Payment of employee tax withholding on equity award vestings |
|
(2.1 |
) |
|
(2.5 |
) |
|
| Payment of contingent consideration liability |
|
(3.4 |
) |
|
- |
|
|
| Other financing activities |
|
(1.3 |
) |
|
(0.8 |
) |
|
| Net cash provided by (used in) financing activities |
|
90.1 |
|
|
(24.8 |
) |
|
| Effect of exchange rate changes on cash and cash equivalents |
|
1.1 |
|
|
2.6 |
|
|
| Net (decrease) increase in cash and cash equivalents |
|
(6.2 |
) |
|
12.8 |
|
|
| Cash and cash equivalents, beginning of period |
|
43.7 |
|
|
28.6 |
|
|
| Cash and cash equivalents, end of period | $ |
37.5 |
|
$ |
41.4 |
|
|
HELIOS TECHNOLOGIES SEGMENT DATA (In millions) (Unaudited) |
|||||||||||||||
| For the Three Months Ended | For the Six Months Ended | ||||||||||||||
| July 1, 2023 | July 2, 2022 | July 1, 2023 | July 2, 2022 | ||||||||||||
| Sales: | |||||||||||||||
| Hydraulics | $ |
152.4 |
|
$ |
142.8 |
|
$ |
300.1 |
|
$ |
279.9 |
|
|||
| Electronics |
|
75.2 |
|
|
98.9 |
|
|
140.7 |
|
|
202.3 |
|
|||
| Consolidated | $ |
227.6 |
|
$ |
241.7 |
|
$ |
440.8 |
|
$ |
482.2 |
|
|||
| Gross profit and margin: | |||||||||||||||
| Hydraulics | $ |
49.7 |
|
$ |
49.5 |
|
$ |
99.6 |
|
$ |
100.3 |
|
|||
|
32.6 |
% |
|
34.7 |
% |
|
33.2 |
% |
|
35.8 |
% |
||||
| Electronics |
|
26.1 |
|
|
32.8 |
|
|
47.2 |
|
|
65.6 |
|
|||
|
34.7 |
% |
|
33.2 |
% |
|
33.5 |
% |
|
32.4 |
% |
||||
| Consolidated | $ |
75.8 |
|
$ |
82.3 |
|
$ |
146.8 |
|
$ |
166.0 |
|
|||
|
33.3 |
% |
|
34.1 |
% |
|
33.3 |
% |
|
34.4 |
% |
||||
| Operating income (loss) and margin: | |||||||||||||||
| Hydraulics | $ |
27.0 |
|
$ |
31.1 |
|
$ |
55.0 |
|
$ |
62.7 |
|
|||
|
17.7 |
% |
|
21.8 |
% |
|
18.3 |
% |
|
22.4 |
% |
||||
| Electronics |
|
12.0 |
|
|
20.3 |
|
|
19.5 |
|
|
40.8 |
|
|||
|
16.0 |
% |
|
20.5 |
% |
|
13.9 |
% |
|
20.2 |
% |
||||
| Corporate and other |
|
(9.5 |
) |
|
(8.4 |
) |
|
(20.2 |
) |
|
(17.6 |
) |
|||
| Consolidated | $ |
29.5 |
|
$ |
43.0 |
|
$ |
54.3 |
|
$ |
85.9 |
|
|||
|
13.0 |
% |
|
17.8 |
% |
|
12.3 |
% |
|
17.8 |
% |
||||
ORGANIC AND ACQUIRED REVENUE 1 (In millions) (Unaudited) |
|||||||||||||||||||||||
| Three Months Ended | Full Year Ended | Three Months Ended | Six Months Ended | ||||||||||||||||||||
| April 2, | July 2, | October 1, | December 31, | December 31, | April 1, | July 1, | July 1, | ||||||||||||||||
|
2022 |
|
2022 |
|
2022 |
|
2022 |
|
2022 |
|
2023 |
2023 |
|
2023 |
|||||||||
| Hydraulics | |||||||||||||||||||||||
| Organic | $ |
130.7 |
$ |
137.1 |
$ |
129.1 |
$ |
132.0 |
$ |
528.9 |
$ |
134.0 |
$ |
137.2 |
$ |
271.2 |
|||||||
| Acquisition |
|
6.4 |
|
5.7 |
|
2.1 |
|
8.2 |
|
22.4 |
|
13.7 |
|
15.2 |
|
28.9 |
|||||||
| Total | $ |
137.1 |
$ |
142.8 |
$ |
131.2 |
$ |
140.2 |
$ |
551.3 |
$ |
147.7 |
$ |
152.4 |
$ |
300.1 |
|||||||
| Electronics | |||||||||||||||||||||||
| Organic | $ |
102.7 |
$ |
97.9 |
$ |
75.2 |
$ |
55.8 |
$ |
331.6 |
$ |
65.5 |
