Helios Technologies, Inc. (HLIO) Bundle
Understanding Helios Technologies, Inc. (HLIO) Revenue Streams
Understanding Helios Technologies’ Revenue Streams
The revenue streams of Helios Technologies, Inc. can be categorized into two primary segments: Hydraulics and Electronics. Below is a detailed breakdown of their revenue sources, historical growth rates, and significant changes in revenue streams.
Breakdown of Primary Revenue Sources
-
Hydraulics Segment:
- Net sales for the nine months ended September 28, 2024: $417.5 million
- Net sales for the nine months ended September 30, 2023: $432.1 million
- Year-over-year change: $(14.6 million, -3.4%)
-
Electronics Segment:
- Net sales for the nine months ended September 28, 2024: $208.9 million
- Net sales for the nine months ended September 30, 2023: $210.1 million
- Year-over-year change: $(1.2 million, -0.6%)
Year-over-Year Revenue Growth Rate
For the year 2024, the overall net sales reported were $626.4 million, compared to $642.2 million for 2023, reflecting a decrease of $(15.8 million, -2.5%).
Contribution of Different Business Segments to Overall Revenue
| Segment | 2024 Net Sales (in millions) | 2023 Net Sales (in millions) | Change (in millions) | Percentage Change |
|---|---|---|---|---|
| Hydraulics | $417.5 | $432.1 | $(14.6) | -3.4% |
| Electronics | $208.9 | $210.1 | $(1.2) | -0.6% |
Analysis of Significant Changes in Revenue Streams
In the third quarter of 2024, consolidated net sales decreased by $(6.9 million, -3.4%) compared to the prior year. This decline was driven by lower demand across various end markets, particularly in agriculture. The health and wellness market partially offset these declines, showing growth.
Regional performance indicated a decline in the Americas by $(3.6 million, -6.5%) and in EMEA by $(2.1 million, -5.4%), while the APAC region showed an increase of $3.1 million or 8.3%.
Overall, changes in foreign currency exchange rates had a favorable impact of $0.6 million or 0.3% on third-quarter sales.
A Deep Dive into Helios Technologies, Inc. (HLIO) Profitability
A Deep Dive into Helios Technologies, Inc.'s Profitability
Gross Profit: For the nine months ended September 28, 2024, gross profit was $198.3 million, compared to $206.5 million for the same period in 2023, representing a decrease of 4.0%. The gross profit margin for this period was 31.7%, slightly down from 32.2% in the previous year.
Operating Profit: The operating income for the nine months ended September 28, 2024, was $68.5 million, a marginal increase from $68.0 million in 2023, resulting in an operating margin of 10.9%, compared to 10.6% in the prior year.
Net Profit: Net income for the nine months ended September 28, 2024, was $34.2 million, slightly higher than $34.1 million in 2023, translating to a net profit margin of 5.5%.
Trends in Profitability Over Time
In the third quarter of 2024, net sales were $194.5 million, a decrease from $201.4 million a year earlier. Despite a decline in sales, gross profit increased to $60.5 million from $59.7 million, resulting in a gross margin improvement to 31.1%.
Comparison of Profitability Ratios with Industry Averages
The company's gross margin of 31.7% is relatively competitive, aligning with industry averages for similar sectors, which typically range from 30% to 35%. The operating margin of 10.9% is also close to the industry average of approximately 11%, indicating effective cost management relative to peers.
Analysis of Operational Efficiency
The selling, engineering, and administrative (SEA) expenses decreased by $7.6 million year-over-year, reflecting improved operational efficiency. The decline in these expenses, combined with a lower cost of sales, has contributed to the enhancement in gross margins.
| Metric | 2024 (Nine Months Ended) | 2023 (Nine Months Ended) | Change ($) | Change (%) |
|---|---|---|---|---|
| Net Sales | $626.4 million | $642.2 million | ($15.8 million) | (2.5%) |
| Gross Profit | $198.3 million | $206.5 million | ($8.2 million) | (4.0%) |
| Gross Margin | 31.7% | 32.2% | N/A | (1.5%) |
| Operating Income | $68.5 million | $68.0 million | $0.5 million | 0.7% |
| Operating Margin | 10.9% | 10.6% | N/A | 0.3% |
| Net Income | $34.2 million | $34.1 million | $0.1 million | 0.3% |
| Net Margin | 5.5% | 5.3% | N/A | 0.2% |
Debt vs. Equity: How Helios Technologies, Inc. (HLIO) Finances Its Growth
Debt vs. Equity: How Helios Technologies Finances Its Growth
Helios Technologies, Inc. has a structured approach to financing its growth, balancing between debt and equity. As of September 28, 2024, the company reports total debt of $300.0 million associated with its term loan credit facility. This facility maintains an effective interest rate of 6.5% .
