10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 30, 2024

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 001-40935

HELIOS TECHNOLOGIES, INC.

(Exact Name of Registration as Specified in its Charter)


Florida		59-2754337
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

7456 16th St E SARASOTA, Florida		34243
(Address of Principal Executive Offices)		(Zip Code)

(941)362-1200

(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:

    Title of each class

    Trading
Symbol(s)

    Name of each exchange on which registered

    Common Stock $.001 Par Value

    HLIO

    The New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller Reporting Company	☐


				Emerging growth company		☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The registrant had 33,197,487 shares of common stock, par value $.001, outstanding as of April 26, 2024.

Helios Technologies, Inc.

INDEX

For the quarter ended

March 30, 2024


			Page

PART I. FINANCIAL INFORMATION			3

	Item 1.	Financial Statements	3

	Consolidated Balance Sheets as of March 30, 2024 (unaudited) and December 30, 2023		3

	Consolidated Statements of Operations (unaudited) for the Three Months Ended March 30, 2024 and April 1, 2023		4

	Consolidated Statements of Comprehensive Income (unaudited) for the Three Months Ended March 30, 2024 and April 1, 2023		5

	Consolidated Statements of Shareholders’ Equity (unaudited) for the Three Months Ended March 30, 2024 and April 1, 2023		6

	Consolidated Statements of Cash Flows (unaudited) for the Three Months Ended March 30, 2024 and April 1, 2023		7

	Condensed Notes to the Consolidated, Unaudited Financial Statements		8

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	30

	Item 4.	Controls and Procedures	30

PART II. OTHER INFORMATION			31

	Item 1.	Legal Proceedings	31

	Item 1A.	Risk Factors	31

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	31

	Item 3.	Defaults Upon Senior Securities	31

	Item 4.	Mine Safety Disclosures	31

	Item 5.	Other Information	31

	Item 6.	Exhibits	32

PART I: FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS.

Helios Technologies, Inc.

Consolidated Balance Sheets

(in millions, except per share data)


	March 30, 2024			December 30, 2023
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	37.3		$	32.4
Accounts receivable, net of allowance for credit losses of $2.3 and $2.1		126.5			114.8
Inventories, net		213.9			215.1
Income taxes receivable		9.6			11.3
Other current assets		22.0			23.1
Total current assets		409.3			396.7
Property, plant and equipment, net		224.4			227.9
Deferred income taxes		1.5			1.7
Goodwill		507.9			514.0
Other intangible assets, net		414.2			426.4
Other assets		26.3			23.7
Total assets	$	1,583.6		$	1,590.4
Liabilities and shareholders' equity
Current liabilities:
Accounts payable	$	67.7		$	70.3
Accrued compensation and benefits		19.3			19.4
Other accrued expenses and current liabilities		26.3			27.0
Current portion of long-term non-revolving debt, net		23.2			23.2
Dividends payable		3.0			3.0
Income taxes payable		5.3			2.0
Total current liabilities		144.8			144.9
Revolving lines of credit		202.1			199.8
Long-term non-revolving debt, net		292.7			298.3
Deferred income taxes		53.0			57.1
Other noncurrent liabilities		34.4			35.7
Total liabilities		727.0			735.8
Commitments and contingencies
Shareholders' equity:
Preferred stock, par value $0.001, 2.0 shares authorized, no shares issued or outstanding		—			—
Common stock, par value $0.001, 100.0 shares authorized, 33.2 and 33.1 shares issued and outstanding		—			—
Capital in excess of par value		437.3			434.4
Retained earnings		481.8			475.6
Accumulated other comprehensive loss		(62.5	)		(55.4	)
Total shareholders' equity		856.6			854.6
Total liabilities and shareholders' equity	$	1,583.6		$	1,590.4

The accompanying Condensed Notes to the Consolidated, Unaudited Financial Statements are an integral part of these financial statements.

Helios Technologies, Inc.