$ |
74.0 |
$ |
139.5 |
|||||||
| Acquisition |
|
0.8 |
|
1.0 |
|
0.7 |
|
- |
|
2.5 |
|
- |
|
1.2 |
|
1.2 |
|||||||
| Total | $ |
103.4 |
$ |
98.9 |
$ |
75.9 |
$ |
55.8 |
$ |
334.1 |
$ |
65.5 |
$ |
75.2 |
$ |
140.7 |
|||||||
| Consolidated | |||||||||||||||||||||||
| Organic | $ |
233.4 |
$ |
235.0 |
$ |
204.3 |
$ |
187.8 |
$ |
860.5 |
$ |
199.5 |
$ |
211.2 |
$ |
410.7 |
|||||||
| Acquisition |
|
7.2 |
|
6.6 |
|
2.9 |
|
8.2 |
|
24.9 |
|
13.7 |
|
16.4 |
|
30.1 |
|||||||
| Total | $ |
240.5 |
$ |
241.7 |
$ |
207.2 |
$ |
196.0 |
$ |
885.4 |
$ |
213.2 |
$ |
227.6 |
$ |
440.8 |
|||||||
HELIOS TECHNOLOGIES
ADDITIONAL INFORMATION
(Unaudited)
| 2023 Sales by Geographic Region and Segment | |||||||||||||||
| ($ in millions) | |||||||||||||||
| Q1 | % Change y/y |
Q2 | % Change y/y |
YTD 2023 | % Change y/y |
||||||||||
| Hydraulics | $ |
57.9 |
|
34 |
% |
$ |
60.6 |
|
21 |
% |
$ |
118.5 |
|
27 |
% |
| Electronics |
|
55.1 |
|
(29 |
%) |
|
63.2 |
|
(21 |
%) |
|
118.3 |
|
(25 |
%) |
| Consol. |
|
113.0 |
|
(6 |
%) |
|
123.8 |
|
(5 |
%) |
|
236.8 |
|
(6 |
%) |
| % of total |
|
53 |
% |
|
54 |
% |
|
54 |
% |
||||||
| EMEA: | |||||||||||||||
| Hydraulics | $ |
49.4 |
|
(7 |
%) |
$ |
51.3 |
|
5 |
% |
$ |
100.7 |
|
(1 |
%) |
| Electronics |
|
6.7 |
|
(43 |
%) |
|
7.0 |
|
(43 |
%) |
|
13.7 |
|
(43 |
%) |
| Consol. EMEA |
|
56.1 |
|
(13 |
%) |
|
58.3 |
|
(5 |
%) |
|
114.4 |
|
(9 |
%) |
| % of total |
|
26 |
% |
|
26 |
% |
|
26 |
% |
||||||
| APAC: | |||||||||||||||
| Hydraulics | $ |
40.4 |
|
(2 |
%) |
$ |
40.5 |
|
(8 |
%) |
$ |
80.9 |
|
(5 |
%) |
| Electronics |
|
3.7 |
|
(73 |
%) |
|
5.0 |
|
(22 |
%) |
|
8.7 |
|
(57 |
%) |
| Consol. APAC |
|
44.1 |
|
(20 |
%) |
|
45.5 |
|
(10 |
%) |
|
89.6 |
|
(15 |
%) |
| % of total |
|
21 |
% |
|
20 |
% |
|
20 |
% |
||||||
| Total | $ |
213.2 |
|
(11 |
%) |
$ |
227.6 |
|
(6 |
%) |
$ |
440.8 |
|
(9 |
%) |
| 2022 Sales by Geographic Region and Segment | |||||||||||||||||||||||||
| ($ in millions) | |||||||||||||||||||||||||
|
Q1 |
% Change
|
Q2 |
% Change
|
Q3 |
% Change
|
Q4 |
% Change
|
2022 |
% Change
|
|||||||||||||||
| Hydraulics | $ |
43.1 |
|
26 |
% |
$ |
49.9 |
|
20 |
% |
$ |
49.7 |
|
10 |
% |
$ |
56.8 |
|
22 |
% |
$ |
199.5 |
|
19 |
% |
| Electronics |
|
77.7 |
|
20 |
% |
|
80.2 |
|
25 |
% |
|
65.0 |
|
1 |
% |
|
48.0 |
|
(26 |
%) |
|
270.9 |
|
5 |
% |
| Consol. |
|
120.8 |
|
22 |
% |
|
130.1 |
|
23 |
% |
|
114.7 |
|
5 |
% |
|
104.8 |
|
(6 |
%) |
|
470.4 |
|
11 |
% |
| % of total |
|
50 |
% |
|
54 |
% |
|
55 |
% |
|
53 |
% |
|
53 |
% |
||||||||||
| EMEA: | |||||||||||||||||||||||||
| Hydraulics | $ |
52.9 |
|
22 |
% |
$ |
49.0 |
|
5 |
% |
$ |
41.3 |
|
(8 |
%) |
$ |
43.3 |
|
(4 |
%) |
$ |
186.5 |
|
4 |
% |
| Electronics |
|
11.8 |
|
27 |
% |
|
12.3 |
|
12 |
% |
|
7.7 |
|
(31 |
%) |
|
5.3 |
|
(50 |
%) |
|
37.1 |
|
(12 |
%) |
| Consol. EMEA |
|
64.7 |
|
23 |
% |
|
61.3 |
|
6 |
% |
|
49.0 |
|
(12 |
%) |
|
48.6 |
|
(13 |
%) |
|
