Helios Technologies, Inc. · NYSE:HLIO
Helios Technologies — Stifel 2023 Cross Sector Insight Conference
40 slides from Helios Technologies's conference presentation, Jun 7, 2023
Slide 1: Investor Presentation – Stifel 2023 Cross Sector Insight Conference
INVESTOR PRESENTATION JUNE 7, 2023 – STIFEL 2023 CROSS SECTOR INSIGHT CONFERENCE J O S E F M AT O S E V I C , P R E S I D E N T & C E O | TA N I A A L M O N D , V P O F I R & C O R P. C O M M .
Slide 2: Safe Harbor Statement
SAFE HARBOR STATEMENT This presentation and oral statements made by management in connection herewith that are not historical facts are “forward ‐looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934. Forward‐looking statements involve risks and uncertainties,
Slide 3: Growing, Global Industrial Technology Leader
GROWING, GLOBAL INDUSTRIAL TECHNOLOGY LEADER (1) Helios Technologies (NYSE: HLIO) Financial & Market Data Global leader in highly engineered motion control and electronic controls technology for diverse end markets • Outsized growth driven by diversification and innovation $858M $1.8B • Strong finan
Slide 4: Helios Business System
HELIOS BUSINESS SYSTEM 1 Drive the cash flow engine 1 Champion a global operating mindset 2 Deliver new products 2 Leverage global resources and assets 3 Leverage existing products 3 Manufacture to support diverse end markets 4 Cultivate customer centricity 4 Accelerate innovation 5 Build in the reg
Slide 5: Existing End Markets and New Diversified Opportunities
EXISTING END MARKETS AND NEW DIVERSIFIED OPPORTUNITIES Industrial Mobile Agriculture Recreational Health & Wellness End Markets Specialty Commercial Commercial Pharmaceutical Off Road Vehicle HVAC Food Service Manufacturing Vehicles New Applications HELIOS TECHNOLOGIES INVESTOR PRESENTATION 5
Slide 6: Think and Act Globally
THINK AND ACT GLOBALLY Streamlining the Customer Experience Lifecycle CURRENT STATE FUTURE STATE Customer Helios Team New strategy allows for fewer customer contact points Business Segment and internal efficiencies, resulting in satisfied customers, higher margins, and increased revenue HYDRAULICS I
Slide 7: Latest M&A Flywheel Acquisition
LATEST M&A FLYWHEEL ACQUISITION i3 Product Development i3 has served more than 450 clients and completed over 4,000 projects in its 28-year history. Creates products that holistically combine emotion, user-centered design, engineered precision, quality craftsmanship, smart technology and design for
Slide 8: Q1 2023 – Consolidated Results
Q1 2023 – CONSOLIDATED RESULTS Sales Gross Profit & Margin ($ millions) ($ millions) Includes ($3.5M) FX - $240.5 $241.7 $216.7M(1) Adjusted $83.6 $82.3 $207.2 $213.2 $196.0 for FX $71.0 $69.3 $103.4 $98.9 $63.2 $65.5 $76.0 $55.8 $137.1 $142.8 $131.2 $140.2 $147.7 34.8% 34.1% 33.4% 32.2% 33.3% Q1 22
Slide 9: Q1 2023 – Consolidated Results
Q1 2023 – CONSOLIDATED RESULTS Adjusted EBITDA Margin Drivers Adj. EBITDA Margin(1) • Adjusted EBITDA margin up sequentially 30 basis points maintaining healthy level at 20.3% in Q1 despite macro headwinds, supply chain delays, FX impacts, while investing for 24.6% 24.5% 24.4% 23.2% 23.2% future gro
Slide 10: Q1 2023 – Hydraulics Segment
Q1 2023 – HYDRAULICS SEGMENT First Quarter Highlights Q1 Sales by Region Sales Drivers • Sales up sequentially over 4Q22 5%; Sales up YoY 8%, on a 27% constant currency(1) basis up 10%; driven by sales to the Americas APAC and some pricing 39% • Acquisitions added $13.7 million Americas $148 m • FX
Slide 11: Hydraulics Segment Overview