Consolidated Statements of Operations (unaudited)

(in millions, except per share data)


	Three Months Ended
	March 30, 2024			April 1, 2023
	(unaudited)			(unaudited)
Net sales	$	212.0		$	213.2
Cost of sales		144.8			142.2
Gross profit		67.2			71.0
Selling, engineering and administrative expenses		39.0			38.1
Amortization of intangible assets		7.9			8.1
Operating income		20.3			24.8
Interest expense, net		8.2			6.2
Foreign currency transaction loss, net		0.3			0.4
Other non-operating (income) expense, net		(0.2	)		0.2
Income before income taxes		12.0			18.0
Income tax provision		2.8			4.1
Net income	$	9.2		$	13.9

Net income per share:
Basic	$	0.28		$	0.43
Diluted	$	0.28		$	0.42

Weighted average shares outstanding:
Basic		33.1			32.6
Diluted		33.3			32.7

Dividends declared per share	$	0.09		$	0.09

The accompanying Condensed Notes to the Consolidated, Unaudited Financial Statements are an integral part of these financial statements.

Helios Technologies, Inc.

Consolidated Statements of Comprehensive (Loss) Income (unaudited)

(in millions)


	Three Months Ended
	March 30, 2024			April 1, 2023
Net income	$	9.2		$	13.9
Other comprehensive income (loss)
Foreign currency translation adjustments, net of tax		(8.3	)		3.1
Unrealized gain (loss) on interest rate swaps, net of tax		1.2			(2.4	)
Total other comprehensive (loss) income		(7.1	)		0.7
Comprehensive income	$	2.1		$	14.6

The accompanying Condensed Notes to the Consolidated, Unaudited Financial Statements are an integral part of these financial statements.

Helios Technologies, Inc.

Consolidated Statements of Shareholders’ Equity (unaudited)

Three Months Ended

(in millions)


															Accumulated
									Capital in						other
	Preferred		Preferred		Common		Common		excess of			Retained			comprehensive
	shares		stock		shares		stock		par value			earnings			loss			Total

Balance at December 30, 2023		—	$	—		33.1	$	—	$	434.4		$	475.6		$	(55.4	)	$	854.6
Shares issued, restricted stock						0.1													—
Shares issued, ESPP										0.5									0.5
Stock-based compensation										4.2									4.2
Cancellation of shares for payment of employee tax withholding										(1.8	)								(1.8	)
Dividends declared													(3.0	)					(3.0	)
Net income													9.2						9.2
Other comprehensive loss																(7.1	)		(7.1	)
Balance at March 30, 2024		—	$	—		33.2	$	—	$	437.3		$	481.8		$	(62.5	)	$	856.6

Balance at December 31, 2022		—	$	—		32.6	$	—	$	404.3		$	450.0		$	(59.4	)	$	794.9
Shares issued, ESPP										0.5									0.5
Stock-based compensation										3.4									3.4
Cancellation of shares for payment of employee tax withholding										(1.8	)								(1.8	)
Dividends declared													(3.0	)					(3.0	)
Net income													13.9						13.9
Other comprehensive income																0.7			0.7
Balance at April 1, 2023		—	$	—		32.6	$	—	$	406.4		$	460.9		$	(58.7	)	$	808.6

The accompanying Condensed Notes to the Consolidated, Unaudited Financial Statements are an integral part of these financial statements.

Helios Technologies, Inc.

Consolidated Statements of Cash Flows (unaudited)

Three Months Ended

(in millions)


	Three Months Ended
	March 30, 2024			April 1, 2023
	(unaudited)			(unaudited)
Cash flows from operating activities:
Net income	$	9.2		$	13.9
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		15.7			15.2
Stock-based compensation expense		4.2			3.4
Amortization of debt issuance costs		0.1			0.1
Benefit for deferred income taxes		(0.9	)		(1.1	)
Forward contract gains, net		—			0.3
Other, net		0.3			0.1
(Increase) decrease in, net of acquisitions:
Accounts receivable		(13.1	)		(9.5	)
Inventories		(0.7	)		(6.5	)
Income taxes receivable		1.6			1.6
Other current assets		0.6			(4.1	)
Other assets		1.1			2.4
Increase (decrease) in, net of acquisitions:
Accounts payable		(1.8	)		(3.1	)
Accrued expenses and other liabilities		(1.1	)		(3.4	)
Income taxes payable		3.3			4.3
Other noncurrent liabilities		(0.7	)		(1.3	)
Net cash provided by operating activities		17.8			12.3
Cash flows from investing activities:
Business acquisitions, net of cash acquired		—			(84.7	)
Capital expenditures		(5.5	)		(9.1	)
Cash settlement of forward contracts		—			0.3
Software development costs		(0.8	)		(1.1	)
Net cash used in investing activities		(6.3	)		(94.6	)
Cash flows from financing activities:
Borrowings on revolving credit facilities		21.8			95.0
Repayment of borrowings on revolving credit facilities		(17.3	)		(12.5	)
Repayment of borrowings on long-term non-revolving debt		(5.2	)		(4.1	)
Proceeds from stock issued		0.5			0.5
Dividends to shareholders		(3.0	)		(3.0	)
Payment of employee tax withholding on equity award vestings		(1.8	)		(1.8	)
Other financing activities		(0.4	)		(0.3	)
Net cash (used in) provided by financing activities		(5.4	)		73.8
Effect of exchange rate changes on cash and cash equivalents		(1.2	)		1.1
Net increase (decrease) in cash and cash equivalents		4.9			(7.4	)
Cash and cash equivalents, beginning of period		32.4			43.7
Cash and cash equivalents, end of period	$	37.3		$	36.3

