• Sales: $180 million in Q4 2024, slightly above the upper end of guidance.
• Gross Margin: Expanded 150 basis points in Q4 despite a 7% decline in sales.
• Operating Income: Grew 12% in Q4, with operating margin expanding 120 basis points to 7.4%.
• Adjusted Operating Margin: 13.3% in Q4, up 70 basis points from last year.
• Adjusted EBITDA Margin: Expanded 70 basis points over the prior year period.
• Effective Tax Rate: 37.2% in Q4; full year rate was 22.8%.
• Diluted EPS: $0.14 in Q4, up 40% due to a one-time gain.
• Diluted Non-GAAP EPS: $0.33 in Q4, down 13% from last year.
• Free Cash Flow Conversion Rate: 244% for the year.
• Cash from Operations: $35.7 million in Q4, a 6% improvement over last year.
• Inventory Reduction: $25 million or 12% in 2024.
• Capital Expenditures: $7.4 million in Q4, totaling $27 million for the year.
• Total Debt Reduction: 14% or $75 million over the year.
• Net Debt to Adjusted EBITDA Leverage Ratio: Reduced to 2.6 times.
• 2025 Sales Outlook: $775 million to $825 million.
• 2025 Adjusted EBITDA Outlook: $140 million to $165 million.
• Share Repurchase Program: Authorized up to $100 million in shares.

• Warning! GuruFocus has detected 5 Warning Signs with HLIO.

Release Date: February 25, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Helios Technologies Inc (NYSE:HLIO) launched several innovative products in 2024, including new cartridge valves and electronic displays, which could drive future growth.
• The company achieved record cash generation in 2024, focusing on cash conversion and reducing inventory, which strengthened its financial flexibility.
• Helios Technologies Inc (NYSE:HLIO) improved its balance sheet by reducing and refinancing debt, resulting in lower borrowing spreads.
• Operational efficiency improvements led to expanded quarterly margins despite softer revenue, showcasing effective cost management.
• The company announced an inaugural share repurchase program, indicating confidence in its cash flow generation and commitment to shareholder value.

Negative Points

• Sales in key markets such as agriculture, mobile, and industrial remained weak, impacting overall revenue growth.
• Foreign exchange negatively impacted sales by $100,000 in the fourth quarter, highlighting exposure to currency fluctuations.
• The company faced production disruptions due to hurricanes, losing 18 cumulative shifts at its Sarasota operations.
• The effective tax rate for the fourth quarter was higher than expected due to changes in income mix and discrete items in foreign jurisdictions.
• Tariff uncertainties pose a potential risk to the company's supply chain and cost structure, particularly affecting the electronics segment.

Q & A Highlights

Q: Can you elaborate on the go-to-market strategy and whether it focuses more on one segment than another? A: Sean Bagan, President, CEO, and CFO, explained that the strategy is broad-based across the company. Helios aims to leverage its strong product quality and engineering capabilities to drive a sales-driven culture. The focus is on identifying markets where they can win with existing products and enhancing cross-selling opportunities across segments.

Q: How significant is the partnership with Alto-Shaam for new opportunities in the commercial food service market? A: Sean Bagan highlighted the excitement around the partnership, noting that it represents a software opportunity that could lead to future hardware sales. The Cygnus Reach platform is expected to transform backend support in the commercial food service sector.

Q: What is the outlook for free cash flow in 2025, given the strong performance in 2024? A: Sean Bagan noted that while 2024 was a record year for cash flow, the focus remains on financial priorities like inventory reduction. Jeremy Evans added that there is room to further reduce inventory and manage capital expenditures effectively.

Q: Can you provide more color on the seasonality and expectations for the second half of 2025? A: Sean Bagan mentioned that while historical trends suggest seasonality, the more impactful factors are end-market performances. The expectation for a stronger second half is based on current order trends, OEM forecasts, and macroeconomic indicators.

Q: How will potential tariffs impact the electronics segment, particularly with production in Mexico? A: Sean Bagan stated that while they are evaluating options, moving production back to Oklahoma could increase costs. The strategy will depend on final tariff rulings, and they are prepared to adjust their supply chain and production footprint accordingly.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.