Helios (HLIO) Q1 2026 Earnings Call Transcript

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DATE

Tuesday, May 12, 2026 at 9:00 a.m. ET

CALL PARTICIPANTS

• President and Chief Executive Officer — Sean Bagan
• Chief Financial Officer — Jeremy Evans
• Vice President, Investor Relations — Tania Almond

TAKEAWAYS

• Total Sales -- $228 million, up 17% year over year and above the high end of management's outlook.
• Pro Forma Sales Growth -- 23% year over year, excluding the Custom Fluidpower (CFP) divestiture and foreign exchange impacts, with both segments and all regions contributing.
• Gross Profit -- $75 million, a 25% increase, with gross margin expanding by 220 basis points to 32.8% due to higher sales volume, favorable segment mix, operational initiatives, and CFP divestiture impact.
• Operating Income -- $30 million, up 76%, with an operating margin of 13.1%, up 440 basis points.
• Adjusted EBITDA Margin -- 20.4%, a 310 basis point improvement and the third consecutive quarter above 20%.
• Diluted Non-GAAP EPS -- $0.80, an 82% increase, exceeding the high end of prior guidance.
• Hydraulics Segment Sales -- 10% growth year over year, or 19% pro forma, with operating income up 34% to $23.4 million and operating margin expanding by 300 basis points.
• Electronics Segment Sales -- 29% growth, with operating income up 78% to $14.2 million and operating margin expanding by 34 basis points.
• Cash Flow from Operations -- $24 million, and free cash flow of $17 million, both record first quarter totals for the company.
• Net Debt to Adjusted EBITDA -- 1.6x, down from 2.7x a year earlier, reaching the lowest level since 2018.
• Quarterly Dividend -- Increased by 33% to $0.12 per share, continuing 117 consecutive quarters of payments.
• Share Repurchases -- Nearly $5 million spent, leaving $82 million authorized for future buybacks.
• Full-Year Sales Outlook -- Increased to a range of $840 million to $870 million, projecting 8% pro forma growth at the midpoint.
• Full-Year Segment Guidance -- Hydraulics sales expected at $520 million–$535 million (up 7% midpoint, pro forma); Electronics at $320 million–$335 million (up 10% midpoint).
• Full-Year Adjusted EBITDA Margin Guidance -- Projected in the 19.5%-21% range; diluted non-GAAP EPS expected at $2.70–$2.95 (11% midpoint growth).
• 2Q 2026 Guidance -- Consolidated sales projected at $227 million–$232 million (up 16% midpoint, pro forma); Hydraulics at $141 million–$144 million (up 13% midpoint, pro forma); Electronics at $86 million–$88 million (up 21% midpoint).
• Order Intake -- 12 consecutive months, including April, of double-digit year-over-year order intake, with backlog up by double digits as well.
• New Product Launches -- Notable introductions include the Sun Hydraulics QMEH cartridge valve with proprietary position sensor technology, new thermal management products for data centers from Faster, and next-generation electronics platforms such as OpenView S70.
• Operational Excellence Initiatives -- Cited footprint optimization and productivity improvements in North America and Europe as key drivers toward increased margins and long-term targets.

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RISKS

• Management cited "the uncertain tariff landscape," inflationary pressures on fuel and energy costs, and "ongoing geopolitical tensions" as potential headwinds in the second half, with the statement: "We are also mindful of several second half considerations to our full year outlook including the uncertain tariff landscape, the inflationary pressures on fuel cost, the impact of rising energy prices, shift cost dynamics, ongoing geopolitical tensions, and broader recovery of cyclical markets."
• Segment commentary referenced persistent "pockets of softness in certain consumer exposed end markets, most notably marine."
• For the Americas agriculture market, management stated: "the U.S. continues to be a challenged market here in the Americas."
• Sustained margin expansion is partly contingent on successfully offsetting tariff and inflation-related cost headwinds through pricing and sourcing strategies, as explicitly discussed by management.

SUMMARY

Helios Technologies (NYSE:HLIO) delivered record first-quarter sales, gross profit, and cash generation, and raised its full-year financial outlook on the back of improved demand and operational execution. Management maintained long-term targets to double sales by 2030 and steadily expand adjusted operating and EBITDA margins, emphasizing continued progress on its core strategic priorities and capital deployment flexibility. Order backlog and pipeline strength, supported by new product launches and channel expansion, were presented as key drivers for sustained momentum across both business segments. The call also detailed the company's active management of cost, supply chain, and tariff headwinds, as well as capital allocation priorities that balanced organic investment, shareholder returns, and disciplined M&A pipeline development.