The accompanying Condensed Notes to the Consolidated, Unaudited Financial Statements are an integral part of these financial statements.

HELIOS TECHNOLOGIES, INC.

CONDENSED NOTES TO THE CONSOLIDATED, UNAUDITED FINANCIAL STATEMENTS

(Currencies in millions, except per share data)

1. COMPANY BACKGROUND

Helios Technologies, Inc. (“Helios,” the “Company", "we", "us" or "our”) and its wholly owned subsidiaries, is a global leader in highly engineered motion control and electronic controls technology for diverse end markets, including construction, material handling, agriculture, energy, recreational vehicles, marine and health and wellness. Helios sells its products to customers in over 90 countries around the world. The Company’s strategy for growth is to be the leading provider in niche markets, with premier products and solutions through innovative product development and acquisitions.

The Company operates in two business segments: Hydraulics and Electronics. There are two key technologies within the Hydraulics segment: motion control technology (MCT) and fluid conveyance technology (FCT). Our MCT products provide simultaneous control of acceleration, velocity and position. MCT includes our cartridge valve technology (CVT) where we pioneered a fundamentally different design platform employing a floating nose construction that results in a self-alignment characteristic. This design provides better performance and reliability advantages compared with most competitors’ product offerings. Our cartridge valves are offered in several size ranges and include both electrically actuated and hydro-mechanical products. They are designed to be able to operate reliably at higher pressures than most competitors, making them equally suitable for both industrial and mobile applications. Our FCT products transfer hydraulic fluid from one point to another. FCT includes our quick release couplings (QRC) products, which allow users to connect and disconnect quickly from any hydraulic circuit without leakage and ensure high-performance under high temperature and pressure using one or multiple couplers. The Electronics segment provides complete, fully-tailored display and control solutions for engines, engine-driven equipment, specialty vehicles, therapy baths and traditional and swim spas. This broad range of products is complemented by extensive application expertise and unparalleled depth of software, embedded programming, hardware and sustaining engineering teams.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited interim consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission for reporting on Form 10-Q. Accordingly, certain information and footnotes required by accounting principles generally accepted in the United States of America (“U.S. GAAP”) for complete financial statements are not included herein. The financial statements are prepared on a consistent basis (including normal recurring adjustments) and should be read in conjunction with the consolidated financial statements and related notes contained in the Annual Report on Form 10-K for the fiscal year ended December 30, 2023 (“Form 10-K”), filed by Helios with the Securities and Exchange Commission on February 27, 2024. In management’s opinion, all adjustments necessary for a fair statement of the Company’s financial position are reflected in the interim periods presented. Operating results for the three months ended March 30, 2024, are not necessarily indicative of the results that may be expected for the fiscal year ended December 28, 2024.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Capitalized Software Development Costs

The Company sells certain products that contain embedded software that is integral to the functionality of the products. Internal and external costs incurred for developing this software are charged to expense until technological feasibility has been established, at which point the development costs are capitalized. Capitalized software development costs primarily include payroll, benefits and other headcount related expenses. Once the products are available for general release to customers, no additional costs are capitalized. Capitalized software development costs, net of accumulated amortization, were $9.5 and $9.0 at March 30, 2024, and December 30, 2023, respectively, and are included in Other assets in the Consolidated Balance Sheets.