223.6 |
|
1 |
% |
| % of total |
|
27 |
% |
|
25 |
% |
|
24 |
% |
|
25 |
% |
|
25 |
% |
||||||||||
| APAC: | |||||||||||||||||||||||||
| Hydraulics | $ |
41.1 |
|
(1 |
%) |
$ |
43.9 |
|
(2 |
%) |
$ |
40.2 |
|
(7 |
%) |
$ |
40.1 |
|
3 |
% |
$ |
165.3 |
|
(2 |
%) |
| Electronics |
|
13.9 |
|
23 |
% |
|
6.4 |
|
(58 |
%) |
|
3.3 |
|
(77 |
%) |
|
2.5 |
|
(79 |
%) |
|
26.1 |
|
(51 |
%) |
| Consol. APAC |
|
55.0 |
|
4 |
% |
|
50.3 |
|
(16 |
%) |
|
43.5 |
|
(25 |
%) |
|
42.6 |
|
(16 |
%) |
|
191.4 |
|
(14 |
%) |
| % of total |
|
23 |
% |
|
21 |
% |
|
21 |
% |
|
22 |
% |
|
22 |
% |
||||||||||
| Total | $ |
240.5 |
|
17 |
% |
$ |
241.7 |
|
8 |
% |
$ |
207.2 |
|
(7 |
%) |
$ |
196.0 |
|
(10 |
%) |
$ |
885.4 |
|
2 |
% |
HELIOS TECHNOLOGIES Non-GAAP Adjusted Operating Income RECONCILIATION (In millions) (Unaudited) |
|||||||||||||||
| Three Months Ended | Six Months Ended | ||||||||||||||
| July 1, 2023 | July 2, 2022 | July 1, 2023 | July 2, 2022 | ||||||||||||
| GAAP operating income | $ |
29.5 |
|
$ |
43.0 |
|
$ |
54.3 |
|
$ |
85.9 |
|
|||
| Acquisition-related amortization of intangible assets |
|
8.3 |
|
|
6.8 |
|
|
16.4 |
|
|
13.8 |
|
|||
| Acquisition and financing-related expenses(A) |
|
1.1 |
|
|
0.9 |
|
|
2.8 |
|
|
1.8 |
|
|||
| Restructuring charges(B) |
|
3.1 |
|
|
1.7 |
|
|
4.3 |
|
|
1.9 |
|
|||
| Officer transition costs |
|
- |
|
|
- |
|
|
0.8 |
|
|
0.3 |
|
|||
| Acquisition integration costs (C) |
|
0.1 |
|
|
0.6 |
|
|
0.2 |
|
|
1.7 |
|
|||
| Other |
|
- |
|
|
0.2 |
|
|
(0.1 |
) |
|
0.2 |
|
|||
| Non-GAAP adjusted operating income | $ |
42.1 |
|
$ |
53.2 |
|
$ |
78.7 |
|
$ |
105.6 |
|
|||
| GAAP operating margin |
|
13.0 |
% |
|
17.8 |
% |
|
12.3 |
% |
|
17.8 |
% |
|||
| Non-GAAP adjusted operating margin |
|
18.5 |
% |
|
22.0 |
% |
|
17.9 |
% |
|
21.9 |
% |
|||
Adjusted EBITDA RECONCILIATION (In millions) (Unaudited) |
|||||||||||||||||||
| Three Months Ended | Six Months Ended | Twelve Months Ended | |||||||||||||||||
| July 1, 2023 | July 2, 2022 | July 1, 2023 | July 2, 2022 | July 1, 2023 | |||||||||||||||
| Net income | $ |
16.8 |
|
$ |
30.0 |
|
$ |
30.6 |
|
$ |
60.5 |
|
$ |
68.6 |
|
||||
| Interest expense, net |
|
7.8 |
|
|
3.8 |
|
|
14.0 |
|
|
7.6 |
|
|
23.1 |
|
||||
| Income tax provision |
|
5.0 |
|
|
8.7 |
|
|
9.2 |
|
|
17.5 |
|
|
15.0 |
|
||||
| Depreciation and amortization |
|
16.1 |
|
|
12.4 |
|
|
31.3 |
|
|
25.0 |
|
|
57.9 |
|
||||
| EBITDA |
|
45.7 |
|
|
55.0 |
|
|
85.1 |
|
|
110.6 |
|
|
164.6 |
|
||||
| Acquisition and financing-related expenses(A) |
|
1.1 |
|
|
0.9 |
|
|
2.8 |
|
|
1.8 |
|
|
6.9 |
|
||||
| Restructuring charges(B) |
|
3.1 |
|
|
1.7 |
|
|
4.3 |
|
|
1.9 |
|
|
5.8 |
|
||||
| Officer transition costs |
|
- |
|
|
- |
|
|
0.8 |
|
|
0.3 |
|
|
0.8 |
|
||||
| Acquisition integration costs (C) |
|
0.1 |
|
|
0.6 |
|
|
0.2 |
|
|
1.7 |
|
|
2.0 |
|
||||
| Change in fair value of contingent consideration |
|
0.6 |
|
|
0.6 |
|
