BAIRD 2026 GLOBAL INDUSTRIAL CONFERENCE - HELIOS TECHNOLOGIES INC

Explicit Guidance:

• FY2026 total revenue guidance: Approx. $900M pro forma (excluding the divested business); expected to drop by ~$100M in 2025 due to divestiture, with the FY2026 run rate starting at that lower base.
• FY2026 organic growth: Expects >$100M in planned organic growth on a pro forma basis (post-divestiture comparison).
• FY2026 segment growth: All four core businesses (Sun Hydraulics, Faster, Innovation Controls, Balboa) are expected to grow double digits.
• 2027 Margin Target: Committed to a strategic 100 basis points improvement in operating income and adjusted EBITDA annually through the 2030 strategy.
• 2027 Pricing/Inflation Impact: Anticipates recovery in margin from prior price increases (material costs) and freight surcharges to flow through in early 2027.

Business-Segment Outlook:

• Hydraulics (Sun Hydraulics & Faster):
  • Expected to grow double digits, significantly outpacing the market (which is growing in the low single digits).
  • Sun Hydraulics: Growth driven by renewed expansion in ag and construction mobile equipment; launching "Zero Series" counterbalance valve for smaller form factors; leveraging distributor engagement and data analytics.
  • Faster: Transitioning from a purely agricultural focus (which has been in a multi-year down cycle for large equipment) toward construction; entering the data center thermal management market; launching "Multi-Faster" and "Genius" products for larger equipment to increase content per unit.
• Electronics (Innovation Controls & Balboa):
  • Balboa (Health & Wellness): Recovered to above pre-acquisition levels ($130M baseline); returning to low-to-mid single-digit structural growth after the COVID peak; launching more products in the next year than the prior decade; expanding into water care and water treatment.
  • Innovation Controls (Recreation): Benefiting from a "lap" of a large OEM win starting in H2 2025; focusing on product refresh to secure multi-year redesign cycles; diversifying into adjacent markets beyond marine/consumer.
  • New Verticals: Entered audio solutions via acquisition of RadioSound assets to own the "cab" experience, targeting marine, recreational, mobile, and agriculture applications (currently in a contract relationship with Indian Motorcycles).

Market and Competitive Outlook:

• Demand Trends: Five consecutive quarters of double-digit order growth; Q3 2026 backlog is higher than Q3 2025.
• Market Share Strategy: Target addressable market is ~$12B; Helios holds <10% share but focuses on niche markets where it has differentiated technology rather than broad market share games.
• Geographic Shifts: Noting a ~10% production shift from Americas to Asia (specifically China) where OEMs are relocating; leveraging strong local operation (Joyanwei acquisition) to capture this export flow.
• Product Content: Focusing on increasing dollar content per machine (e.g., multi-faster couplings, sensor-enabled valves) rather than just unit volume.

Macro / Industry Outlook:

• Agriculture: Large ag equipment remains challenged with a multi-year down cycle, but small/compact ag is stabilizing and performing better; expecting recovery in large equipment after recent positive readings.
• Construction: Currently growing nicely, providing a diversification tailwind for the Faster business.
• Interest Rates: Acknowledged as a headwind for consumer-facing recreation markets; monitoring general market conditions.
• Inflation/Cost Pressures: Rising input costs for metals (aluminum, cast iron, steel, tungsten carbide) and freight (fuel/transportation); utilizing price increases to mitigate, with lag effects expected to resolve in early 2027.

Strategic Initiatives:

• 2030 Core Strategy: Committed to 100 basis points of annual margin expansion via volume leverage and efficiency.
• R&D and Innovation: Revamped R&D investment after years of under-investment; launched targeted new products in the last 18 months to create incremental revenue streams (non-cannibalizing).
• Operational Restructuring: Consolidated Faster North America operations into a single facility in Toledo, Ohio; closed Canadian office (costs in gross margin expected to be behind us post-Q3).
• Cross-Selling/Integration: Pursuing "electrohydraulics" integration where electronics teams support hydraulics (e.g., QMEH valve with flow monitoring sensors); commercial teams aligned to sell full portfolio offerings.
• M&A: Small acquisition of RadioSound assets for audio solutions; active investment in Joyanwei (Asia) to support global footprint.

Risks and Headwinds to Outlook:

• Agricultural Cycle: Continued weakness in large ag equipment could impact Faster; small ag recovery is critical for offsetting large equipment declines.
• Pricing Lag: Price increases taken in Q3 2026 to offset input costs have a timing lag, potentially impacting Q4 2026 margins before flowing into 2027 earnings.
• Seasonality: Q4 historically the lowest performing quarter for sales; Q4 2026 guide ($210M) is lower than Q1-Q3 combined ($230M), creating natural margin pressure relative to higher-volume quarters.
• Consumer Sensitivity: Recreational and consumer electronics demand remains sensitive to interest rates and general economic conditions.
• OEM Dependencies: Business requires "winning" redesign contracts every 2–3 years with key OEMs (e.g., marine, recreational, ag); failure to win can lead to revenue gaps.

Management Tone on the Future:

• High Confidence: Management expresses strong confidence in the "inflection point" achieved in June 2025; cites 12 quarters of growth post-2016 stagnation.
• Strategic Clarity: Explicit focus on returning to growth, fixing the "sales problem," and leveraging the diversified portfolio to mitigate cyclicality.
• Commitment: Strong commitment to the 100 bps margin improvement target and the 2030 strategy, despite current cost headwinds.
• Optimism on Diversification: Highlights success in moving beyond reliance on legacy Sun Hydraulics and cyclical ag equipment into data centers, health/wellness, and smaller equipment.

Miscellaneous:

• Capacity: Hydraulics segment reportedly had excess capacity accommodating ~$400M revenue; leveraging this volume leverage is central to margin improvement.
• Divestiture: CFP business divestiture removed ~$100M in revenue from the base for 2025 comparisons.
• Acquisition History: 12 acquisitions deployed $1.3B between 2016–2023; now focusing on organic growth and integration of existing portfolio (Sun, Faster, Innovation, Balboa).