Earnings Per Share

The following table presents the computation of basic and diluted earnings per common share (in millions, except per share data):


	Three Months Ended
	March 30, 2024		April 1, 2023
Net income	$	9.2	$	13.9

Weighted average shares outstanding - Basic		33.1		32.6
Net effect of dilutive securities - Stock based compensation		0.2		0.1
Weighted average shares outstanding - Diluted		33.3		32.7

Net income per share:
Basic	$	0.28	$	0.43
Diluted	$	0.28	$	0.42

Recently Adopted Accounting Standard

In March 2020, and clarified through December 2022, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. This update provides optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships and other transactions affected by reference rate reform. The guidance was effective immediately upon issuance in March 2020 and cannot be applied subsequent to December 31, 2024, except for certain optional expedients. The Company adopted the standard for the fiscal year beginning January 1, 2023. In March 2023, the Company executed an amendment to the term loan and revolving credit facility to modify and replace reference to the London Interbank Offered Rate ("LIBOR"). Additionally in March 2023, the company executed an amendment to the interest rate swap agreements to modify and replace reference to LIBOR. The company applied the accounting relief in accordance with ASC 848 as the relevant contract and hedge accounting relationship modifications were executed. The adoption of this standard did not have a material impact on our accounting policies or consolidated financial statements.

Recently Issued Accounting Standards

The Financial Accounting Standards Board (FASB) issued Accounting Standards Update 2023-07 Segment Reporting (Topic 280) - Improvements to Reportable Segment Disclosures in November 2023. The amendments in this update improve financial reporting by requiring disclosure of incremental segment information on an annual and interim basis, primarily related to significant segment expenses. The amendments in this update are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company does not expect the additional segment disclosures to have a material impact on the consolidated financial statements and does not plan to early adopt the standard.

The Financial Accounting Standards Board (FASB) issued Accounting Standards Update 2023-09 Income Taxes (Topic 740) - Improvements to Income Tax Disclosures. The amendments in this update focus on improving the transparency, effectiveness and comparability of income tax disclosures primarily related to the pretax income (or loss), income tax expense (or benefit), rate reconciliation and income taxes paid for public business entities. The amendments in this update are effective for annual periods beginning after December 15, 2024. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. The amendments in this update should be applied on a prospective basis. Retrospective application is permitted. The Company does not expect the additional income tax disclosures to have a material impact on the consolidated financial statements and does not plan to early adopt the standard.

3. BUSINESS ACQUISITIONS

On January 27, 2023, the Company completed the acquisition of Schultes Precision Manufacturing, Inc. ("Schultes"), an Illinois corporation. Schultes is a highly trusted specialist in manufacturing precision machined components and assemblies for customers requiring very tight tolerances, superior quality and exceptional value-added manufacturing processes. Currently serving the hydraulic, aerospace, communication, food services, medical device and dental industries, Schultes brings the manufacturing quality, reliability and responsiveness critical to its customers’ success. The results of Schultes' operations are reported in the Company’s Hydraulics segment and have been included in the Consolidated, Unaudited Financial Statements since the date of acquisition.

Initial cash consideration paid at closing for Schultes, net of cash acquired, totaled $84.7. Cash consideration paid at closing was funded with additional borrowings on the Company’s credit facility.

On May 26, 2023, the Company completed the acquisition of i3 Product Development, Inc. (“i3”), a Wisconsin corporation. i3 is a custom engineering services firm with expertise in electronics, mechanical, industrial, embedded and software engineering. i3's solutions are used across many sectors, including medical, off-highway, recreational and commercial marine, power sports, health and wellness, agriculture, consumer goods, industrial, sports and fitness. We anticipate that i3 will equip Helios with significant value-added professional services capabilities to provide customization to Helios platforms and to develop greenfield solutions. The results of i3's operations are reported in the Company’s Electronics segment and have been included in the Consolidated, Unaudited Financial Statements since the date of acquisition.

Initial consideration paid at closing for i3, net of cash acquired, totaled $44.0, consisting of 370,276 shares of the Company's common stock, issued in a private placement to the previous owners of i3, and a cash payment of $25.4. Total consideration for the acquisition is subject to a post-closing adjustment in accordance with the terms of the purchase agreement. The cash consideration paid at closing was funded with additional borrowings on the Company’s credit facility.

