Helios Technologies, Inc. · NYSE:HLIO
Helios Technologies — Investor Presentation (September 2021)
47 slides from Helios Technologies's investor presentation, September 2021
Slide 1: Investor Presentation
Investor Presentation September 2021 Josef Matosevic – President & CEO Tricia Fulton – Chief Financial Officer Tania Almond – VP, IR and Corp. Comm. Helios Technologies // Investor Presentation 1
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, a
Slide 3: Growing, Global Industrial Technology Leader
Growing, Global Industrial Technology Leader (1) Helios Technologies (Nasdaq: 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 $703M $2.6B • Strong fin
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: Accelerated Plans: Hitting $1B Milestone in Sales Two Years Early
Accelerated Plans Hitting $1B Milestone in Sales Two Years Early Organic Sales ~25% Adj. Organic Non- ≥$1B in Sales GAAP Cash EPS Growth ~2x EBITDA Margin(1) by YE 2023 CAGR(2) ≥22% Market Rates by YE 2023 With Enhanced Margin Profile (1) Reflects a non-GAAP financial measure; see supplemental slide
Slide 6: A Scalable Approach to Implementing Strategy
A Scalable Approach to Implementing Strategy Purpose/ Strategy Structure Tactics Mission Helios Technologies // Investor Presentation 6
Slide 7: Business System Driving Acquisition Strategy
Business System Driving Acquisition Strategy Helios Technologies // Investor Presentation 7
Slide 8: Accomplishments in the Last Year
Aug Accomplishments in the Last Year July c And we are just getting started... June c JP Parent May Appointed SVP and MD of Balboa c Water Group April March c 2021 February Acquired 2020 December January c NEM June July … October November c Paid 99th c Sequential c c c c c Quarterly Dividend Billy A
Slide 9: 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 9
Slide 10: Hydraulics Segment Overview
Hydraulics Segment Overview 2020 Total Revenue SegmentbyRevenue Segment, $523as % of Total million (2Q21 LTM) 65% $453M $703M Hydraulics (Announced Intent to Acquire) 1Q 2021 (LTM) Electronics Revenue Screw-in hydraulic cartridge Quick-release hydraulic Distribution of hydraulic, Hydraulics Revenue
Slide 11: Hydraulics End Markets Today
Hydraulics End Markets Today Revenue by End Market Defining End Markets (2Q21 LTM) • Channels to market are decades strong • A material “off-balance sheet asset” • Conduit for growth and expansion $453M 3% Mobile Industrial Recreational Agricultural Current Total Addressable Market(1) $32-35B Global
Slide 12: Hydraulics Market Expansion Potential
Hydraulics Market Expansion Potential Specialized Material Handling Forestry Equipment Agriculture Renewable Energy Mining Current Vehicles Markets Packaging & Machine Tools & Marine/Offshore Construction Factory Automation Exploration Processing Presses Growth Markets Recreational Pharmaceutical He
Slide 13: New Product Innovations in Hydraulics
New Product Innovations in Hydraulics Diversified Machine Growing Applications Automation Wallet Share Oil Grease 35K 100K life cycles Synergy Portfolio Solutions Expansion Helios Technologies // Investor Presentation 13
Slide 14: John Deere Supplier Innovation Award
John Deere Supplier Innovation Award Combining the advantages and features of Combined Technologies for Systems Solutions MultiFaster and Sun electrohydraulic cartridge valves into an integrated manifold - reducing Special multiconnection combined with an integrated complexity and increasing reliabi
Slide 15: Electronics Segment Overview
Electronics Segment Overview 2020 Total Revenue Segment Revenue by Segment, asmillion $523 % of Total (2Q21 LTM) 35% $249M $703M Electronics Hydraulic Control 1Q 2021 (LTM) Electronics Revenue Electronics Revenue by Channel by Channel, $263 million Solutions Electronic Controls (2Q21 LTM) and Access
Slide 16: Electronics End Markets Today
Electronics End Markets Today Revenue by End Market (2Q21 LTM) 19% $249 Million Current Addressable Market(1) Industrial & Mobile Recreational Global Electronics Health & Wellness Market $Trillions… Industrial & Mobile Recreational Health & Wellness $4B Helios’s Electronics • Off-Highway • Marine •
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: New Electronics Product Innovations
New Electronics Product Innovations Motorcycle Off Road Machine Displays Displays Controller Spa Touch Integrated Screens Heat Pump Helios Technologies // Investor Presentation 18