• Sean Bagan highlighted that net leverage reduction to 1.6x net debt to adjusted EBITDA "is not just a financial milestone. it is a strategic" enabling new capital deployment opportunities.
• Management stated that its "momentum model" and operational improvements have yielded three straight quarters of 20%+ adjusted EBITDA margin.
• Hydraulics performance benefited from "better fixed cost leverage on higher volume, lower material costs and the impact of the CFP divestiture," according to CFO Evans.
• During Q&A, it was noted by management that order and backlog trends continue to run at double-digit annual growth, providing positive visibility into short-cycle demand.
• The electronics segment outlook incorporates expected new wins, as management stated: "Our outlook for the rest of the year includes the impact from expected new wins as well as changes to both our order trends and our OEM forecast."
• Sustained improvement in cash conversion cycle—25-day enhancement year over year—was specifically flagged as contributing to first-quarter cash flow records.
• Supply chain risks, particularly electronic chip sourcing, were reported as not material at this point, and measures were taken to secure necessary supply.
• No revenue yet recognized from the new thermal management business with Faster, though management signaled confidence that this would begin to contribute in the second half of the year.
• Management's capital allocation in 2026 prioritizes organic investment, dividend growth, and identifying white-space M&A opportunities, clarifying that "there is nothing imminent at this point."

INDUSTRY GLOSSARY

• CFP (Custom Fluidpower): A former Helios Technologies hydraulics business, divested in September 2025 and relevant for pro forma financial comparisons.
• QMEH Cartridge Valve: A proprietary Sun Hydraulics cartridge valve featuring position sensor technology, launched at CONEXPO.
• OpenView S70: Next-generation electronic display platform designed for advanced control and monitoring applications.
• IEPA Refunds: Refers to potential tariff refunds related to the U.S. International Emergency Economic Powers Act, with process and timing uncertainties cited by management.
• Cash Conversion Cycle: The number of days it takes for a company to convert resource inputs into cash flows from sales; Helios reported a 25-day year-over-year improvement.

Full Conference Call Transcript

Sean will begin with highlights from the first quarter Jeremy will then review our financial results in more detail and provide our outlook Sean will return with some closing remarks and then we will open the call for questions. Before we get started, please turn to Slide 2 where you will find our Safe Harbor statement. As you may be aware, we will make some forward-looking during this presentation and the Q and A session These statements apply to future events that are subject to risks and uncertainties as well as other factors that could cause actual results to differ materially from those presented today.

These risks and uncertainties and other factors can be found in our annual report on Form 10 ks for 2025 along with our upcoming 10 Q to be filed with the Securities and Exchange Commission. You can find these documents on our website or at sec.gov. I will also point out that during today's call, we will discuss some non GAAP financial measures which we believe are useful in evaluating our performance. You should not consider the presentation of this additional information in isolation or as a substitute for results prepared in accordance with GAAP. We have provided reconciliations of comparable GAAP with non GAAP measures in the tables that accompany today's slides.

Please reference slides 3 through 5 as I now turn the call over to Sean.

Sean Bagan: Thanks, Tania, and welcome, everyone. We appreciate you joining us today. Anyone who watched this year's Kentucky Derby saw more than just a winner. They saw focused execution under pressure at exactly the right moment. Golden Tempo stayed focused found his stride, and delivered when it mattered most. We believe our first quarter performance tells a similar story Helios entered 2026 having done the hard work. Sharpening our go to market model, strengthening our balance sheet, and building a team and culture aligned around the core 2030 strategy we introduced at our Investor Day. And like that Saturday race, the results for Helios this quarter were not just a 1-headline moment.

They were a collection of firsts and records the highest quarterly sales ever for innovation controls our largest electronic segment business. A record first quarter of cash generation for the company. And our first ever regular dividend increase of 33%. And perhaps 1 of the most telling measures of how far we have come, we reduced our net leverage by more than a full turn in just 1 year bringing us to 1.6x net debt to adjusted EBITDA. The lowest level since the 2018. The balance sheet position is not just a financial milestone. it is a strategic 1. Opening a meaningful level of optionality in how we deploy capital as we pursue the next leg of our growth.

2025 was our year of repositioning, 2026 is where that work finds its stride. As we came out of the starting gates the 2030 financial targets, a plan built on 5% plus organic sales growth annually, Our first quarter performance did not just meet that bar, it cleared it decisively. Giving us early momentum against a 5-year road map that we intend to run all the way through. The core strategy laid out a clear set of performance priorities to double our sales by 2030 and expand adjusted operating and EBITDA margins to 20% plus and 25% plus, respectively.

The work we have done over the last 18 months to sharpen our go to market model invest in innovation, and enhance operational excellence across our global footprint is an outcome of our momentum model, the engine behind this performance. Our first quarter results reflect the effectiveness of the Helios business system, as we are executing our organic sales growth plans and improving our margins year over year while we manage through a choppy geopolitical environment and invest for future growth. Let me summarize the first quarter. With a more robust demand environment than expected, total sales exceeded the high end of our outlook range up 17% year over year to $228 million.

On a pro forma basis, excluding the custom fluid power or CFP divestiture, and the impact of foreign exchange sales grew 23%, with both segments and all regions contributing to the increase. Our profitability measures kept improving, as higher sales volume drove significant year over year expansion in our margins. We continue to deeply engage with our existing and prospective customers seeking out opportunities, leveraging our enhanced go to market model. Our teams from both hydraulics and electronics across our relevant major brands attended the CONEXPO trade show in the first quarter and showcased our latest products with a record level of show attendees present.

Based on the level of booth activity and leads we extracted, we are seeing healthy activity across most of the markets we address. On a consolidated pro forma basis, we saw year over year growth across all the major end markets that we serve. With our balance sheet in excellent shape, our Board of Directors approved the aforementioned increase to the quarterly dividend in March we continue to return capital to shareholders under our existing $100 million share repurchase authorization. These actions reflect our confidence in the long term outlook and alignment with the value creation framework we shared as part of the core strategy.