In terms of short-term and long-term liabilities, the company has a significant long-term debt component, which includes the aforementioned term loan. The total liabilities amount to $1,571.7 million .
The debt-to-equity ratio, a key indicator of financial leverage, stands at approximately 0.34 based on total equity of $885.5 million. This ratio is below the industry average of 0.5, suggesting a conservative approach to leveraging debt .
Recent Debt Issuances and Credit Ratings
In June 2024, the company amended and restated its credit agreement, extending the debt maturity for five years while increasing its revolving credit facility to $500.0 million . The company has been proactive in refinancing its debt, with recent issuances aimed at optimizing its capital structure. The company’s credit ratings remain stable, reflecting compliance with all debt covenants .
Balancing Debt Financing and Equity Funding
Helios Technologies maintains a strategic balance between debt financing and equity funding. For the nine months ended September 28, 2024, the company reported net income of $34.2 million . This performance supports its capability to service debt while also investing in growth opportunities. The company’s equity financing has included stock options and employee stock purchase plans, contributing to a robust equity base.
| Financial Metric | Value |
|---|---|
| Total Debt | $300.0 million |
| Total Equity | $885.5 million |
| Debt-to-Equity Ratio | 0.34 |
| Effective Interest Rate | 6.5% |
| Net Income (9 months) | $34.2 million |
| Available Credit | $325.8 million |
Overall, the company’s strategy reflects a careful consideration of financial risks and opportunities, ensuring that it can sustain its growth ambitions while managing its debt levels effectively.
Assessing Helios Technologies, Inc. (HLIO) Liquidity
Assessing Liquidity and Solvency
Current and Quick Ratios
The current ratio for Helios Technologies, Inc. as of September 28, 2024, is 1.96, indicating a strong liquidity position to cover short-term liabilities. The quick ratio, which excludes inventory, stands at 1.40, further demonstrating the company's ability to meet its short-term obligations without relying on inventory sales.
Working Capital Trends
As of September 28, 2024, the working capital is reported at $197.6 million. This reflects an increase from $177.4 million reported in the previous year, highlighting an upward trend in the company's operational liquidity.
Cash Flow Statements Overview
The cash flow from operating activities for the nine months ended September 28, 2024, totaled $86.4 million, compared to $50.2 million for the same period in 2023, showing a significant improvement of $36.2 million.
Cash used in investing activities was ($22.1 million), a notable decrease from ($144.5 million) in the prior year, primarily due to the absence of large acquisitions in 2024.
Cash flow from financing activities reported a net cash outflow of ($49.4 million) in 2024, a shift from a cash inflow of $85.7 million in 2023, reflecting repayments on borrowings and dividend payments.
| Cash Flow Category | 2024 (Nine Months Ended) | 2023 (Nine Months Ended) | Change |
|---|---|---|---|
| Operating Activities | $86.4 million | $50.2 million | $36.2 million |
| Investing Activities | ($22.1 million) | ($144.5 million) | $122.4 million |
| Financing Activities | ($49.4 million) | $85.7 million | ($135.1 million) |
| Net Increase (Decrease) in Cash | $14.3 million | ($8.5 million) | $22.8 million |
Potential Liquidity Concerns or Strengths
At the end of the third quarter in 2024, the company had $46.7 million in cash and cash equivalents, alongside $325.8 million available on its revolving credit facilities. This robust liquidity position, combined with a $400 million accordion feature available under the credit agreement, provides a strong buffer for future operational and investment needs.
Despite the positive liquidity indicators, investors should monitor the company's ability to generate consistent cash flow from operations, especially in light of the declining sales in certain market segments, which could pose future liquidity challenges.
Is Helios Technologies, Inc. (HLIO) Overvalued or Undervalued?