Slide 19: Electronics Modular Central Platform Offerings
Electronics Modular Central Platform Offerings Instrument Cluster Drive Systems (Touch or No-Touch) Sensors Infotainment (Touch) Physical Switches Central Platform GPS Onboard Cameras Stereo Amplifier Telematics Microphone WiFi Wearable Camera Bluetooth Mobile Devices Helios Technologies // Investor
Slide 20: Think and Act Global
Think and Act Global 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 Int
Slide 21: Innovating Sales and Marketing Globally
Innovating Sales and Marketing Globally Cooperate globally – simplify the customer experience Standardized Training • Cross functional training of sales and application teams • Development of Market Segment Experts • Leverage geographic market expertise to cross sell Internal Communication Coordinat
Slide 22: Helios Go-To-Market Strategy
Helios Go-To-Market Strategy Market Segment Leads Partners • Experts with commercial and • Strategic OEMs technical experience in target markets • Diversified markets • Strategic geographic leads • Leverage channel partners System Sales Seed Customers Strategy Swarm Theory • Leverage existing strong
Slide 23: 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
Slide 24: Helios Center of Engineering Excellence (HCEE) Philosophy
Helios Center of Engineering Excellence (HCEE) Philosophy Champion Market- Making Products for Diversification Driving Swarm Urgent Intercompany Drive a Engineering Innovation Continuous Issues to Initiatives Engineering Sustain Flywheel Talent Funnel Strategies Helios Technologies // Investor Prese
Slide 25: HCEE in Action
HCEE in Action • Strategic Value • Time to Revenue Product/Solution • Annual Revenue at Maturity Concept • Expected Lifetime of Product 2 1 3 • Familiarity with Customers 4 4 • Probability of Project Success 5 5 6 6 7 Project Type VALUE 7 HCEE Compatible Project: 8 COMPLEXITY 8 Intercompany 10 9 Div
Slide 26: HCEE Multiplier Effect
HCEE Multiplier Effect BEFORE Focus on one customer’s request AFTER Fulfill customer’s request, multiply outputs Instrument Cluster Audio Amplifier Wearable (Touch or No-Touch) Camera Vehicle Cameras WiFi Infotainment Development Display(s) USB (Touch) Options Central Platform Information Microphone
Slide 27: Expansive & Growing Global Manufacturing Reach
Expansive & Growing Global Manufacturing Reach Manufacturing centers in developed and low-cost locations Integrated global operating system expands capacity & capabilities Hydraulics and Electronics manufacturing capabilities within the Americas, EMEA, and APAC Helios Technologies // Investor Presen
Slide 28: Global Operating System
Global Operating System Driving Operational Excellence Engage & Grow Global Talent Helios Global Leverage Drive Strategy Operating & Guiding Global System Assets & Principles Resources Engagement is the foundation Helios Technologies // Investor Presentation 28
Slide 29: Measuring Success
Measuring Success Competencies Costs Performance Supply Chain Our manufacturing process Relentless improvements Market leading Quality, Strategic make/buy technologies, operating in Quality and Delivery, and Productivity decisions and carefully system capabilities, and Environmental footprint protec
Slide 30: Strong Financial Performance
Strong Financial Performance Revenue Gross Profit & Margin ($ millions) ($ millions) $257 $703 $212 $555 $523 $193 $196 $508 $249 $112 $116 $126 $382 $443 $407 $453 37.9% 38.3% 37.5% 36.6% 2018 2019 2020 Q2 21 TTM 2018 2019 2020 Q2 21 TTM EPS & Non-GAAP Cash EPS Adjusted EBITDA & Margin ($ millions)
Slide 31: Accelerating Growth: Hitting $1B Milestone Two Years Early
Accelerating Growth: Hitting $1B Milestone Two Years Early Historic and Projected Revenue Growth Highlights ($ millions) • Outpacing market growth by ~2x; Our markets grow on average 3% to 5% ≥$1B • Diversifying our markets, our products and our $815 (1) applications $703 • Leveraging a strong pipel
Slide 32: Revenue Diversification Expected to Continue
Revenue Diversification Expected to Continue Segment Electronics 35% expected to $197m become a 2016 Revenue $703M much larger LTM Q2 2021 contributor by Revenue 2023 98% 65% Hydraulics Electronics Geographic 22% 28% $197m 48% Geographic 2016 Revenue $703M 46% Diversity Will 30% LTM Q2 2021 Continue
Slide 33: Strong Margins with a Pathway to Grow