With that, I will turn the call over to Jeremy to review the financial results in more detail. Jeremy?

Jeremy Evans: Thank you, Sean, and good day, everyone. As I review our first quarter results, please refer to slides 6 through 8. First quarter sales were $228 million up 17% compared with $195 million in the prior year period, and above the expectations we laid out on our fourth quarter call. Changes in foreign exchange had nearly a 6 million favorable impact on a year over year basis and contributed approximately 2 million to the overachievement of our Q1 outlook. As a reminder, we divested CFP at the end of September, so the first quarter comparison is more meaningful on a pro forma basis.

Excluding the CFP sales in last year's first quarter and the foreign exchange impact, sales for the quarter were up 23%, year over year. Higher sales and improved absorption drove gross profit up 25% in the quarter to $75 million and gross margin expanded 220 basis points year over year to 32.8%. In addition to higher volumes, margin expansion was driven by favorable segment mix operational initiatives, and benefits from the CFP divestiture, partially offset by net tariff impacts and higher overhead expenses driven by equipment maintenance and energy costs. First quarter operating income rose 76% year over year to $30 million and operating margin expanded 440 basis points to 13.1% demonstrating the operating leverage inherent in the business.

On a non GAAP basis, adjusted operating margin in the quarter was 16.7%, up 33 basis points year over year. Adjusted EBITDA margin was 20.4% in the first quarter, up 310 basis points over the prior year, and the third consecutive quarter above 20%. Diluted EPS in the quarter was $0.59 up 168% compared with the prior year period. And diluted non GAAP EPS of $0.80 rose 82% exceeding the high end of our guidance range and a great start toward our expectation to deliver double digit EPS growth for the second consecutive year. The upside reflects the realized sales growth margin expansion, and solid operating performance. Turning to the segments, please refer to slide 9.

Growth remained broad based, driven by both segments and all regions. Hydraulic sales were up 10% and electronics up 29%. On a pro form a basis and normalizing for the impact of foreign exchange, hydraulics grew 19%. Regionally, we saw growth across the Americas and EMEA while APAC declined year over year as a result of the divestiture. On a pro forma basis, APAC grew over last year as well. Our business mix has shifted year over year to a greater weighting of electronics from not only the CFP divestiture, but also because our electronics segment has been growing faster on a relative basis.

By end market, hydraulics saw strength in mobile, especially in the construction category, along with continued signs of recovery in agriculture, while we have seen channel inventories normalize. Our lead times have improved with operational challenges behind us, and we are capitalizing on this to win more business. We have a clear path identified to drive incremental sales across a number of adjacent markets we have not historically participated in. All of this gives us confidence in driving sustainable growth across our segment.

Hydraulics gross profit in the quarter grew 18% year over year and gross margin expanded 220 basis points to 31.8% driven by better fixed cost leverage on higher volume, lower material costs and the impact of the CFP divestiture. Segment SG&A expenses in the quarter increased approximately $1 million or 4% primarily reflecting investments in wages and benefits, as well as research and development but improved as a percentage of sales. Segment operating income increased 34% to $23.4 million and operating margin expanded by 300 basis points. In electronics, demand remained robust across recreational markets including persistent strength with a large OEM customer that has been a key contributor to recent volume outperformance.

While there are still pockets of softness in certain consumer exposed end markets, most notably marine, we are realizing growth with health and wellness, mobile, and industrial. Overall, the electronics segment is performing extremely well on driving profitable sales growth. Electronics gross profit in the quarter was up 36% and gross margin expanded 170 basis points primarily driven by hard higher volumes and lower direct labor cost as a percentage of sales. SG&A expenses increased $2 million reflecting ongoing investment in engineering and research and development but improved as a percentage of sales. Segment operating income increased 78% to $14.2 million and operating margin expanded by 34 basis points.

On slide 10, we generated $24 million of cash from operations and $17 million of free cash flow, both records for our first quarter. it is well worth noting that we have been able to effectively manage our working capital as we have adapted to growth, achieving a 25 day year over year improvement in our cash conversion cycle. Flipping to slide 11, you will see we used this cash to further strengthen the balance sheet as we continue to pay down debt bringing our net debt to adjusted EBITDA leverage ratio down to 1.6 times at quarter end, compared with 2.7x in the prior year period.

The lower debt level along with a lower spread on our credit facility borrowings due to reduced leverage resulted in $2 million interest expense savings in the first quarter compared to the prior year. Total liquidity continues to exceed total debt giving us ample flexibility to fund organic growth investments and return capital to shareholders, while preserving dry powder for strategic M&A consistent with the core strategy we shared during our investor day. As mentioned, we extended our history of paying cash dividends to 117 consecutive quarters, highlighted by a 33% increase to $0.12 per share. We also deployed nearly $5 million on share repurchases during the quarter, leaving approximately $82 million remaining on our share repurchase authorization.