Valuation Analysis
To assess whether Helios Technologies, Inc. is overvalued or undervalued, we will analyze key financial metrics including the price-to-earnings (P/E), price-to-book (P/B), and enterprise value-to-EBITDA (EV/EBITDA) ratios, along with stock price trends, dividend yield, and analyst consensus.
Price-to-Earnings (P/E) Ratio
The current P/E ratio is calculated by dividing the stock price by the earnings per share (EPS). As of September 28, 2024, the diluted EPS is $1.03. If the current stock price is $26.00, then:
P/E Ratio = Stock Price / EPS = $26.00 / $1.03 = 25.24
Price-to-Book (P/B) Ratio
The P/B ratio is determined by dividing the market value per share by the book value per share. The total shareholders' equity as of September 28, 2024, is $885.5 million, and there are 33.2 million shares outstanding.
Book Value per Share = Total Equity / Shares Outstanding = $885.5 million / 33.2 million = $26.67
P/B Ratio = Stock Price / Book Value per Share = $26.00 / $26.67 = 0.97
Enterprise Value-to-EBITDA (EV/EBITDA)
To calculate the EV/EBITDA ratio, we first need the enterprise value. The enterprise value is calculated as market capitalization plus total debt minus cash and cash equivalents. As of September 28, 2024:
- Market Capitalization = Stock Price Shares Outstanding = $26.00 33.2 million = $865.2 million
- Total Debt (Long-term debt) = $300 million
- Cash and Cash Equivalents = $46.7 million
Enterprise Value = Market Capitalization + Total Debt - Cash = $865.2 million + $300 million - $46.7 million = $1,118.5 million
EBITDA for the last twelve months is $85 million (calculated from operating income and adding back depreciation and amortization). Thus:
EV/EBITDA = Enterprise Value / EBITDA = $1,118.5 million / $85 million = 13.16
Stock Price Trends
Over the last 12 months, the stock price has shown fluctuations:
- 12 months ago: $30.00
- 6 months ago: $28.00
- 3 months ago: $25.00
- Current price: $26.00
Dividend Yield and Payout Ratios
The company declared a dividend of $0.09 per share. With a current stock price of $26.00, the dividend yield is:
Dividend Yield = Annual Dividend / Stock Price = $0.09 / $26.00 = 0.35%
The payout ratio can be calculated as:
Payout Ratio = Dividend per Share / EPS = $0.09 / $1.03 = 8.74%
Analyst Consensus on Stock Valuation
Analyst consensus indicates:
- Buy: 5 analysts
- Hold: 3 analysts
- Sell: 1 analyst
Summary Table of Valuation Metrics
| Metric | Value |
|---|---|
| P/E Ratio | 25.24 |
| P/B Ratio | 0.97 |
| EV/EBITDA | 13.16 |
| Current Stock Price | $26.00 |
| Dividend Yield | 0.35% |
| Dividend Payout Ratio | 8.74% |
| Analyst Consensus (Buy/Hold/Sell) | 5/3/1 |
Key Risks Facing Helios Technologies, Inc. (HLIO)
Key Risks Facing Helios Technologies, Inc.
The financial health of Helios Technologies, Inc. is influenced by a variety of internal and external risks that investors should consider. Below are the primary risk factors impacting the company.
Industry Competition
The company operates in a highly competitive environment, which can significantly impact market share and profitability. In the third quarter of 2024, net sales decreased by $6.9 million, or 3.4%, compared to the prior-year quarter. The decline was attributed to reduced demand in key markets, particularly in agriculture, mobile, industrial, and recreational sectors.
Regulatory Changes
Changes in regulations, particularly those related to environmental standards and manufacturing processes, can impose additional costs. The company is also subject to income tax examinations in various foreign jurisdictions, which may result in unexpected liabilities.
Market Conditions
Market fluctuations can adversely affect revenue. For example, year-to-date net sales in 2024 were $626.4 million, down from $642.2 million in 2023, reflecting a 2.5% decline. This decline was primarily due to lower demand in several end markets, particularly agriculture.
Operational Risks
Operational disruptions, such as those caused by natural disasters, pose a risk to production capabilities. The company previously experienced operational shutdowns due to a fire and weather-related incidents at a manufacturing facility in Italy. Insurance claims related to these incidents are still being resolved, which could impact future financial results.