In connection with these acquisitions, the Company recorded $37.7 of goodwill, $48.0 of other identifiable intangible assets, $34.2 of property, plant and equipment and $8.8 of other net assets. The intangible assets include customer relationships of $36.4 (15.7 year weighted average useful life), trade names and brands of $7.6 (14.0 year weighted average useful life), technology of $3.3 (5.0 year weighted average useful life) and sales order backlog of $0.7 (less than one year weighted average useful life).

The purchase price was allocated to tangible and intangible assets acquired and liabilities assumed based on their estimated fair values. The fair value of identified intangible assets acquired was based on estimates and assumptions made by management at the time of the acquisitions. The purchase price allocation for i3 is preliminary, pending post-closing adjustments, final intangibles valuation and tax-related adjustments, and may be revised during the remainder of the measurement period (which will not exceed 12 months from the acquisition dates). Any such revisions or changes to the fair values of the tangible and intangible assets acquired and liabilities assumed could be material.

Pro forma results of operations and the revenue and net income subsequent to the acquisition dates have not been presented because the effects of the acquisitions, individually and in the aggregate, were not material to the Company's financial results.

4. FAIR VALUE OF FINANCIAL INSTRUMENTS

The following tables provide information regarding the Company’s assets and liabilities measured at fair value on a recurring basis at March 30, 2024, and December 30, 2023.


	March 30, 2024
			Quoted Market		Significant Other Observable		Significant Unobservable
	Total		Prices (Level 1)		Inputs (Level 2)		Inputs (Level 3)
Assets
Interest rate swap contracts	$	8.2	$	—	$	8.2	$	—
Forward foreign exchange contracts		—		—		—		—
Total	$	8.2	$	—	$	8.2	$	—
Liabilities
Forward foreign exchange contracts	$	—	$	—	$	—	$	—
Contingent consideration		0.5		—		—		0.5
Total	$	0.5	$	—	$	—	$	0.5


	December 30, 2023
			Quoted Market		Significant Other Observable		Significant Unobservable
	Total		Prices (Level 1)		Inputs (Level 2)		Inputs (Level 3)
Assets
Interest rate swap contracts	$	6.7	$	—	$	6.7	$	—
Forward foreign exchange contracts		—		—		—		—
Total	$	6.7	$	—	$	6.7	$	—
Liabilities
Forward foreign exchange contracts	$	—	$	—	$	—	$	—
Contingent consideration		0.5		—		—		0.5
Total	$	0.5	$	—	$	—	$	0.5

There was no change in the estimated fair value of contingent consideration from December 30, 2023. The balance at March 30, 2024, was $0.5.

5. INVENTORIES, NET

At March 30, 2024, and December 30, 2023, inventory consisted of the following:


	March 30, 2024			December 30, 2023
Raw materials	$	124.1		$	126.8
Work in process		55.6			55.4
Finished goods		44.3			43.0
Provision for obsolete and slow-moving inventory		(10.1	)		(10.1	)
Total	$	213.9		$	215.1

6. OPERATING LEASES

The Company leases machinery, equipment, vehicles, buildings and office space, throughout its locations, which are classified as operating leases. Remaining terms on these leases range from less than one year to nine years. For the three months ended March 30, 2024, and April 1, 2023, operating lease costs totaled $1.9 and $1.7, respectively.

Supplemental balance sheet information related to operating leases is as follows:


	March 30, 2024			December 30, 2023
Right-of-use assets	$	25.7		$	25.8
Lease liabilities:
Current lease liabilities	$	5.1		$	4.0
Non-current lease liabilities		22.1			23.2
Total lease liabilities	$	27.2		$	27.2

Weighted average remaining lease term (in years):		4.6
Weighted average discount rate:		4.6	%

Supplemental cash flow information related to leases is as follows:


	Three Months Ended
	March 30, 2024		April 1, 2023
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	2.0	$	1.7
Non-cash impact of new leases and lease modifications	$	1.3	$	0.1

Maturities of lease liabilities are as follows:


2024 Remaining	$	5.5
2025		5.3
2026		5.0
2027		3.9
2028		3.5
2029		3.4
Thereafter		7.6
Total lease payments		34.2
Less: Imputed interest		(7.0	)
Total lease obligations		27.2
Less: Current lease liabilities		(5.1	)
Non-current lease liabilities