Slide 12 reflects the 26 financial priorities that we established. We started the year with solid execution against each priority as confirmed by our first quarter results. We remain focused on disciplined operational execution and investing in high return opportunities positioning Helios for earnings growth and long term value creation. Turning to slides 13 and 14, based on our strong first quarter performance and improved visibility into the second quarter, we are raising the full year sales and earnings per share outlook. We now expect sales to be in the range of $840 million to $870 million for the year, compared with $839 million as reported in 2025 and $792 million on a pro forma basis.

This implies 8% growth over 2025 on a pro form a basis at the midpoint driven primarily by volume growth in our core platforms and the ramping of recent commercial wins. At the segment level for the full year, we expect hydraulic sales in the range of $520 million to $535 million, up approximately 7% at the midpoint on a pro forma basis. For electronics, we expect sales in the range of $320 million to $335 million up 10% at the midpoint. We continue to expect 2026 adjusted EBITDA margin to be in the range of 19.5% to 21% reflecting gross margin expansion operating expense discipline, and the full year benefit of our portfolio and footprint actions.

We now expect diluted non GAAP EPS in the range of $2.70 to $2.95 or 11% growth at the midpoint. For the 2026, we expect sales to be in the range of $227 million to $232 million, up 16% over last year's second quarter at the midpoint when taking the divestiture of CFP into consideration. At the segment level for the second quarter, we expect Hydraulics sales in the range of $141 million to $144 million up approximately 13% at the midpoint on a pro forma basis. For electronics, we expect sales in the range of $86 million to $88 million up 21% at the midpoint.

We expect consolidated adjusted EBITDA margin to be in the range of 20% to 21% up 190 basis points at the midpoint and diluted non GAAP EPS of $0.78 to $0.83 per share, up 36% at the midpoint. As we originally guided 2026, we expect first half growth rates to be stronger year over year compared to the second half driven by the timing of end market recoveries and the ramp of certain commercial wins in 2025. We are also mindful of several second half considerations to our full year outlook including the uncertain tariff landscape, the inflationary pressures on fuel cost, the impact of rising energy prices, shift cost dynamics, ongoing geopolitical tensions, and broader recovery of cyclical markets.

We remain focused on executing the core strategy positioning Helios for earnings growth and long term value creation. With that, please turn to slide 15, and I will turn the call back to Sean for his closing remarks.

Sean Bagan: Thanks, Jeremy. As you have heard today, Helios is off to a strong start in 2026. We are delivering double digit sales growth, expanding margins, and realizing strong cash generation. We are making progress on the initiatives that underpin the core strategy and have a balance sheet that enables us to make strategic organic investments and explore incremental acquisition opportunities. Thank you to the Global Helios team for such a strong start out of the gate for the year. Our go to market engine is performing. We are converting a healthy funnel of opportunities into wins across both segments and across the regions where we compete.

Our innovation road map is on track, with a robust pipeline of new products, including the all new state of the art QMEH cartridge valve, with proprietary position sensor technology launched by Sun Hydraulics at CONEXPO. Faster's launch of a collection of new products designed to support thermal management systems within data centers, and our next generation of electronics platforms like the OpenView s 70 display to provide advanced control and monitoring systems within data centers and other end markets. Our operational excellence efforts from footprint optimization in North America and Europe to productivity improvements across our facilities are all designed to support margin expansion toward the long term targets we laid out at Investor Day.

Most importantly, we have a high performing global team that is executing with discipline, and a customer centric culture that believes in the path we have laid out The combination of a clear strategy a stronger operating model, and a solid financial foundation has Helios positioned well to navigate a dynamic environment and to deliver sustainable growth enhanced profitability, and compelling long term value for our shareholders. We will stay focused on running our own race, settling into our accelerated pace, and keeping our sights set on the long term targets we have established for ourselves. Thank you for your engagement and support. With that, operator, let's open the lines for Q&A, please.

Operator: Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. 1 moment, please, while we poll for questions. Our first question comes from the line of Christopher Moore with CJS Securities. Please proceed with your question.

Christopher Moore: Hey, good morning, guys. Congrats on a great quarter. Thanks for taking a couple. So despite the continued success, it still does not look like you are necessarily operating in an environment where you are seeing exceptional broad strength across a lot of your markets. Maybe can you drill down a little further on how you would characterize demand, kind of overall at this point?

Sean Bagan: Good morning, Christopher. Thanks for the call. Or the question. So yes, in terms of the demand environment and the market environment, certainly, we have continued to see our order trends pace favorably. Couple just talking points there in terms of year over year order demand. We have seen 12 consecutive months including April, of double digit order intake over the prior year. And secondly, when you look at our order backlog, that obviously continues to grow and, continues to be up about double digits year over year as well. So our order trends are strong. When we look at the market performance, though, we would characterize it as choppy.

We have got our 4 big large businesses, and if you go around the horn on those with Sun Hydraulics, really benefiting from the construction and infrastructure investments that are being made and a lot of the OEM equipment. That our products goes into through our distribution channels. We are seeing that very strong And in addition, we really look at the channel inventory levels of our distribution partners, and they are very healthy levels down again in levels where we would envision more reordering patterns.

On the ag side at faster, where they are predominantly indexed to. it is really a story of geographic impacts where Europe and Asia are stronger, and the U.S. continues to be a challenged market here in the Americas. And so we have done a nice job to diversify that business into more construction and also recently announced our entry into the thermal management for data centers. So we see some nice green shoot opportunities there as well. On the electronic side, the Balboa business for that health and wellness market continues to be a low-single-digit growth market. It has effectively recovered from the gyrations from what happened with COVID with the uptick during COVID and then the downturn.

