BAIRD 2026 GLOBAL INDUSTRIAL CONFERENCE - HELIOS TECHNOLOGIES INC

Financial Performance:

• Projected full-year 2025 sales of approximately $900 million, excluding the divested business which reduces the baseline by ~$100 million.
• Achieved five consecutive quarters of double-digit sales and earnings growth, ending a 12-quarter streak of declining sales.
• Expects to generate roughly $100 million in planned organic growth on a pro forma basis for the year.
• Committed to driving 100 basis points of annual improvement in both operating income and adjusted EBITDA, targeting 2030 strategic goals.
• Q4 revenue guidance is approximately $210 million (below Q1-Q3 average), reflecting typical seasonality and the impact of price increases pulling orders forward into Q3.
• Hydraulics segment has locked in long-term pricing for raw materials (aluminum, steel, tungsten carbide) to mitigate input cost inflation, though freight costs have risen.
• Balboa unit has recovered sales to levels exceeding its $130 million pre-acquisition baseline, despite the post-COVID normalization.

Guidance and Future Outlook:

• Management anticipates a return to sustained growth with double-digit targets across all four core businesses: Sun Hydraulics, Faster, Innovation Controls, and Balboa.
• QMEH valve launch and new product refreshes in recreational electronics are expected to drive incremental revenue streams rather than cannibalize existing base business.
• Balboa plans to launch more new products in the next year than in the previous decade, including entries into water care and treatment markets.
• Outlook for 2027 includes potential margin recovery from freight surcharges and the full realization of pricing power after 2026 cost pressures.
• Expectations remain that small agricultural equipment markets will stabilize and outperform the struggling large combine sector.

Business Segments and Product Lines:

• Hydraulics: Comprises Sun Hydraulics (distributor-led, mobile equipment) and Faster (OEM-led, direct sales). Sun is expanding into smaller form factors with the "zero series" valve, while Faster is diversifying into construction and launching "Genius" multi-fastener units for larger equipment.
• Electronics: Consists of Balboa (health and wellness, marine) and Innovation Controls (recreational, marine).
• New Acquisitions: Acquired RadioSound assets to enter audio solutions, enabling "cab ownership" by combining displays, control modules, and sound systems for motorcycles and marine clients.
• Strategic Shifts: Consolidated Faster North America operations into a single Toledo, Ohio facility, closing the Sarasota and Canada offices to improve efficiency; this one-time cost is expected to be behind margin.
• Product Innovation: Cross-functional engineering teams are developing electro-hydraulic solutions, specifically sensors integrated into valves, leveraging electronics R&D to enhance hydraulics performance.

Market and Competitive Landscape:

• Addressable markets total ~$12 billion; Helios holds <10% share but focuses on niche markets with differentiated technology where they are the market leader.
• Hydraulics: Benefiting from growth in the NFPA mobile equipment market (currently low single-digit) while targeting double-digit growth through distributor engagement and new product applications.
• Recreational/Marine: Seeing a bottoming out and recovery in marine demand following the post-pandemic downturn; a large OEM win in the second half of the prior year is now providing a comp base for growth.
• Global Expansion: A ~10% shift in production from the Americas to Asia (specifically China) is creating export opportunities; Helios is strengthening its APAC footprint through investment in Joyanwei.
• Data Centers: Faster has successfully entered the data center thermal management market as a new growth vertical.

Risks and Challenges:

• Agricultural Cycles: The large agricultural equipment market remains in a multi-year down cycle, though small tractor and compact equipment show signs of recovery.
• Input Costs: Rising costs for metals (aluminum, cast iron, steel) and tungsten carbide, alongside increasing freight and fuel expenses, are pressuring gross margins.
• Consumer Sensitivity: Recreational electronics are sensitive to interest rates and general consumer economic conditions.
• One-time Costs: Operational expenses related to the Faster North America consolidation are temporarily impacting gross margins.

Management Commentary and Tone:

• CEO Sean Baggin expressed high confidence, describing the 2026 trajectory as "much better" with a clear inflection point reached in Q3.
• Management emphasized a shift from acquisition-driven growth to organic growth via "1.0, 2.0, 3.0" core strategy, focusing on go-to-market restructuring and sales leadership changes.
• The tone is defensive yet optimistic regarding the Balboa asset, asserting that Helios is the "best owner" due to cost arbitrage (Tijuana vs. Tulsa), global manufacturing scale, and cross-segment engineering leverage.
• Management highlighted a 10-year history of profitability and a commitment to accountability, citing a "goal deployment process" (GDP) to drive performance.

Analyst Questions and Answers:

• Distributor vs. End-User Demand: Clarified that hydraulics growth is driven by distributor engagement and data analytics, while electronics (recreation) is driven by end-user demand recovery and model redesign cycles.
• Cross-Selling Validity: Addressed the thesis that cross-selling between electronics and hydraulics is limited by customer vertical integration; instead, the strategy focuses on joint engineering for electro-hydraulics and acting as the "preferred supplier" for full cab solutions.
• Balboa Recovery: Confirmed Balboa has surpassed pre-acquisition sales levels and is no longer a drag on the portfolio, citing the Tijuana manufacturing advantage and global distribution network.
• Content per Unit: Clarified that while larger tractors have higher dollar content per unit, growth is increasingly driven by higher unit counts in small/ag equipment and increased content (more couplings) per machine via multi-fastener innovation.
• Margin Levers: Confirmed excess capacity of ~$400 million revenue; emphasized that volume growth is the primary lever for margin expansion, targeting 100 bps annual EBITDA improvement.

Other Key Points:

• The company was founded in 1970 as Sun Hydraulics and underwent a 2016 strategy to diversify via 12 acquisitions, deploying $1.3 billion to create its current dual-segment structure.
• Jeremy Evans noted a significant increase in R&D investment during the downturn to position the company for the recovery, resulting in a high volume of new product launches over the last 18 months.
• The board now includes Laura Dempsey-Brown as chair, serving since 2020.
• Helios is 56 years old, with a history of $200M annual sales and $100M cash balance prior to 2016 diversification.