HYDRAULICS SEGMENT OVERVIEW Segment Revenue as % of Total (TTM 1Q23) 65% $562m $858m Hydraulics Screw-in hydraulic cartridge Quick-release hydraulic Distribution of hydraulic, valves, electro-hydraulics, couplings, casting solutions & pneumatic, filtration, Hydraulics Revenue by Channel manifolds, i
Slide 12: Hydraulics End Markets Today
HYDRAULICS END MARKETS TODAY Revenue by End Market Defining End Markets (TTM 1Q23)(2) • Channels to market are decades strong • Conduit for growth and expansion $562m Industrial Mobile Agricultural Other Current Total Addressable Market(1) $32-35B Global Hydraulics Market $14B Valve & Mobile Industr
Slide 13: Hydraulics Market Expansion Potential
HYDRAULICS MARKET EXPANSION POTENTIAL Current Material Handling Specialized Forestry Equipment Agriculture Renewable Energy Mining Vehicles Markets Packaging & Machine Tools & Marine/Offshore Construction Factory Automation Exploration Processing Presses Growth Markets Recreational Pharmaceutical He
Slide 14: Q1 2023 – Electronics Segment
Q1 2023 – ELECTRONICS SEGMENT Q1 Sales by Region First Quarter Highlights Sales Drivers 10% • Sales up sequentially over 4Q22 17% (of which Health and EMEA 84% Wellness up 36%). Sales down YoY 37% while up 11% 6% $66m Americas (excluding Health and Wellness.) End market demand was APAC driven by mob
Slide 15: Electronics Market Expansion Potential
ELECTRONICS MARKET EXPANSION POTENTIAL Segment Revenue as % of Total (TTM 1Q23) 35% $296m $858m Electronics Hydraulic Control Solutions Electronics Revenue by Channel Electronic Controls (TTM 1Q23) and Accessories for Rugged Electronic Spas, Swimspas & Monitoring & GPS Speed Control Walk-In Baths Co
Slide 16: Electronics End Markets Today
ELECTRONICS END MARKETS TODAY Revenue by End Market (TTM 1Q23)(2) $296 Million Current Addressable Market(1) Industrial, Mobile & Agriculture Recreational Global Electronics Market $Trillions… Health & Wellness Industrial & Mobile Recreational Health & Wellness $4B Helios’s Electronics • Off-Highway
Slide 17: Electronics Market Expansion Potential
ELECTRONICS MARKET EXPANSION POTENTIAL Material Handling Specialized Vehicles Stationary Equipment Agriculture Current Markets Health & Wellness Construction Recreational Mining Growth Markets On-Road Commercial Food Bus & Commercial Commercial Recreation Service Transportation Lawn Equipment HVAC H
Slide 18: Value Proposition of Augmented Strategy
VALUE PROPOSITION OF AUGMENTED STRATEGY System Sales Strategy How We Win ✓ Increase wallet/market share ✓ Develop deeper, more strategic relationships ✓ Create “Sticky Solutions” ✓ Grow diversified markets ✓ Drive operational efficiencies through R&D cross pollination HELIOS TECHNOLOGIES INVESTOR PR
Slide 19: Revenue Diversification Expected to Continue
REVENUE DIVERSIFICATION EXPECTED TO CONTINUE Segment 98% 2% Electronics 62% 38% expected to $197m 2016 $885m become a much larger Revenue 2022 Revenue contributor by 2023 Hydraulics Electronics Geographic 22% 22% 48% $197m Geographic 2016 $885m 53% Diversity Will Revenue 2022 Revenue Continue 30% 25
Slide 20: 2023 Outlook
2023 OUTLOOK Path to Hit 22% Three-Year Earnings* CAGR Implied 3 -Year Exiting CAGR at 2 0 2 3 2023 2 0 2 0 Ac tual 2 0 2 1 Ac tual 2 0 2 2 Ac tual 2 0 2 3 O utlook range mid-point Run-Rate Consolidated revenue $523 million $869 million $885 million $910 - $940 million 21% ~$1 billion Net income $14
Slide 21: Path for Long Term Growth Plans
PATH FOR LONG TERM GROWTH PLANS As Outlined at June 2021 Investor Day Our Performance & Current View ($ in millions) ≥$1B ~$1B (2) $925 $869 $885 (1) $745 ~10% Organic $555 $523 $555 $523 CAGR $508 $508 2021-2023 $343 $343 $201 $197 $201 $197 2015 2016 2017 2018 2019 2020 2021E 2023 Goal 2015 2016 2