We are back consistently growing that business. And we have seen a shift there as well where Asia particularly strong faster than a little bit lighter here in the Americas, and that is just due to where the OEMs are choosing to make the end equipment. Now, as us, as the lead supplier, we are a bit agnostic where the spas get built because we are going to fulfill that to and chase that in whichever geography it is. And then finally, with innovation controls, very diversified. But as we highlighted in prepared remarks, it was a record quarter for innovation. So we are really thrilled about the trajectory there in the marketplace. Is mixed.

So the biggest part of the innovation business has historically been the recreational, which is also off road product. And marine. Marine still remains very challenged. Recreational is stabilized as dealer channel inventories have been stable as well there for a period of time and starting to see some growth And then the off highway continues to be a an increase there, but our business is really indexed to the U.S. there. And generally feeling really good about the large growth we are getting out of that business. That is really helpful. I appreciate that.

Analyst: And maybe just a So coming into the quarter, you know, consensus adjusted EPS Roughly was really the same level for Q3 and Q4. Based on the strong Q1 and the Q2 guide, and overall 2026 guide, you know, obviously, February versus Q4 at this point in time?

Jeremy Evans: Yeah. Christopher, this is this is Jeremy. As you noted, we said, when we did the initial guide for the year that we expect the second half growth to be a little bit less than what we see in the first half.

And part of that is due to the timing of some of those customer wins that we had last year as well as some of the markets that we saw starting to return And we get really good visibility into, you know, the next 12 weeks or so on the order book, especially on the distribution side as you start getting out further than that, Right? it is a little bit less clear But, definitely, based on the good Q1, how we are guiding Q2 which we would expect to be similar to Q1, You know, we did raise the outlook. We are expecting to have a little bit stronger year than we did originally.

And when we look at the EPS, specifically in the 2088, and we would see it a little bit I think, higher in the third quarter and relatively similar in the fourth quarter as well.

Sean Bagan: Then, Christopher, can I just add on to that a little bit as well? Because I think it is important to point out from just not necessarily seasonality perspective, but the pace of our business. And Jeremy's made this point on prior calls that if you consider this year, and then you go and you do a 5-year period, 4 of those 5 years, our first half has been bigger than the back half. it is kind of either 53 to 54% in the first half to 46% to 47% in the back half. And last year in 2025, Jeremy's point being, the back half was really strong.

And so that is the only year out of those 5 where the back half was larger. And so we are really looking at this on a 2-year growth basis. And if you do the math on our implied guidance, we actually, particularly at the high end of our guide, see the back half accelerating on a 2-year basis from a growth rate perspective, And so I just wanna highlight that, particularly because we have a quarter of our business that is in the EMEA region roughly, and that July, August time period is generally seasonality just a little bit lower. And so that is 1 of the things at play. So we have been mindful.

I would say we wanna be cautious to see further growth develop in the back half. But, we could not be more thrilled out of the gate here getting ahead of our plan and the ability to raise our guide. And then Q2 will be a it is typically our largest quarter for orders. So as we pace throughout the quarter, we will get better visibility into that back half because we are fairly short cycle in terms of our order trends, but we feel really good about the momentum. And as I highlighted 12 consecutive quarters of double digit order intake, including the month of April, If that continues, we will continue to chase our numbers up. No.

That makes perfect sense. Thanks, guys. I really, really appreciate it. I will jump back in line.

Operator: Thanks, Christopher. Our next question comes from the line of Jeffrey Hammond with KeyBanc. Please proceed with your question.

David Tarantino: Hey, good morning, everyone. This is David Tarantino on for Jeffrey.

Sean Bagan: Hey, David. I just wanna follow-up on that last point, Sean, acknowledging that choppy backdrop you were describing in the back half comps are tougher. But could you give us some perspective on what the implied second half outlook embeds relative to the underlying demand trends you are seeing today and what the customers are telling you?

David Tarantino: Is the second half moderation more around being conservative given that it is still relatively limited visibility? Or should we be thinking about something from an end market perspective?

Sean Bagan: So I would say first, again, I just wanna anchor back to the prior year when we look at the prior year and I am gonna take CFP out of those numbers because I think it is important to strip that out knowing that was a roughly a $60 million run-rate business, had about $45 million of revenue in the 2025 period. But when you when you look at that last year in the back half, the excluding that, we reported a plus 21% in the back half. And so as we carry that forward into this year, we think at the at the at the low end, there could be some contraction over that.

However, at the high end, for sure, we could see growth as well. And, again, that is just taking the Q1 actuals. With our Q2 implied guide in the back half. But then when you look at it on the 2-year trend, again, it actually would accelerate on the back half. It would be plus 15% the first half, plus 20% on the back half. At the high end of the $870 million full-year guide. I think some of the variability and the factors we are looking at is ag is a big part of that. And what does that recovery look like?