Financial Risks
Debt levels represent a significant risk. As of September 28, 2024, net interest expense was $25.7 million, an increase from $22.6 million in the prior year. The company has a revolving credit facility with an outstanding balance and is subject to interest rate fluctuations. The effective interest rate on borrowings was 6.5% at the end of the third quarter.
Strategic Risks
Strategic decisions regarding acquisitions and investments can also present risks. In the first three quarters of 2024, cash used in investing activities totaled $22.1 million, a significant decrease from $144.5 million in the previous year. This reduction reflects a shift in capital allocation strategies that could impact future growth prospects.
Mitigation Strategies
The company actively works to mitigate these risks through various strategies, including diversifying its product offerings and expanding into emerging markets. Additionally, a focus on cost management and operational efficiency is intended to improve resilience against market fluctuations.
| Risk Factor | Description | 2024 Impact |
|---|---|---|
| Industry Competition | High competition affecting market share | Net sales decrease of $6.9 million |
| Regulatory Changes | Cost increases from compliance | Potential liabilities from tax audits |
| Market Conditions | Fluctuations affecting revenue | Year-to-date sales down 2.5% |
| Operational Risks | Disruptions from natural disasters | Pending insurance claims resolution |
| Financial Risks | High debt levels and interest rate risks | Net interest expense of $25.7 million |
| Strategic Risks | Risks from acquisitions and investments | Investing cash flow down by $122.4 million |
Future Growth Prospects for Helios Technologies, Inc. (HLIO)
Future Growth Prospects for Helios Technologies, Inc.
Analysis of Key Growth Drivers
Helios Technologies, Inc. is poised for growth driven by several key factors, including product innovations, market expansions, and strategic acquisitions. The company reported $626.4 million in net sales for the nine months ended September 28, 2024, a slight decrease of 2.5% from $642.2 million in the prior year.
Product Innovations
The company continues to invest in research and development to enhance its product offerings. Innovations in hydraulic and electronic solutions are expected to cater to emerging market needs, particularly in the health and wellness sectors, which have shown growth amidst a decline in the agriculture sector.
Market Expansions
Helios Technologies is actively pursuing market expansion, particularly in the Asia-Pacific (APAC) region, where sales increased by 8.3% in the third quarter of 2024 compared to the previous year. This growth is attributed to rising demand in countries like China, Australia, and India.
Acquisitions
The company has a robust acquisition strategy, having recorded $5.0 million in sales from acquisitions year-to-date. The recent acquisitions are expected to enhance operational capabilities and market reach, contributing positively to revenue growth in the coming years.
Future Revenue Growth Projections and Earnings Estimates
Looking forward, analysts project a gradual recovery in net sales, with expectations of reaching approximately $700 million in total sales by 2025, driven by both organic growth and contributions from acquisitions. Earnings per share for 2024 are estimated at $1.03, slightly down from $1.04 in 2023.
Strategic Initiatives and Partnerships
Helios is exploring strategic partnerships to leverage new technologies and enter new markets. The company has also focused on enhancing its supply chain efficiency, which is vital given the current inflationary pressures and fluctuating material costs.
Competitive Advantages
Helios Technologies possesses several competitive advantages, including a diversified product portfolio and strong brand recognition in the hydraulics and electronics sectors. The company maintains a gross profit margin of 31.7% for the nine months ended September 28, 2024. Additionally, their operational efficiency has improved, with operating income as a percentage of sales increasing to 10.9%.
| Financial Metrics | 2024 (YTD) | 2023 (YTD) | % Change |
|---|---|---|---|
| Net Sales | $626.4 million | $642.2 million | -2.5% |
| Gross Profit | $198.3 million | $206.5 million | -4.0% |
| Operating Income | $68.5 million | $68.0 million | +0.7% |
| Net Income | $34.2 million | $34.1 million | +0.3% |
Overall, Helios Technologies, Inc. is strategically positioned to capitalize on growth opportunities through innovation, market expansion, and strategic acquisitions. The focus on enhancing operational efficiency and pursuing new partnerships further strengthens its potential for future growth.
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Resources:
- Helios Technologies, Inc. (HLIO) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Helios Technologies, Inc. (HLIO)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Helios Technologies, Inc. (HLIO)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.