Strong Margins with a Pathway to Grow Historic and Projected Adj. EBITDA Margin Growth Highlights • Leveraging shared global supply chains Capture ~180 bps from 2020A to 2023E • Integrating manufacturing operations and systems 25.4% 25.0% • Leveraging manufacturing centers in developed and low-cost
Slide 34: Solid Cash Position
Solid Cash Position Historic Annual Free Cash Flow Historic Annual Leverage(1) Highlights ($ millions) • Ability to convert FCF and increase it 204% over time 137% 126% 3.04x • Self-funding acquisition strategy over time $98.1 2.38x $94.0 ≤ 2.0x Target 2.16x 105% 2.12x • FCF dollars and conversion h
Slide 35: Strong Liquidity Position
Strong Liquidity Position Capital Structure Highlights ($ millions, Ending Q2 2021) $400 $34 $196 • Current: Net Debt / Adj. EBITDA(1): 2.16x Total RCF • Target: Net Debt / Adj. EBITDA ≤ 2.0x $161 Undrawn • Structure enables disciplined acquisition strategy • Continue to flex up for acquisitions the
Slide 36: Capital Allocation Priorities
Capital Allocation Priorities Capital Allocation Priorities Last 5 Years Near-Term 1 ORGANIC GROWTH 4% 8% • Grow at ~2x market • New product development 10% • Integrate electronics and hydraulics know-how • Support product platform Expect a more balanced approach with our flywheel 2 DEBT REDUCTION a
Slide 37: Proven M&A Framework
Proven M&A Framework 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 customer relationships •
Slide 38: M&A Scorecard
M&A Scorecard 2016 2018 2018 2020 2021 2021 2021 (Pending) Acquisition Type: Transformational Transformational Flywheel Transformational Flywheel Flywheel Flywheel 1 Meets Growth & Profitability Goals 2 Enhances Technology 3 Diversifies End Markets 4 Deepens Geographic Reach 5 Accretive to EPS 6 Ope
Slide 39: Accelerated Plans: Hitting $1B Milestone in Sales Two Years Early
Accelerated Plans Hitting $1B Milestone in Sales Two Years Early Organic Sales ~25% Adj. Organic Non- ≥$1B in Sales GAAP Cash EPS Growth ~2x EBITDA Margin(1) by YE 2023 CAGR(2) ≥22% Market Rates by YE 2023 With Enhanced Margin Profile (1) Reflects a non-GAAP financial measure; see supplemental slide
Slide 40: Driving Growth and Delivering Profitability
Driving Growth and Delivering Profitability 1 2 3 4 5 Strategy Growth Operational Financial Targets Recap Opportunities Efficiencies Position Expanding existing Meeting revenue goals markets, adding Streamlining sales, Growing free cash flow Pivoting to an operating 2 years early, adjacent markets,
Slide 41: Helios Technologies // Investor Presentation 41
Helios Technologies // Investor Presentation 41
Slide 42: Non-GAAP Reconciliation Tables
Non-GAAP Reconciliation Tables Helios Technologies // Investor Presentation 42
Slide 43: Adjusted EBITDA Reconciliation
Adjusted EBITDA Reconciliation (Unaudited) ($ in thousands) 2016 2017 2018 2019 2020 Net income $ 23,304 $ 31,558 $ 46,730 $ 60,268 $ 14,218 Interest expense, net (790) 3,781 13,876 15,387 13,286 Income tax provision 11,597 15,986 9,665 15,039 9,829 Depreciation and amortization 11,318 19,190 39,714
Slide 44: Adjusted EBITDA Reconciliation
Adjusted EBITDA Reconciliation Three Months Ended (Unaudited) Septem ber 26, J a nua ry 2, A pri l 3, J ul y 3, TTM Q 2 ($ in thousands) 2020 2021 2021 2021 2021 Net inc ome $ 1 2 ,9 8 2 $ 5 ,5 5 1 $ 2 2 ,5 8 7 $ 3 0 ,6 9 4 $ 7 1 ,8 1 4 Interest expense, net 2,730 4,714 4,751 4,400 16,595 Income tax
Slide 45: Non-GAAP Cash Net Income Reconciliation
Non-GAAP Cash Net Income Reconciliation (Unaudited) TTM Q2 ($ in thousands) 2018 2019 2020 2021 Net income $ 46,730 $ 60,268 $ 14,218 $ 71,814 Amortization of intangible assets 23,262 18,065 22,114 31,293 Acquisition and financing-related expenses 5,685 11 7,264 9,436 Restructuring charges 170 1,724
Slide 46: Free Cash Flow Reconciliation
Free Cash Flow Reconciliation (Unaudited) ($ in thousands) 2017 2018 2019 2020 Q2 2 1 TTM Net c ash provided by operating ac tivities $ 4 9 ,3 8 2 $ 7 7 ,4 5 0 $ 9 0 ,4 8 0 $ 1 0 8 ,5 5 6 $ 1 1 7 ,7 5 8 Contingent consideration payment in excess of acquisition date fair value - - 10,731 - - Adjusted
Slide 47: Net Debt to Adjusted EBITDA Reconciliation
Net Debt to Adjusted EBITDA Reconciliation (Unaudited) TTM Q2 ($ in thousands) 2017 2018 2019 2020 2021 Current portion of long-term non-revolving debt, net $ - $ 5,215 $ 7,623 $ 16,229 $ 15,662 Revolving lines of credit 116,000 255,750 208,708 256,224 239,198 Long-term non-revolving debt, net - 91,
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