We are encouraged by the most recent releases from some of the egg OEMs, the large 3 AGCO, CNH, DEAR. Obviously, DEAR is not reporting for another 9 days, but given what is expected of their sales, the AGCO growth was nice to see in the quarter. Knowing that we are a supplier in. We are gonna feel that a little bit earlier, that is what we have seen in our order book. We look at our faster order trends, and our orders are consistently outpacing our sales. And so that could be that could be a mover. The other 1 is our announced entry into this thermal management business with Faster.

We are pretty confident that will start ramping in the back half of the year. We have not had any revenue yet. And so when we look at whether it is faster or the rest of our products that have been launched like QMEH, like some of the displays that we talked about for innovation. These are incremental. These are not cannibalizing existing sales, and so it really starts with that closeness to the customer, understanding their needs, and building our product pipeline around that. So those are some of the things that we see, but, our own execution internally is at a high level right now, and we need to continue that.

With our product launches, which will be robust here in the back half of the year, and we expect to have some successful launches.

Jeremy Evans: Yeah. But just add to the new product piece. We did talk about the new wins that we had in 2025. And some of those started in 2025. We projected that around 60 million in new business win to be phased in over time. And a lot of maybe second half potential is in some of those new products and timing of getting orders for those Some of those Sean mentioned, and, you know, we continue to put out press releases on new products. And we are pretty excited about the product road map that we have.

David Tarantino: Okay. Great. that is helpful. Maybe turning to margins, you highlighted a number of cost headwinds in the book prepared remarks, do not seem apparent in the margins yet. I guess, can you walk us through the puts and takes on the margin guide, particularly around price cost? And if there is any incremental tariff impacts and what you are doing to offset these headwinds you laid out Yeah.

Jeremy Evans: This is Jeremy. As we said at our Investor Day and as you can see in our results, 1 of the biggest movers on our margin is just the volumes. And as we get the leverage going through our footprint, you can see that ramp as we saw here in Q1 with the year over year improvement. In the guide at the midpoint for the second half, right, sales would be a bit lower However, we are still committed to improving our margins You know, our intent is to improve margins roughly a 100 basis points per year. As we go forward towards our long term 2030 targets that we communicated.

When we look at some of the inflationary pressures, you mentioned tariffs, We have done a fairly good job of mitigating those tariffs. We talked about moving of the production into our following our in the region, for the region strategy. We have looked at sourcing products from alternate suppliers, been fairly successful with that. We have also had some, you know, pricing actions, in place too. So from a I would say a dollar perspective, we are we are recovering really well. It does have an impact on the margin percentage, because we are not we are essentially passing through tariff costs, not trying to make incremental profit on those. And I think we have navigated that fairly well.

You know, we communicated last year tariff impacts in the second half were roughly 8 million. So on a full run rate basis, it would be a little higher. But in the current tariff situation, it definitely is still fluid. Subject to change, right, with the ruling on the IEPA, the tariffs would be would be less than that if things maintained as they are now. But again, who knows with that situation?

Sean Bagan: Outside of tariffs, the 2 costs that we do see inflationary pressure on, 1 is just freight cost with fuel. The fuel surcharges with the freight carriers continue to go up. We are starting to see surcharges, impact to 2022 levels. As well as some of the rising energy cost, more specifically there in Europe. And so we look to offset those. Obviously, pricing is a component or price strategy. Over the last you know, 12 months or so has been to recover our cost. And so that is absolutely lever in things that we are looking at. So definitely some margin on pressure, but believe we are managing that really well.

And we are still looking to expand our margins as we grow and as we get the top line growth. Targeting that 100 basis points roughly expansion per year. And I think 2025 demonstrated that we can contend with a very volatile situation and still control our margins. And as is implied in our guidance, we have held our full year adjusted EBITDA range from 19.5% to 21%. Yes. We have taken up our top line, but by 10 million on the high end.

So effectively saying our margin profile is intact, and anchoring back to our commitments to drive over a 100 basis points of improvement year on year out over through cycle to 2030, we feel really good about that. Obviously, we have got way ahead here in the first quarter. From a year over year perspective, and again, from a as a guidance setting since Jeremy and I have been partnering on this, We try and protect on the bottom end for some unforeseen things, but we are obviously striving to hit the top end of our guidance.

And if we can do that, year over year, we are going to drive 180 basis points of, adjusted EBITDA margin expansion, which would be a great result. And so, really, the takeaway here is not a lot has changed since we entered the year. Where you just had a strong start to the year, and I think a little bit of the second quarter is fairly well in line with what we saw coming into the year. We think second quarter is gonna look a lot like the first quarter. And I think from a street perspective and consensus, the construct of the year looked a little bit different.

But for us, it is progressing slightly better than what we thought. And if this pace continues, we will feel really good going into the back half of the year. Great. Thanks.

Operator: Our next question comes from the line of Mircea Dobre with Baird. Please proceed with your question.

Joseph Grabowski: Hey, good morning, guys. This is Joseph Grabowski on for Mircea this morning. Morning, Joe. Good morning. So just kind of building on the last 2 sets of questions. Your sales in the first quarter, $228 million expected to be up a little bit sequentially. Those would be the 2 strongest quarters in several years. And that is even taking into account the divestiture, which you know, reduced sales by about $15 million or so a quarter.