Slide 22: Strong Margins with a Pathway to Grow
STRONG MARGINS WITH A PATHWAY TO GROW Historic and Projected Adj. EBITDA Margin(1) Growth Highlights • Leveraging shared global supply chains 25.4% ~25.0% • Integrating manufacturing operations and systems 24.5% 24.6% • Leveraging manufacturing centers in developed and low-cost 24.4% locations 23.8%
Slide 23: Strong Cash Flow
STRONG CASH FLOW ($ in millions) Free Cash Flow(1) Three Months Ended ($ millions) Hitting $1B Milestone 4/1/23 on 4/2/22 a Run Rate (RR) Basis by YE23 204% 83% Net cash provided by operating activities $12.3 $14.7 126% $94.0 79% 88% $86.3 $76.2 $78.0 CapEx (9.1) (5.6) $72.1 105% (1) Free cash flow
Slide 24: Capital Allocation Priorities
CAPITAL ALLOCATION PRIORITIES Capital Allocation Priorities Last 5 Years(1) Near-Term 1 ORGANIC GROWTH • Grow at ~2x(2) market 4% • New product development • Integrate electronics and hydraulics know-how 10% • Support product platform Expect a more balanced approach 68% with our flywheel 2 DEBT REDU
Slide 25: Capital Structure
CAPITAL STRUCTURE ($ in millions) Financial Flexibility Capitalization • Cash and cash equivalents up $3.3 million from prior year 4/1/22 4/2/22 • Generated $12.3 million of operating cash flow in Q1 Cash and cash equivalents $36.3 $33.0 (2) • Achieved net debt/pro forma Adjusted EBITDA of 2.5x : To
Slide 26: Proven M&A Framework Driving What Comes Next
PROVEN M&A FRAMEWORK DRIVING WHAT COMES NEXT… Goals Targets Integration Model • Meets Growth and Profitability Goals • Strong management • Successful on standalone basis • Enhances Technology • Culture supporting innovation • Retain employees • Diversifies End Markets • Superior profitability • Keep
Slide 27: M&A Scorecard – Profile of Each Deal When Acquired
M&A SCORECARD – PROFILE OF EACH DEAL WHEN ACQUIRED 2016 2018 2018 2020 2021 2021 2021 2022 2022 2023 2023 Acquisition Type: Transformational Transformational Flywheel Transformational Flywheel Flywheel Flywheel Flywheel Flywheel Flywheel Flywheel Meets Growth & 1 Profitability Goals 2 Enhances Techn
Slide 28: Path to Hit Accelerated Targets
PATH TO HIT ACCELERATED TARGETS Hitting $1B Milestone on a Run Rate (RR) Basis by YE23 ~$1B in RR (1) Organic Sales ~25% Adj. Non-GAAP Sales by Growth(2) ~2x EBITDA Margin(2) Cash EPS YE 2023 Market Rates by RR YE 2023 CAGR(2,3) ~22% With Enhanced Margin Profile (1) Run rate basis defined as annuali
Slide 29: Driving Growth and Delivering Profitability
DRIVING GROWTH AND DELIVERING PROFITABILITY 1 2 3 4 5 Strategy Growth Operational Financial Targets Recap Opportunities Efficiencies Position Expanding existing Meeting revenue goals markets, adding Streamlining sales, Growing free cash flow Pivoting to an operating 2 years early on run adjacent mar
Slide 30: Supplemental Information
SUPPLEMENTAL INFORMATION
Slide 31: Segment Data
SEGMENT DATA (Unaudited) ($ in millions) For the Three Months Ended April 1, 2023 April 2, 2022 Sales: Hydraulics $ 147.7 $ 137.1 Electronics 65.5 103.4 Consolidated $ 213.2 $ 240.5 Gross profit and margin: Hydraulics $ 50.0 $ 50.8 33.9% 37.1% Electronics 21.0 32.8 32.1% 31.7% Consolidated $ 71.0 $
Slide 32: Organic and Acquired Sales
ORGANIC AND ACQUIRED SALES (Unaudited) ($ in millions) Three Months Ended Full Year Ended Three Months Ended April 2, July 2, October 1, December 31, December 31, April 1, 2022 2022 2022 2022 2022 2023 Hydraulics Organic $ 130.7 $ 137.1 $ 129.1 $ 132.0 $ 528.9 $ 134.0 Acquisition 6.4 5.7 2.1 8.2 22.