|
0.7 |
|
|
1.5 |
|
|
1.1 |
|
||||
| Other |
|
(0.5 |
) |
|
0.2 |
|
|
(0.5 |
) |
|
0.2 |
|
|
(0.6 |
) |
||||
| Adjusted EBITDA | $ |
50.1 |
|
$ |
59.0 |
|
$ |
93.4 |
|
$ |
118.0 |
|
$ |
180.6 |
|
||||
| Adjusted EBITDA margin |
|
22.0 |
% |
|
24.4 |
% |
|
21.2 |
% |
|
24.5 |
% |
|
21.4 |
% |
||||
| Pre-acquisition adjusted EBITDA, 2023 Schultes and i3, 2022 Daman |
|
7.4 |
|
||||||||||||||||
| TTM Pro forma adjusted EBITDA | $ |
188.0 |
|
||||||||||||||||
HELIOS TECHNOLOGIES Non-GAAP Cash Net Income RECONCILIATION (In millions) (Unaudited) |
|||||||||||||||
| Three Months Ended | Six Months Ended | ||||||||||||||
| July 1, 2023 | July 2, 2022 | July 1, 2023 | July 2, 2022 | ||||||||||||
| Net income | $ |
16.8 |
|
$ |
30.0 |
|
$ |
30.6 |
|
$ |
60.5 |
|
|||
| Amortization of intangible assets(D) |
|
8.4 |
|
|
6.9 |
|
|
16.8 |
|
|
14.0 |
|
|||
| Acquisition and financing-related expenses(A) |
|
1.1 |
|
|
0.9 |
|
|
2.8 |
|
|
1.8 |
|
|||
| Restructuring charges(B) |
|
3.1 |
|
|
1.7 |
|
|
4.3 |
|
|
1.9 |
|
|||
| Officer transition costs |
|
- |
|
|
- |
|
|
0.8 |
|
|
0.3 |
|
|||
| Acquisition integration costs (C) |
|
0.1 |
|
|
0.6 |
|
|
0.2 |
|
|
1.7 |
|
|||
| Change in fair value of contingent consideration |
|
0.6 |
|
|
0.6 |
|
|
0.7 |
|
|
1.5 |
|
|||
| Other |
|
(0.5 |
) |
|
0.2 |
|
|
(0.5 |
) |
|
0.2 |
|
|||
| Tax effect of above |
|
(2.8 |
) |
|
(2.7 |
) |
|
(5.5 |
) |
|
(5.4 |
) |
|||
| Non-GAAP cash net income | $ |
26.8 |
|
$ |
38.3 |
|
$ |
50.2 |
|
$ |
76.6 |
|
|||
| Non-GAAP cash net income per diluted share | $ |
0.81 |
|
$ |
1.18 |
|
$ |
1.53 |
|
$ |
2.35 |
|
|||
(A) Acquisition and financing-related expenses include costs associated with our M&A activities. We believe these costs are not representative of the Company's operational performance and it is therefore meaningful to analyze results with the costs excluded. For the three months and six months ended July 1, 2023, the charges include recurring labor costs of
(B) Restructuring activities include costs associated with the creation of our two new Regional Operational Centers of Excellence. We believe these costs are not representative of the Company's operational performance and it is therefore meaningful to analyze results with the costs excluded. For the three months and six months ended July 1, 2023, the charges include non-recurring labor costs of
(C) Acquisition integration activities include costs associated with integrating our recently acquired businesses, which can occur up to 18 months after acquisition date. We believe these costs are not representative of the Company's operational performance and it is therefore meaningful to analyze results with the costs excluded. For the three months and six months ended July 1, 2023, these costs totaled
(D) Amortization of intangible assets presented here includes
HELIOS TECHNOLOGIES Non-GAAP Sales Growth RECONCILIATION (In millions) (Unaudited) |