So, when you think about this kind of current level of sales, how do you kind of parse it out between recovering end markets and what you guys are doing internally as far as, you know, new product launches, new customers, new end markets, so forth?

Sean Bagan: Thanks for the question, Joe. Yes. And I am glad you picked up on the relevant comparable there once you take out CFP that the first quarter was 1 of our highest quarters ever of sales. And, again, our Q2 guide would indicate it is gonna look very similar. In the second quarter. To answer the question in terms of where we see that growth coming from, I and you and I Jeremy, Tania, enjoyed some time at CONEXPO together. You saw it. You saw the activity in the booth. You saw the excitement. You saw all the new products we had on display. We think that is clearly the backdrop for our current environment in terms of our growth.

And, again, my point earlier of we need to cleanly continue to execute on our product launches to support that. Our refined go to market that we really changed significantly over the last 18 months is certainly driving a lot of that as well on how we are interfacing with our customers, how we are driving business discussions, how we are targeting new customers in adjacent spaces. The end markets none of them are, would I call it, on fire or providing a significant year over year improvement. In pockets, there are some really strong markets as we have, like construction. Here in the US is doing well. In Asia, it is doing really well.

In Europe, it is been pretty steady and good. But from an ag perspective, we all know where that is, and we already talked about that 1. Our Balboa Health and Wellness, very slow growth, and we do not expect that 1 to grow any faster than historical low single digit levels. However, we do believe we will be able to take share and outpace that with a lot of win back strategies and our new product pipeline and finally, innovation.

Has continued to significantly outpace growth of any of our other businesses for multiple quarters, including a record quarter here in the past quarter, and that is 100% aligned to their go to market initiatives because those markets they operate in have been challenged. So as those come back, gives us a lot a lot of excitement. We know that those are very cyclical markets in some of those consumer discretionary. Even ag, a long term cyclical market that has to be bottoming here at a point in time, and there are signs in small compact tractors and other geographic regions where it is starting to recover.

So we are we are pretty, we are pretty confident that if we get some market help we can certainly be in that mid to upper 4 points of our new guidance ranges. Great. That all sounds terrific.

Joseph Grabowski: And maybe my just follow-up question. I know you guys just touched upon the tariff landscape, but maybe kind of drill down a little bit maybe what has changed as far as your tariff outlook versus maybe at the end of the or when you announced Q4, and do not know, maybe any strategy you can give as far as the way you are thinking about tariff rebates or just anything around that topic.

Jeremy Evans: Yeah. This is Jeremy. I will I will I will take that 1. Obviously, the topic of the IEPA refunds is at the forefront of our minds probably like most other companies. We continue to monitor that situation closely. We will pursue refunds, although it is not extremely clear yet how that process will play out and when or if any of that will actually get collected. So that is not included in our guide or our numbers at this point. From a how do we manage the tariff standpoint, it is it will look a lot like it has done in the past.

You know, we continue to look at our product portfolio and you know, specific to our Tijuana facility, making sure that those products are USMCA compliant. Looking at the in the region for the region production, as a way to avoid tariffs and then constantly working with our suppliers as well in to the extent you know, tariffs change and we need to, we are working with our as a last resort, we will take pricing actions and that is that is been historical. So we will continue to manage as we have up to this point and specific to refunds. We were absolutely monitor the situation.

We will pursue refunds but and we are not gonna you know, factor that in until it comes a little bit more certain and we have a better feel for what would be paid and when. But to put it in perspective, maybe 1 thing to add just to quantify that a little bit. Again, if you anchor back on our August impact of last year, you know, a little more than half of that is related to the, you know, the IEPA refunds, and that would be if everything were paid and obviously, there is some uncertainty around that. So it is not a huge number for us either. Just wanna highlight that point. Okay. Great. Thank you.

Good luck.

Operator: Thanks. Our next question comes from the line of Tomo Sano with JPMorgan.

Tomo Sano: Hi. Good morning, everyone. Good morning, Tomo. Thank you for taking my questions. You highlighted strong recreational demand in electronics supported by a large OEM. For Q2 and the fiscal year, is the base case it holds, normalizes, or decelerates And what is driving that view, please?

Jeremy Evans: Sorry, Tomo, what is driving the view for the For the recreational demand.

Tomo Sano: Yes. For a strong recreational demand in electronics you talk about the supported by a large OEM. So could you talk about your view into second quarter and the rest of the year, please?

Jeremy Evans: Yeah. So as Sean mentioned, within that innovation business, they have really been focused on their go to market strategy as well as new product, and we are rolling out our next generation displays We have an open view platform that is built on the CODESYS programming language, which actually empowers our customers to do some of their own engineering design on those displays and applications. And yes, we have seen some wins with the large OEM customer that you referenced. But there are others. We have a very diversified customer base. There as well. We have got a funnel of opportunities and there is absolutely an opportunity to win more business.

Our outlook for the rest of the year includes the impact from expected new wins as well as changes to both our order trends and our OEM forecast. So, with all the OEM customers, we engage with them on a regular basis. You know, we get updates from them. And I would say, at least as of now, those forecasts have not changed that materially from when we set up the annual guide. The other thing I would just highlight about that innovation business is, you know, they continue to diversify as well, into the industrial space, mobile space, They actually have a product as well that has been sold into the data center environment.

