Company Overview
Helios Technologies, a global leader in highly engineered motion control and electronic controls technology, has long been a reliable partner for diverse end markets, including construction, material handling, agriculture, energy, and recreational vehicles. With a rich history spanning over four decades, the company has navigated industry challenges, embraced transformative technologies, and solidified its position as a trusted innovator in its field.
Founded in 1996, Helios Technologies, Inc. has established itself as a pioneer in the motion control and electronic controls industry. The company operates through two main business segments: Hydraulics and Electronics. In the Hydraulics segment, Helios designs and manufactures hydraulic components and systems used to transmit power and control force, speed, and motion. This includes a range of products such as cartridge valves, manifolds, and quick release couplings. Notably, Helios has developed a fundamentally different design platform for its cartridge valves, offering superior performance and reliability compared to competitors' products.
The Electronics segment of Helios provides comprehensive, fully-tailored display and control solutions for various applications, including engines, engine-driven equipment, specialty vehicles, therapy baths, and traditional and swim spas. The company's expertise in this segment extends to displays, panels, sensors, valves, and other end-devices. Leveraging its extensive application knowledge and capabilities in software, embedded programming, hardware, and engineering, Helios delivers customized solutions that meet the specific needs of its customers.
Helios has pursued a growth strategy that combines organic expansion with strategic acquisitions. Key acquisitions have played a crucial role in diversifying the company's product offerings, expanding its geographic presence, and enhancing its ability to provide integrated system solutions. Notable acquisitions include Faster in 2017, Enovation Controls in 2018, and Balboa Water Group in 2019. These strategic moves have significantly strengthened Helios' market position and capabilities across various industries.
In recent years, Helios has faced challenges stemming from macroeconomic headwinds affecting several of its end markets, as well as the impacts of the COVID-19 pandemic. Despite these obstacles, the company has maintained a steadfast focus on operational excellence, new product development, and prudent capital allocation, positioning itself to navigate these challenges and ensure long-term success.
Business Segments
Today, Helios operates in two main business segments: Hydraulics and Electronics. The Hydraulics segment designs and manufactures hydraulic motion control and fluid conveyance technology products, including cartridge valves, manifolds, and quick release couplings. This segment is divided into two key technologies - motion control technology (MCT) and fluid conveyance technology (FCT). The MCT products provide simultaneous control of acceleration, velocity and position, including the company's proprietary cartridge valve technology. These cartridge valves are offered in several size ranges and include both electrically actuated and hydro-mechanical products. The FCT products transfer hydraulic fluid from one point to another, such as the company's quick release couplings which allow users to connect and disconnect quickly from any hydraulic circuit without leakage.
The Electronics segment, on the other hand, provides customized electronic controls systems, displays, wire harnesses, and software solutions for a variety of end markets. Product categories include traditional mechanical and electronic gauge instrumentation, plug and go CAN-based instruments, robust environmentally sealed controllers, hydraulic controllers, engineered panels, and printed circuit board assemblies and wiring harnesses.
Both segments leverage the company's global operating network to drive sales, marketing, innovation, customer relationships and operational excellence across the business. Helios is focused on expanding its technologies and markets, as well as pursuing strategic acquisitions, to diversify its end markets and revenue sources. The company continues to invest in research and development to support new product innovations across its Hydraulics and Electronics platforms.
Financials
Financially, Helios has demonstrated its resilience and adaptability in the face of industry headwinds. In the fiscal year 2024, the company reported revenue of $805.9 million, a 4% decline compared to the previous year, primarily due to weakness in the agriculture, mobile, and industrial markets. However, the company's focus on operational efficiency and cost management allowed it to maintain a healthy gross margin of 31.3% and an operating margin of 10.2%.
Breaking down the performance by segment, the Hydraulics segment accounted for $537.2 million in net sales, or 67% of the company's total revenue. Gross profit for the Hydraulics segment was $165.8 million, with a gross margin of 30.9%. The Electronics segment generated $268.7 million in net sales, or 33% of total revenue. Gross profit for the Electronics segment was $86.5 million, with a gross margin of 32.2%.
Net income for the fiscal year 2024 was $39.0 million. The company's operating cash flow reached a record $122.1 million, while free cash flow stood at $91.7 million.