|||||||||||||||||||||||
| Three Months Ended | Six Months Ended | ||||||||||||||||||||||
| Hydraulics | Electronics | Consolidated | Hydraulics | Electronics | Consolidated | ||||||||||||||||||
| Q2 2023 Net Sales | $ |
152.4 |
|
$ |
75.2 |
|
$ |
227.6 |
|
$ |
300.1 |
|
$ |
140.7 |
|
$ |
440.8 |
|
|||||
| Impact of foreign currency translation(E) |
|
0.2 |
|
|
0.1 |
|
|
0.3 |
|
|
3.4 |
|
|
0.3 |
|
|
3.7 |
|
|||||
| Net Sales in constant currency |
|
152.6 |
|
|
75.3 |
|
|
227.9 |
|
|
303.5 |
|
|
141.0 |
|
|
444.5 |
|
|||||
| Less: Acquisition related sales |
|
(15.2 |
) |
|
(1.2 |
) |
|
(16.4 |
) |
|
(28.9 |
) |
|
(1.2 |
) |
|
(30.1 |
) |
|||||
| Organic sales in constant currency | $ |
137.4 |
|
$ |
74.1 |
|
$ |
211.5 |
|
$ |
274.6 |
|
$ |
139.8 |
|
$ |
414.4 |
|
|||||
| Q2 2022 Net Sales | $ |
142.8 |
|
$ |
98.9 |
|
$ |
241.7 |
|
$ |
279.9 |
|
$ |
202.3 |
|
$ |
482.2 |
|
|||||
| Net sales growth |
|
7 |
% |
|
-24 |
% |
|
-6 |
% |
|
7 |
% |
|
-30 |
% |
|
-9 |
% |
|||||
| Net sales growth in constant currency |
|
7 |
% |
|
-24 |
% |
|
-6 |
% |
|
8 |
% |
|
-30 |
% |
|
-8 |
% |
|||||
| Organic net sales growth in constant currency |
|
-4 |
% |
|
-25 |
% |
|
-12 |
% |
|
-2 |
% |
|
-31 |
% |
|
-14 |
% |
|||||
| (E) The impact from foreign currency translation is calculated by translating current period activity at average prior period exchange rates. | |||||||||||||||||||||||
Net Debt-to-Adjusted EBITDA RECONCILIATION (In millions) (Unaudited) |
||
| As of | ||
| July 1, 2023 | ||
| Current portion of long-term non-revolving debt, net | 20.5 |
|
| Revolving lines of credit | 218.9 |
|
| Long-term non-revolving debt, net | 309.7 |
|
| Total debt | 549.1 |
|
| Less: Cash and cash equivalents | 37.5 |
|
| Net debt | 511.6 |
|
| TTM Pro forma adjusted EBITDA (F) | 188.0 |
|
| Ratio of net debt to TTM pro forma adjusted EBITDA | 2.72 |
|
| (F) On a pro-forma basis for |
||
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, cash net income per diluted share and sales in constant currency are not measures determined in accordance with generally accepted accounting principles in
_____________________________________
1 Revenue is considered to be acquisition related until the acquisition has been included in the Company’s financial results for one full year.
View source version on businesswire.com: https://www.businesswire.com/news/home/20230807366355/en/
Tania Almond
Vice President, Investor Relations and Corporate Communication
(941) 362-1333
tania.almond@HLIO.com
Deborah Pawlowski
Kei Advisors LLC
(716) 843-3908
dpawlowski@keiadvisors.com
Source: Helios Technologies, Inc.
FAQ
What was the sequential top line growth in Q2 2023?
What was the change in diluted EPS compared to the previous quarter?
What is the reason for updating the 2023 outlook?
What is the company's focus on driving innovation?
How did the operating margin change sequentially?