So it is not just the recreational where we see opportunities there with innovation. Thank you, Jeremy.

Tomo Sano: And if you could talk just follow-up on a company-wide level. Outside of the demand environment, what incremental drivers do you expect from your go to market initiatives into second quarter and back half new wins, program ramps, and cross sell channel expansions? Anything you would, highlight here for the rest of the year, I appreciate it. Thank you. Hey, Tomo.

Sean Bagan: it is Sean. I would first point to the product side, and a lot of the product has been announced last year in terms of our launch of new products and our new NPI processes that we put in place. To similarly drive accountability and timing and investment to prioritize products and really put a effort around incremental products that are not cannibalizing existing We believe our product offering is extremely competitive. We have leading positions in the markets we choose to participate in. But really looking at where do we wanna go from a end market perspective. And then how do we become a better partner for our customers and offer incremental opportunities.

So on electronics, for instance, it is offering additional components and things that would naturally pair with a display or a controller on our hydraulic distribution channel, which in our 55-year history, we have chosen to go to market through really strong distributors that now are being measured and we are augmenting our targeted account planning with them to close more sales with our engineering capabilities and teams because it is a very technical sale at times. And then really the cross selling and the ability for us to share customer list and engage more deeply across all of our brands to drive more wins. And so right now, it starts with the product and the focus there.

But we do believe that our end markets provide an opportunity to continue to recover and outpace the growth we are seeing. And we do believe this year, could be a record year for Helios Technologies at the high end, particularly when you take out the $60 million of CFP revenue that has now been divested. So a lot of trajectory. Jeremy, I know you have got a couple things to add there.

Jeremy Evans: Yeah. Somewhat specific to some of the ramps throughout the year. We referenced a genius product which is a casting block, a large coupling connection out of our faster group. We actually shared that at our CONEXPO display had a lot of interest in that. We are pretty excited about that. Within innovation, yep, we have continued to roll out that new next generation of our displays We see opportunities there. And same thing with Sun, some of the work we are doing there launching our, zero series counterbalance valve which is a smaller valve.

We also just launched the QMEH valve with a flow sensor in it, Proprietary design, and so part of this is just the adoption of those new products and getting new orders for that and what is the ramp but we are starting to see some, early wins for those that could be upside. And then as Sean said, again, the market, specifically in ag, specifically in that rec marine where it is still fairly depressed, I would say industrial, still is in a big tailwind for us. there is still some opportunities there as those markets return. Thank you, Sean. Thank you, Jeremy.

Sean Bagan: Congrats on a quarter. Thank you. Thanks, Tomo.

Operator: Star 1 on your telephone keypad. Our next question comes from the line of Nathan Jones with Stifel. Please proceed with your question.

Analyst (Andres Florentem): Good morning, everyone. Thanks for taking my question. This is Andres Florentino on for Nathan Jones Maybe switching gears a little bit. During Investor Day, we talked about the $500 million about $500 million of acquisition revenue. Can you update us on the acquisition pipeline a little bit? What opportunities you are seeing in the market for MCT and FCT?

Jeremy Evans: Yes, Andres, this is Jeremy. First, let me anchor back to that message we said at investor day with the goal to double our sales. We know we are going to need to do that through M&A Obviously, the more we grow on the organic side, the less M&A would be needed. But we put out an estimate of 500 million which is in line with what we have done historically. So we just need to, in terms of volume, repeat what we have done in the past in the so we believe the 500 million is achievable.

However, going about it in a much more disciplined role as we explained, In terms of opportunities, we are we are still fairly early on in that process. When we look at 2026 and our capital allocation priorities, we are investing in ourselves. We have invested in the data center capabilities there with Faster that we just announced. We are we are going to be investing in some, you know, automation and replacing of old equipment. So we have guided our CapEx expense for 2026 a bit higher And then, obviously, returning capital to shareholders just announced the first ever increase to the company dividend. So I think that is kind of our priority.

However, we are developing the M&A framework and absolutely are starting to identify those white spaces and adjacent markets that we wanna target and starting to build that pipeline of opportunities. But there is nothing imminent at this point, and I expect to continue to develop that as we go throughout 2026.

Analyst (Andres Florentem): Thank you. that is really helpful. Just a quick 1 here. Can you also provide a little bit of an update on the supply chain? Are there any supply chain sourcing concerns we should consider? Or sourcing pressure from electronic chips?

Jeremy Evans: Yeah. Not at this time. There was a lot of focus on the on the chips and constrained demand. I think more forward looking than the current situation. We did see the pricing on some of those chips start to increase, but the teams did a really good job getting ahead of that and securing some supply So we feel that we are we are covered and do not see that as a as a material risk at this point.

Analyst (Andres Florentem): Awesome. Thank you, guys. I will hop back into the queue Thanks, Andres. Thanks.

Operator: Thank you. We have no further questions at this time. Ms. Almond, I would like to turn the floor back to you for closing comments. Great.

Tania Almond: Thank you, operator, and thank you, everyone, for joining us today. We will be out on the road attending some upcoming investor conferences, so we look forward to seeing many of you in person. Feel free to reach out to me as well if you have any follow-up questions. And we look forward to talking to you soon. Have a great day.

Operator: Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.

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