In the most recent quarter (Q4 2024), Helios reported revenue of $179.5 million, representing a year-over-year decline of 7.2%. Net income for the quarter was $4.8 million, with operating cash flow of $35.7 million. Despite the lower volume, the company managed to expand its gross margin by 150 basis points, driven by pricing actions and effective cost management.
Liquidity
One of the standout achievements for Helios in 2024 was its record cash generation, with cash from operations reaching $122.1 million, a 45.5% increase over the prior year. This strong cash flow, coupled with the company's disciplined approach to debt management, enabled Helios to reduce its total debt by 14% or $75.3 million during the year, further strengthening its balance sheet and financial flexibility.
As of the end of fiscal year 2024, Helios reported a debt-to-equity ratio of 0.52, with total debt of $446.5 million and shareholders' equity of $864.4 million. The company had $44.1 million in cash on hand and access to $352.4 million under its $500 million revolving credit facility. Helios maintained a strong liquidity position with a current ratio of 2.77 and a quick ratio of 1.40.
The company's focus on improving its cash conversion cycle led to a reduction in inventory by $25 million or 12% during the year, further enhancing its financial position.
Geographic Distribution
Geographically, Helios' sales were fairly evenly distributed, with 54% of revenue coming from the Americas, 23% from Europe, the Middle East, and Africa (EMEA), and 23% from the Asia-Pacific (APAC) region. This diversified revenue stream has helped the company navigate regional economic fluctuations and mitigate risks. Growth was strongest in the APAC region, driven particularly by Australia, while both EMEA and the Americas experienced declines.
Future Outlook
Looking ahead, Helios has outlined a clear strategic vision centered on reenergizing its go-to-market strategies, driving continuous innovation, and optimizing its operational efficiency. For the fiscal year 2025, Helios has established an outlook with sales in the range of $775 million to $825 million and adjusted EBITDA of $140 million to $165 million. This guidance reflects the company's confidence in the long-term growth potential of its markets and the effectiveness of its strategic initiatives.
For the first quarter of 2025, Helios expects sales in the range of $185 million to $190 million, with an adjusted EBITDA margin between 16% and 17%. The company anticipates that the first half of 2025 will be volume-challenged, while sales are expected to increasingly grow on a year-over-year basis in the second half of the year.
Strategic Initiatives
One such initiative is the company's focus on developing customer-centric solutions and accelerating the pace of new product launches. Helios has a rich pipeline of innovative offerings, including the recently introduced S35 display, which combines advanced technology, rugged durability, and exceptional usability to deliver a superior entry-level display solution for industrial and electronic applications.
Additionally, Helios has made strides in expanding its presence in the commercial food service market, leveraging its Cygnus Reach software platform to enhance the scalability, security, and data-driven capabilities of Alto-Shaam's ChefLinc remote oven management system. This collaboration underscores the company's ability to identify and capitalize on emerging growth opportunities.
The company's commitment to shareholder value is also evident in its recently announced $100 million multi-year share repurchase program, which complements its long-standing history of dividend payments, further demonstrating its confidence in the future of the business.
Industry Trends
Helios operates in a dynamic industry environment. In 2024, fluid power industry shipments in the U.S. declined by 15%, following a 4% decline in 2023. The electronics manufacturing Purchasing Managers' Index (PMI) in North America showed mixed trends, with declines in some periods offset by increases in others. These industry trends have influenced Helios' performance and strategy, prompting the company to focus on operational efficiency and market diversification.
Conclusion
Despite the challenges presented by macroeconomic headwinds and industry-specific factors, Helios has proven its ability to navigate turbulent times and emerge stronger. Its diversified product portfolio, global footprint, and focus on operational excellence have enabled the company to maintain its profitability and market leadership.
As Helios continues to invest in innovation, strengthen its customer relationships, and optimize its operations, the company is well-positioned to capitalize on the growing demand for advanced motion control and electronic controls solutions across its diverse end markets. With a solid financial foundation, a clear strategic vision, and a talented team, Helios Technologies remains a compelling long-term investment opportunity for investors seeking exposure to the dynamic and rapidly evolving motion control and electronic controls industry.