Slide 33: Sales by Geographic Region & Segment
SALES BY GEOGRAPHIC REGION & SEGMENT (Unaudited) 2022 Sales by Geographic Region and Segment 2023 Sales by Geographic Region and Segment ($ in millions) ($ in millions) % Change % Change % Change % Change % Change % Change Q1 y/y Q2 y/y Q3 y/y Q4 y/y 2022 y/y Q1 y/y Americas: Americas: Hydraulics $
Slide 34: Adjusted Operating Income Reconciliation
ADJUSTED OPERATING INCOME RECONCILIATION (Unaudited) ($ in millions) Three Months Ended April 1, 2023 April 2, 2022 GAAP operating income $ 24.8 $ 42.9 Acquisition-related amortization of intangible assets 8.1 7.0 Acquisition and financing-related expenses (A) 1.7 0.9 Restructuring charges (B) 1.2 0
Slide 35: Non-GAAP Cash Net Income Reconciliation
NON-GAAP CASH NET INCOME RECONCILIATION (Unaudited) ($ in millions) Three Months Ended April 1, 2023 April 2, 2022 Net income $ 13.9 $ 30.5 (D) Amortization of intangible assets 8.3 7.1 Acquisition and financing-related expenses (A) 1.7 0.9 (B) Restructuring charges 1.2 0.2 Officer transition costs
Slide 36: Adjusted EBITDA Reconciliation
ADJUSTED EBITDA RECONCILIATION (Unaudited) ($ in millions) Three Months Ended Twelve Months Ended April 1, 2023 April 2, 2022 April 1, 2023 Net income $ 13.9 $ 30.5 $ 81.8 Interest expense, net 6.2 3.8 19.1 Income tax provision 4.1 8.8 18.7 Depreciation and amortization 15.2 12.6 54.2 EBITDA 39.4 55
Slide 37: Free Cash Flow Reconciliation
FREE CASH FLOW RECONCILIATION (Unaudited) ($ in millions) Full Year TTM 2017 2018 2019 2020 2021 2022 Q1 2 0 2 3 Net c ash provided by operating ac tivities $ 4 9 .4 $ 7 7 .5 $ 9 0 .5 $ 1 0 8 .6 $ 1 1 3 .1 1 0 9 .9 1 0 7 .5 Contingent consideration payment in excess of acquisition date fair value -
Slide 38: Non-GAAP Sales Growth Reconciliation
NON-GAAP SALES GROWTH RECONCILIATION (Unaudited) ($ in millions) Three Months Ended Hydraulics Electronics Consolidated Q1 2023 Net Sales $ 147.7 $ 65.5 $ 213.2 (E) 3.3 0.2 3.5 Impact of foreign currency translation Net Sales in constant currency 151.0 65.7 216.7 Less: Acquisition related sales (13.
Slide 39: Net Debt to Adjusted EBITDA Reconciliation
NET DEBT TO ADJUSTED EBITDA RECONCILIATION (Unaudited) ($ in millions) As of April 1, 2023 Current portion of long-term non-revolving debt, net 20.2 Revolving lines of credit 346.7 Long-term non-revolving debt, net 158.9 Total debt 525.8 Less: Cash and cash equivalents 36.3 Net debt 489.5 (F) TTM Pr
Slide 40: Helios Technologies
ELIOS TECHNOLOGIES AUGMIENTING &: Oo ante ADVANCING TECHNOLOGIES v ACCELERATING wiiuwit
Helios Technologies — Stifel 2023 Cross Sector Insight Conference on 6ix